Medically reviewed by Jawad Arshad, MD, FACEP. Last reviewed: October 5, 2026.
Small business health insurance plans are the group or reimbursement options an employer can use to cover its workers, and most owners choose between five of them. The right one depends on your headcount, your budget and how much claims risk you can carry. This guide compares all five with real 2026 limits and one worked cost example.
Key facts
- 59% of firms with 10 to 199 workers offered health benefits in 2025 (KFF Employer Health Benefits Survey, 2025).
- Average annual premiums at those firms were $9,211 for single coverage and $26,054 for family coverage, and workers paid 16% and 36% of them (KFF, 2025).
- 37% of covered workers at firms with 10 to 199 workers were in a level-funded plan (KFF, 2025).
- The 2026 QSEHRA limits are $6,450 for self-only coverage and $13,100 for family coverage (IRS Revenue Procedure 2025-32, 2026).
- The small business health care tax credit pays up to 50% of premiums for employers with fewer than 25 full-time equivalent employees and average wages under $67,000 (IRS, Instructions for Form 8941, 2025).
- Employer FICA is 7.65% of wages, so each pre-tax premium dollar saves the employer 7.65 cents (IRS Tax Topic 751, 2026).
What are the types of small business health insurance plans?
Small business health insurance plans fall into five types: fully insured group, level-funded group, SHOP, ICHRA and QSEHRA. Each one answers a different question about who carries the claims risk and who picks the coverage. A Section 125 plan is not a sixth type, it is a payroll tax layer you add on top.
Table: The five main small business health plan types
| Plan type | How it works | Best fit | Key rule |
|---|---|---|---|
| Fully insured group | Carrier takes the claims risk, you pay a fixed monthly premium | Owners who want predictable costs | Employer chooses the plan and shares the premium |
| Level-funded group | Fixed monthly payment, with unused claim dollars possibly returned | Younger, healthier teams | Common at firms with 10 to 199 workers (KFF, 2025) |
| SHOP | Group coverage bought through the federal small business marketplace | Employers who want the tax credit | Generally for employers with 1 to 50 employees (HealthCare.gov) |
| ICHRA | Employer reimburses workers for individual-market plans | Teams spread across many locations | No dollar cap on reimbursement; 90-day notice before the plan year (SHRM, 2019 rule) |
| QSEHRA | Employer reimburses workers up to a fixed limit | Employers with fewer than 50 full-time equivalent employees and no group plan | $6,450 self-only, $13,100 family in 2026 (IRS Revenue Procedure 2025-32) |
Summit Health Benefits has a deeper guide on each option: level-funded plans, ICHRA, and QSEHRA. Our small business health insurance alternatives guide compares the reimbursement options head to head.
How much do small business health plans cost?
Small business health plans cost about $9,211 a year per worker for single coverage and $26,054 for family coverage, based on 2025 averages at firms with 10 to 199 workers (KFF, 2025). Your price depends on location, ages and plan design.
Workers at those firms paid an average 16% of single premiums and 36% of family premiums, and the average single deductible was $2,631 (KFF, 2025). Prices are rising. The median proposed 2027 small group increase among 295 insurers is 14% (Peterson-KFF Health System Tracker, August 2026). These are proposals, not final rates, so treat them as a reason to get quotes early.
Table: A 15-employee example on single coverage at the 2025 KFF averages
| Line | Per worker per year | Team of 15 per year |
|---|---|---|
| Total premium | $9,211.00 | $138,165.00 |
| Worker pays (16%) | $1,473.76 | $22,106.40 |
| Employer pays | $7,737.24 | $116,058.60 |
| Total premium if a 14% increase lands | $10,500.54 | $157,508.10 |
Source: KFF Employer Health Benefits Survey (2025) and Peterson-KFF Health System Tracker (2026). Worker share is 16% of $9,211. This is an illustration built from national averages, not a quote. For more on prices, see our small business health insurance costs guide.
What is the best small business health plan for my team?
The best small business health plan is the one that fits your team's size, age mix and risk tolerance, and you can narrow it down with three questions. Answer them in order.
- Do you want to pick one group plan for everyone? If yes, compare fully insured and level-funded quotes. Level-funded can cost less for a healthy group, but your costs can move with claims.
- Do you want workers to choose their own plan? If yes, compare ICHRA and QSEHRA. Both reimburse workers for individual coverage instead of buying one group plan.
- Can you qualify for the tax credit? If you have fewer than 25 full-time equivalent employees and modest average wages, price a SHOP plan first.
Our best small business health insurance guide lists carriers, and our group health insurance quotes checklist shows what a broker needs from you.
How do ICHRA and QSEHRA work as small business health plans?
ICHRA and QSEHRA are reimbursement plans: the employer pays workers back for individual health insurance instead of buying one group plan. The two differ on size limits and dollar caps.
