Size guide

Large group health insurance: where each of the ten states draws the line

Large group versus small group, for health insurance rating, is a state insurance-market definition. Under the federal Public Health Service Act, as amended by the PACE Act, 50 is the federal baseline ceiling, and a state could elect to extend small group up to 100. That line is completely separate from the IRS applicable large employer test of 50 full-time employees, counting full-time equivalents (applicable large employer), and completely separate from the 100-participant Form 5500 filing threshold (Form 5500 search). In nine of the ten states where I am licensed, fully insured large group starts at 51. California is the only one of the ten that still uses a 100-employee small group: large group there starts at 101.

Arizona, California, Colorado, Hawaii, Iowa, Michigan, Nevada, North Carolina, Oregon, and Texas.

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The ten-state line, as of 2026

Fully insured large group starts at 51 employees in nine licensed states. California is the only 100-employee small-group state among the ten, so large group there starts at 101. Colorado joined the 51 line on January 1, 2026. The older Colorado rule, small group through 100, is not the current statute.

The count is not payroll headcount. Each statute says who counts, on which days, and whether affiliates are added. Near the line, ask the carrier which count it used before you assume the renewal will be community-rated or experience-rated.

StateSmall groupLarge group startsHow employees are counted
Arizona2 to 50 eligible employees51+Eligible employees on a typical business day during any one calendar year. The count includes the individual proprietor or self-employed person when that person is the employer. Ariz. Rev. Stat. 20-2301(A)(20).
California1 to 100 employees101+On at least 50 percent of working days in the preceding calendar quarter or preceding calendar year, majority employed in California. Count uses the IRC section 4980H(c)(2) full-time and full-time equivalent method. Affiliated companies eligible to file a combined California tax return count as one employer. For plan years on or after January 1, 2019, sole proprietors and their spouses, and partners and their spouses, are not employees for the one-employee test. Cal. Ins. Code 10753(q).
Colorado1 to 50 eligible employees, effective January 1, 202651+Average eligible employees on business days during the immediately preceding calendar year, using IRC section 4980H(c)(2)(E). An eligible employee is a full-time employee in a bona fide employer-employee relationship. Employers with 51 to 100 employees that held a small-group plan before January 1, 2026 may keep small-group coverage for up to 5 years under SB24-073.
Hawaii1 to 50 employees51+Average of at least 1 but not more than 50 employees on business days during the preceding calendar year, and at least 1 employee on the first day of the plan year. For this definition, employee means full-time with a normal workweek of 20 hours or more. Haw. Rev. Stat. 431:2-201.5(b).
Iowa1 to 50 full-time equivalent eligible employees51+On at least 50 percent of working days during the preceding year. Affiliated companies, or companies eligible to file a combined Iowa tax return, count as one employer. An eligible employee works full-time with a normal workweek of 30 or more hours. Iowa Code 513B.2(18).
Michigan1 to 50 full-time employees, beginning January 1, 201851+Average during the preceding calendar year, and at least 1 employee on the first day of the plan year. Full-time employees are calculated under IRC section 4980H(c)(4), including the full-time equivalent rules in 4980H(c)(2). Affiliated persons, or persons eligible to file a combined Michigan tax return, count as one employer. Mich. Comp. Laws 500.3701(q).
Nevada1 to 50 employees51+Nevada adopts 42 U.S.C. 18024(b)(2): average of at least 1 but not more than 50 employees on business days during the preceding calendar year, and at least 1 employee on the first day of the plan year. Aggregation under IRC section 414 applies through 42 U.S.C. 18024(b)(4). NRS 689C.095.
North Carolina1 to 50 employees for a nongrandfathered, nontransitional plan51+Small employer follows 42 U.S.C. 18024(b), and the count uses IRC section 4980H(c)(2). A grandfathered plan still uses the older test: no more than 50 eligible employees on at least 50 percent of working days in the preceding calendar quarter. N.C. Gen. Stat. 58-50-110(22b) and (22).
Oregon1 to 50 full-time equivalent employees51+Average on business days during the preceding calendar year, and at least 1 full-time equivalent employee on the first day of the plan year, using the counting method set by the Oregon Department of Consumer and Business Services. ORS 743B.005(26).
Texas2 to 50 employees51+Average number of employees on business days during the preceding calendar year. A small employer also employs at least 2 employees on the first day of the plan year. A large employer averaged at least 51 employees on business days during the preceding calendar year and employs at least 2 on the first day of the plan year. An eligible employee, the person who can be covered, usually works at least 30 hours a week. That coverage definition is not the size test. Tex. Ins. Code 1501.002(8) and (14).

CMS still lists the states that notified it of a 1 to 100 expansion. Among these ten, that older federal table still flags California and Colorado. California remains 1 to 100 under Insurance Code section 10753(q). Colorado’s own statute moved to 1 to 50 effective January 1, 2026. Use SB24-073 and the Colorado Division of Insurance advisory for Colorado, not the pre-2026 mirror.

Colorado’s 2026 change, including the transition

Effective January 1, 2026, a Colorado small employer employed an average of at least 1 but not more than 50 eligible employees on business days during the preceding calendar year. Large group is more than 50 eligible employees. The Division of Insurance reviewed the rate effect the statute required and the change went forward.

