What Is Participation and Why Does It Matter?

When shopping for health insurance, one question carriers almost always ask is:

"What percentage of your employees will enroll?"

This is known as your participation level.

What Is Participation?

Participation is the percentage of eligible employees who enroll in your employer-sponsored health plan.

For example:

• 20 eligible employees
• 15 enroll

Participation = 75%

Why Do Insurance Companies Care?

Health insurance works best when both healthy and unhealthy employees participate.

If only employees with significant medical needs enroll, claims become much higher, resulting in increased premiums.

Participation requirements help maintain a balanced risk pool.

Do All Plans Require High Participation?

No.

Many traditional fully insured plans require participation levels of 70% or more, although requirements vary by carrier and state.

However, many alternative funding arrangements—including level-funded plans, self-funded plans, Association Health Plans, MEC plans, and ACA compliance solutions—may allow significantly lower participation or even no employee enrollment in certain situations.

These options provide employers with greater flexibility than traditional insurance.

Why Participation Matters

Understanding participation requirements before selecting a health plan can save employers time and frustration.

Some plans simply won't issue coverage if participation is too low, while others are specifically designed for employers with limited enrollment.

Knowing your expected participation level helps determine which funding strategy is the best fit for your business.