A QSEHRA is for employers with fewer than 50 full-time equivalent employees that offer no group health plan, and the 2026 caps are $6,450 for self-only coverage and $13,100 for family coverage (healthinsurance.org; IRS Revenue Procedure 2025-32, 2026). An ICHRA has no dollar cap and no size limit. Employers can set different amounts by class of worker, and must give notice at least 90 days before the plan year begins (SHRM, 2019 final rule). An employer cannot offer an ICHRA and a traditional group plan to the same class of employees.
In a 10-person team, the QSEHRA cap works out to at most $64,500 a year for self-only coverage ($6,450 x 10). That is a ceiling, not a requirement. You choose how much to reimburse, up to the cap.
Can a small business get a tax credit for health plans?
Yes, a small business can get a federal tax credit for health plans of up to 50% of premiums if it meets the Form 8941 tests. The credit has strict size and wage limits and a short window.
The IRS says an employer must have fewer than 25 full-time equivalent employees, pay average annual wages below $67,000 per full-time equivalent (2025 tax year), and buy coverage through a SHOP marketplace. The credit period is 2 consecutive tax years, and the 50% rate applies to non-tax-exempt employers (IRS, Instructions for Form 8941, 2025). The credit also phases out above 10 full-time equivalent employees and $33,000 in average wages. Our small business health care tax credit guide has the worked math.
How does a Section 125 plan lower the cost of any small business health plan?
A Section 125 cafeteria plan lets employees pay their share of premiums with pay that has not been taxed yet. That lowers the wages the employer pays payroll tax on, whichever plan type you choose.
The employer FICA rate is 7.65%, which is 6.2% Social Security plus 1.45% Medicare (IRS Tax Topic 751, 2026). Take the 15-employee example above. Workers pay $1,473.76 each a year toward single coverage, or $22,106.40 for the team. Moving that pre-tax saves the employer 7.65% of $22,106.40, which is $1,691.14 a year. Each worker saves too. At the same $1,473.76, an employee in the 12% federal bracket saves about $176.85 in income tax plus $112.74 in FICA, about $289.59 a year (IRS Tax Topic 751, 2026; IRS 2026 inflation adjustments).
Premium contributions alone produce a modest number, because workers pay a small share of single coverage. Summit Health Benefits runs a Section 125 plan with a $35 per enrolled employee per month administration fee that is paid out of the FICA savings the plan creates. Summit's plan design produces employer FICA recapture of about $91 to $136 per enrolled employee per month, so the employer nets about $56 to $101 per enrolled employee per month (Summit Health Benefits, 2026). Your number depends on which benefits run through the plan, so run the Section 125 savings calculator with your headcount and premiums. Our Section 125 cafeteria plan guide explains how the plan works.
Results depend on your plan terms and IRS rules. Not legal or tax advice.
How do I get quotes for small business health insurance plans?
You get quotes by giving a broker or carrier your employee census, ZIP codes and current plan. Ask for at least three options and compare the deductible and out-of-pocket maximum, not only the premium.
Copy and send this request, and fill in the brackets:
Subject: Small group health insurance quote request, [Company Name]
>
Hello, I run a business in [City, State] with [number] employees. I would like quotes for a [January 1 / other] effective date. Please quote a fully insured plan and a level-funded plan, and tell me whether my group qualifies for SHOP. Attached is my census with each employee's age and ZIP code. I plan to contribute [percent] of the employee-only premium. Please include the deductible, out-of-pocket maximum, network and 2027 renewal outlook for each option. Thank you.
Also ask each quote to be priced twice, once with and once without a Section 125 plan, so you can see the payroll tax effect.
Results depend on your plan terms and IRS rules. Not legal or tax advice.
Compare Your Plan Options Side by Side
See your current plan next to a Section 125 setup, with the payroll tax savings and the net cost after the $35 per employee monthly fee, which those savings cover.
Frequently Asked Questions
What are small business health plans?
What are the options for small business health insurance?
How much do small business health care plans cost per employee?
How many employees do you need for small business health coverage?
Is there a tax credit for small business health insurance plans?
Can a Section 125 plan work with any small business health plan?
Sources: KFF, 2025 Employer Health Benefits Survey (2025); Peterson-KFF Health System Tracker, How much and why premiums are going up for small businesses in 2027 (August 2026); IRS Revenue Procedure 2025-32, 2026 inflation adjustments, QSEHRA limits (via Alera Group summary, 2025); healthinsurance.org, QSEHRA glossary (2026); SHRM, ICHRA final rule summary (2019); HealthCare.gov, Small business SHOP coverage (2026); IRS, Instructions for Form 8941 (2025); IRS Tax Topic 751, Social Security and Medicare withholding rates (2026); IRS, 2026 tax inflation adjustments (2025); Summit Health Benefits, Section 125 program terms (2026).