Funding options, contribution rules, and tax credits, explained for employers. When you’re ready, a licensed agent can compare plans for your team.
Quick answer: Group health insurance is a plan an employer offers its employees, usually paying part of the premium. Small groups typically have 1 to 50 employees, or 1 to 100 in California and a few other states. Insurers generally require the employer to pay at least half of the employee-only premium and a minimum share of eligible employees to enroll.
A group health plan covers employees, and usually their dependents, under one policy the employer sponsors. Employer premium contributions are generally tax-deductible, and employees can usually pay their share pre-tax. Small-group plans cover the same essential health benefits as individual plans, and insurers can’t turn a small group down or price it based on employees’ health.
Each option balances cost, control, and how much your employees get to choose.
| Coverage | How It Works | Tends to Fit |
|---|---|---|
| Fully insured group plan | You buy a plan from an insurer and pay part of each employee's premium | Most small businesses that want one shared plan |
| SHOP marketplace plan | Group coverage through your state's small business marketplace | Employers seeking the small business tax credit |
| ICHRA | A tax-free allowance employees use to buy their own individual coverage | Teams that want a fixed budget or are spread across regions |
| QSEHRA | Tax-free reimbursements up to an annual IRS limit, for employers with fewer than 50 employees | Very small teams not ready for a group plan |
| Self-funded plan | The employer pays claims directly, usually with stop-loss coverage | Larger employers with steady cash flow |
| Large-group plan | More plan design flexibility, priced partly on the group's own claims | Employers above the small-group size limit |
Headcount is measured in full-time-equivalent employees, not just people on payroll.
No federal requirement to offer coverage. If you do, small-group rules apply, and employers under 25 full-time-equivalent employees may qualify for the tax credit.
At 50 or more full-time-equivalent employees, coverage for full-time staff must be affordable and meet minimum value. In California, groups up to 100 still buy small-group plans.
Large-group plans offer more design flexibility, and pricing reflects the group’s own claims history. Most states treat 51 and up as large group; California starts at 101.
Small-group premiums depend on the rating region of your primary business address, your employees’ ages, and the plans you offer.
Employers with fewer than 25 full-time-equivalent employees and average wages below an IRS limit may qualify for a tax credit of up to 50% of premiums paid, for two consecutive years, when they buy through their state’s SHOP marketplace and pay at least half of employee-only premiums.
Usually one, as long as that employee isn’t the owner or the owner’s spouse. Small-group plans generally start at one eligible employee, and the owner can enroll alongside them.
Most insurers require the employer to pay at least 50% of the employee-only premium. Contributing toward spouses and children is optional, and many employers set a fixed dollar amount or percentage for family coverage.
Many insurers require at least 70% of eligible employees to enroll. Employees who decline because they have other coverage, like a spouse’s plan, often don’t count against you. Each year from November 15 to December 15, small groups can enroll without meeting participation or contribution minimums for a January 1 start.
Yes. An ICHRA gives employees a tax-free allowance to buy their own individual coverage, and a QSEHRA works similarly for employers with fewer than 50 employees. Both set a fixed budget, but employees choose and manage their own plans.
Generally, yes. Employer premium contributions are typically deductible as a business expense, and employees can usually pay their share with pre-tax dollars through a Section 125 plan. Your tax advisor can confirm how it applies to your business.
Not usually. Most small-group plans require coverage for employees averaging 30 or more hours a week, and some let employers include those working 20 to 29 hours. Part-time hours do count toward the 50-employee threshold for the employer mandate.
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