Group Health Insurance Options for Small Businesses in 2026

One of the most common questions we hear from small business owners is: "Do I have to offer health insurance, and if so, what are my options?"

The short answer: businesses with fewer than 50 full-time equivalent employees are not required by federal law to offer health insurance. But if you want to attract and retain good employees, offering coverage is increasingly expected — and there are more affordable options than most business owners realize.

Option 1: Fully Insured Group Health Plan

The traditional approach. You purchase a group health plan from an insurance carrier, pay a monthly premium, and the carrier assumes the risk.

Pros:

• Predictable monthly costs
• Carrier handles claims administration
• Wide network of providers

Cons:

• Premiums can be high for small groups
• Limited flexibility in plan design
• Annual renewal increases can be significant

Best for: Businesses that want simplicity and predictability.

Option 2: Level-Funded Health Plan

Level-funded plans are a hybrid between fully insured and self-funded. You pay a fixed monthly amount (like a fully insured plan), but at year-end, if claims come in lower than expected, you receive a refund.

Pros:

• Potential for significant year-end refunds (15–25% savings in good years)
• Access to claims data to manage costs
• More flexible plan design

Cons:

• If claims are high, you pay more (though stop-loss insurance caps your exposure)
• Slightly more administrative complexity

Best for: Businesses with 10–100 employees looking to control costs without full self-funding risk.

Option 3: Qualified Small Employer HRA (QSEHRA)

A QSEHRA allows small businesses (fewer than 50 employees) to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses.

2026 limits:

• Self-only: Up to $6,350/year
• Family: Up to $12,800/year

Pros:

• No minimum participation requirements
• Employees choose their own coverage
• Simple to administer

Cons:

• Reimbursement limits are lower than group plan costs
• Employees must purchase their own individual coverage

Best for: Very small businesses (1–10 employees) that want to offer a health benefit without the complexity of a group plan.

Option 4: Individual Coverage HRA (ICHRA)

The ICHRA is a newer, more flexible version of the HRA with no contribution limits. Employers can reimburse employees for individual health insurance premiums and medical expenses.

Pros:

• No contribution limits
• Can be offered to different employee classes at different levels
• Employees choose their own plans

Cons:

• Employees must purchase individual coverage
• More complex to administer than QSEHRA

Best for: Businesses of any size that want maximum flexibility in how they fund employee health benefits.

Option 5: SHOP Marketplace

The Small Business Health Options Program (SHOP) is the ACA marketplace for small businesses. It allows employers with 1–50 employees to offer coverage and potentially qualify for the Small Business Health Care Tax Credit.

Tax credit eligibility:

• Fewer than 25 full-time equivalent employees
• Average wages below $58,000/year
• Employer pays at least 50% of employee-only premiums

Best for: Very small businesses that qualify for the tax credit.

How to Choose the Right Option

The right choice depends on:

• Number of employees
• Employee demographics (age, health status, family situations)
• Your budget and cost-sharing philosophy
• How much administrative complexity you can handle

As an independent broker, we analyze all of these factors and present you with a side-by-side comparison of your best options — with no pressure to choose any particular carrier or plan type.

Schedule a benefits review and let us help you find the right fit for your business.

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Anderson Financial Group is an independent employee benefits advisor. We represent all major carriers and are not affiliated with any single insurance company.