Health Insurance for Small Business Owners: Group, ICHRA, or Stipend?

You buy a group plan from a carrier. You pay a percentage of the premium for each enrolled employee. The carrier handles enrollment, claims, and member services. Your employees get coverage with no medical underwriting.

Group plans work best when you have 10 or more employees, the team is geographically concentrated, and you want to offer a clear, branded benefit. The premium is a business expense and fully deductible.

An ICHRA lets you reimburse employees, tax-free, for individual health insurance they buy on the marketplace. You set a monthly allowance per employee class. They pick the plan, pay the premium, and submit for reimbursement.

ICHRAs work best when you have a small or geographically distributed team, your employees have varied needs (singles versus families, healthy versus chronic conditions), and you want predictable costs. You can offer different allowance amounts to different employee classes (full-time, part-time, salaried, seasonal).

You add money to each employee's paycheck specifically designated as a health insurance contribution. They use it however they want. The money is taxable to them as wages, and you owe payroll tax on it.

Stipends are the simplest path administratively. No plan to manage. No HRA paperwork. The downside is the tax inefficiency. A $500 stipend nets the employee about $375 after taxes. The same $500 through an ICHRA is fully reimbursable and tax-free.

Quick framework:

• Under 5 employees, varied health needs: ICHRA almost always wins on flexibility and cost predictability.
• 5 to 50 employees, geographically concentrated: traditional group plan is usually competitive and easier to communicate.
• Over 50 full-time-equivalent employees: you're subject to the ACA employer mandate. Group or ICHRA, but not a stipend alone.
• Distributed team across multiple states: ICHRA. Group plans struggle with multi-state networks.

You set up the ICHRA through an administrator (Take Command, PeopleKeep, Gusto, or a few others). The administrator handles compliance, plan attestation, and reimbursement processing. Setup runs $40 to $100 per employee per month in admin fees, depending on the provider.

Employees must enroll in an ACA-compliant individual plan to be reimbursed. They can buy on the marketplace or off, but the plan has to meet minimum essential coverage standards.

Plansure's employer-side brokers will quote group, run an ICHRA cost model, and compare both against a stipend with the actual tax math. We don't make the decision for you. We give you the numbers so you can.

Carriers and ICHRA administrators pay our commission. The consultation costs nothing.