An employer that was issued a small-group plan before January 1, 2026, and that employs 51 to 100 employees, may elect to keep small-group coverage for up to 5 years, or move to large group when the current plan expires. Once that employer enters the large-group market, it does not return to small group during that 5-year period.

What changes for a CFO on the large-group side of the line

Small-group modified community rating prices the plan from the market. Age bands and geography can move the rate. The group’s own claims generally do not. Metal tiers (bronze, silver, gold, platinum) are the plan-design shelf.

Once the group crosses its state’s large-group line, four things open up.

Underwriting. The renewal can be experience-rated, or a blend of the market and the group’s own year. The increase has a claims story, not only a market story.

Plan design. Benefits, deductibles, and contributions are negotiable. They are not limited to the metal-tier shelf.

Claims visibility. You can see more of what drove the number: high-cost claims, who is on the plan, and whether the census moved. In Texas, the plan can ask the insurer for a claims report. How to get your claims report.

Funding, tested side by side. Every renewal, fully insured, level-funded, and self-funded are on the same page when group size and claims fit. Self-funded is a standard option shopped every renewal alongside fully insured and level-funded. Running a custom self-funded structure, once that option is chosen, is priced in the engagement letter before that work starts. Group health insurance for employers with 50 to 500 employees. Level funded versus fully insured.

The work is one seven-step process, Step 1 Introduction through Step 7 All year, every year. For employers with 100 or more employees, Steps 2 to 7 are the Renewal Control Plan, and the Plan Report is its first deliverable. Employers with 50 to 99 employees get the same seven steps. Step 0, a self-run Renewal Benchmark Check or a Form 5500 public-filing read, is optional beforehand. It is not an eighth step.

Three lines that get mixed up

LineWhat it decidesWhere it is written
State small group / large groupHow a fully insured carrier rates the planThis page. 51+ in nine states, 101+ in California.
Applicable large employerIRS employer shared responsibility and Forms 1094-C and 1095-CApplicable large employer. Average of 50 full-time employees, counting equivalents, in the prior year.
Form 5500 welfare filingWhether a public filing is generally dueForm 5500 search. Generally 100 participants at the start of the plan year, unless a trust or another exception applies.

A company can be on different sides of these three lines in the same year. A 60-employee Texas employer can be a large group for rating, an applicable large employer for the IRS, and still under the Form 5500 participant threshold. A 70-employee California employer can still be small group for rating.

Any employer with 50 to 500 employees in these ten states can use the same seven steps. A group outside those states is invited once placement there is set up.

Advisory analysis, not legal or tax advice.

Questions people ask

Is large group the same thing as the IRS 50-employee rule?

No. Large group is how the state insurance code tells a carrier to rate a fully insured health plan. The IRS applicable large employer test is an average of 50 full-time employees, counting full-time equivalents, in the prior calendar year. That test drives employer shared responsibility and Forms 1094-C and 1095-C. Applicable large employer.

Which licensed states start large group at 51, and which at 101?

Arizona, Colorado, Hawaii, Iowa, Michigan, Nevada, North Carolina, Oregon, and Texas start fully insured large group at 51. California is the exception among the ten: small group is 1 to 100 employees, and large group starts at 101 (California Insurance Code section 10753(q)).

What is Colorado's line in 2026?

Effective January 1, 2026, Colorado small group is an average of at least 1 but not more than 50 eligible employees, and large group is more than 50 eligible employees (SB24-073). An employer with 51 to 100 employees that held a small-group plan before January 1, 2026 may keep small-group coverage for up to 5 years. The older Colorado 1 to 100 line is not the current rule.

Is payroll headcount the number the carrier uses?

Not by itself. Each state counts a defined employee, on a defined set of days, sometimes with full-time equivalents and sometimes with affiliated companies added together. A W-2 headcount on one payroll can miss the sister company, the part-time hours, or the hours cutoff that state uses.

What changes once the group crosses its state's large-group line?

The plan leaves ACA small-group modified community rating and the metal tiers. Renewal pricing can be experience-rated or blended. Plan design is negotiable. Claims experience is visible enough to use. Fully insured, level-funded, and self-funded are tested side by side every renewal when group size and claims fit. Group health insurance for 50 to 500 employees.

Does crossing this line mean the plan must file a Form 5500?

No. The Form 5500 welfare-plan filing rule is generally 100 participants at the beginning of the plan year for an unfunded or insured plan, unless assets are held in a trust or another exception applies. That is a Department of Labor count, not the state rating count. Form 5500 search.

I built and sold a health insurance agency: grew it to 60 agents in about 3 years, then sold it. Licensed insurance agent since 2014: Texas license 2501238, NPN 17369817.

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Approve the engagement letter and sign the broker-of-record letter any time of year. For the coming renewal, 150 days out is the latest. The Plan Report follows a signed broker-of-record letter and the transfer, usually about a month. Group health insurance for employers with 50 to 500 employees.

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Questions first? Email aloha@mattragudo.com or book a 30 minute call.

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