Department of Labor and Regulation

Title - Division of Insurance email the Division of Insurance

Small Employers' Frequently Asked Questions on Health Insurance & Related Additional Information

Who is a small employer?

Is every employee eligible?

Can the insurance company charge a higher rate because of age?

What are the minimum participation and employer contributions requirements?

What activities are small employer insurance companies or Insurance agents prohibited from?

Additional Related Information on Health Insurance for Small Employers

COBRA and state continuation health coverage for employers

COBRA and state continuation health coverage for employees

COBRA Continuation Coverage Assistance under the American Recovery and Reinvestment Act of 2009

Who is a small employer?

Generally it is an employer with at least two but not more than 50 employees. The exact definition is any person, firm, corporation, partnership or association actively engaged in business which on an average of its working days during the preceding year, employed no more than 50 and no less than two employees and who employs at least two employees on the first day of the plan year.

In determining the number of employees, companies which are affiliated companies or which are eligible to file a combined tax return for purposes of state taxation are considered to be one employer.

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Is every employee eligible?

It depends upon who the employer wants to cover. The insurance company must offer coverage to any employee who works on a permanent basis and has a normal work week of 30 or more hours.

The term includes any sole proprietor, any partner and any independent contractor, if the sole proprietor, partner or independent contractor is included as an employee under a health benefit plan of a small employer, but does not include any employee who works less than 30 hours or on a temporary or substitute basis.

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Can the insurance company charge a higher rate because of age?

Yes, insurance companies can vary the premiums based upon the age of the employee or dependent. However, the premium rates for an individual covered in a small employer plan may not vary because of age alone by a factor of more than 3:1. Therefore, the lowest age premium and highest age premium cannot be more than three times one another.

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What are the minimum participation and employer contributions requirements?

A small employer carrier may vary application of minimum participation requirements and minimum employer contribution requirements only by the size of the small employer group or by the class of business. In all other respects, the required percentages should be the same for all small employers.

In applying minimum participation requirements, a small employer carrier may consider employees or dependents who have creditable coverage in determining whether the applicable percentage of participation is met.

If any employee or dependent with other creditable coverage is to be considered towards calculating the applicable percentage of participation, the employee or dependent shall be counted as participating in the plan.

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What activities are small employer insurance companies or Insurance agents prohibited from?

No small employer insurance company or insurance agent may, directly or indirectly, engage in the following activities:

  • Encouraging or directing small employers to refrain from filing an application for coverage with the small employer insurance company because of the health status, claims experience, industry, occupation or geographic location of the small employer; or
  • Encouraging or directing small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation or geographic location of the small employer.

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Division of Insurance
124 S. Euclid Ave., 2nd Floor
Pierre, SD 57501
Tel. 605.773.3563
Fax. 605.773.5369