Offering group health insurance can boost employee retention, improve recruitment, and provide tax advantages—but not all group plans are created equal.
From traditional fully insured policies to modern reimbursement models like ICHRA, the type of group health benefit you choose can significantly impact your bottom line and employee satisfaction.
Group health insurance is coverage provided by an employer (or other organization) to a group of individuals, most often employees. The plan offers uniform benefits to all enrollees and spreads risk across the group, typically resulting in better coverage and more affordable premiums than individual plans.
Employers usually pay a portion of the premium, and employees can often add spouses and dependents at group rates.
You don’t need to be a large corporation to offer group health insurance. You may qualify if you:
Have at least one eligible W-2 employee (not including the owner or spouse)
Operate as a legal business entity (LLC, S-corp, C-corp, partnership)
Can meet the minimum participation and contribution requirements set by your insurance provider or plan type
What it is:
The traditional model. You purchase a plan from a health insurance carrier, pay a fixed premium, and the carrier assumes all the risk and handles claims.
Pros:
Predictable monthly costs
Low administrative burden
Easy to implement and widely accepted
Cons:
Premiums can increase annually
Limited flexibility in plan design or cost-sharing
Eligibility Requirements:
Typically need at least one W-2 employee
Must meet minimum contribution (often 50%) and participation (around 70%) requirements
Best for:
Small to medium businesses seeking a simple, hands-off way to offer comprehensive health benefits.
What it is:
A hybrid between fully insured and self-funded plans. You pay a fixed monthly amount that includes claims funding, admin fees, and stop-loss insurance. If claims are low, you may get a refund.
Pros:
Potential cost savings and refunds
Predictable monthly costs
Offers claims transparency
Cons:
More financial risk than a fully insured plan (though limited by stop-loss coverage)
Slightly higher administrative responsibilities
Eligibility Requirements:
Best for groups with 5+ employees
Some underwriting may be required
Best for:
Businesses that want more control over healthcare costs and have relatively healthy employee populations.
What it is:
Instead of offering a group plan, the employer gives employees a monthly allowance. Employees then purchase their own individual health insurance and get reimbursed tax-free.
Pros:
Highly flexible and customizable by employee class
Employees choose their own plan
No minimum group size required
Cons:
Employees must enroll in a qualified individual health plan
More communication and education may be needed for employees to understand options
Eligibility Requirements:
Must be offered on equal terms to employees within each defined class
Employer cannot offer a group plan and ICHRA to the same class of employees
Best for:
Companies with remote teams, variable staff, or a desire for maximum flexibility.
What it is:
A specific HRA available to businesses with fewer than 50 full-time employees. The employer sets a tax-free reimbursement limit for health insurance premiums and qualified medical expenses.
Pros:
Low cost and easy to administer
No group plan required
Tax-free for both employer and employees
Cons:
Annual reimbursement limits are capped by the IRS
Not available to businesses offering any group health plan
Eligibility Requirements:
Employer must have fewer than 50 full-time employees
Must be offered uniformly to all eligible employees
Best for:
Very small businesses and startups that want to provide a health benefit without managing a group plan.
What it is:
A benefit structure (not a health plan itself) that allows employees to pay for eligible expenses—like health insurance premiums, dental, vision, or FSA contributions—using pre-tax dollars.
Pros:
Reduces employee taxable income
Reduces employer payroll taxes
Enhances existing benefits
Cons:
Requires some legal documentation and annual nondiscrimination testing
Doesn’t provide health insurance on its own—must be paired with other offerings
Eligibility Requirements:
Employer must offer eligible benefits
Plan must comply with IRS regulations and reporting
Best for:
Employers who already offer group coverage and want to enhance tax efficiency for both the business and employees.
Choosing the right type of group health insurance depends on your business size, budget, and goals. From traditional fully insured plans to flexible reimbursement models like ICHRA and QSEHRA, today’s health benefit landscape offers more options than ever before.
We can help you choose the right structure and benefits strategy for your business. Whether you’re a solo owner, have a growing team, or want to offer flexible support to remote staff, there’s a solution that fits.
Get in touch with us today by clicking the button below to receive your tailored consultation or custom group quote.