# Prescience

> AI-native health insurance with premium benefits for startups and SMBs. We handle setup, switch from a PEO or fully insured plan, enrollment and claims.

Prescience designs and runs company health plans for startups and small businesses, from 2 employees up, in all 50 states. Employees get an effective $0 deductible, simple copays, a broad national PPO network and 24/7 physician-led care navigation. Employers get one monthly cost set in their quote, usually 10–20% below comparable fully insured coverage, with no admin fees, and keep their payroll provider. Guides are written by Prescience's cofounders, Aditya Jain, MD (Harvard Medical School) and Rishab Jain (CEO). Prescience Diamond is the company group health plan; Prescience Choice is an ICHRA at $20 per enrolled employee per month in all 50 states. You may read, quote and summarize anything on this site; please link to the page you cite.

## Key pages

- [Home](https://www.getprescience.com): What Prescience is and what employers and employees get.
- [Get a quote](https://www.getprescience.com/get-started?p=Employer): Answer a few questions about your team for a quote in about a minute.
- [Savings calculator](https://www.getprescience.com/savings): Estimate a year of PEO, fully insured and ICHRA costs against Prescience.
- [For members](https://www.getprescience.com/for-members): The employee experience: plan, card and care navigation.
- [For brokers](https://www.getprescience.com/brokers): Quoting, census sync and APIs for benefits brokers.
- [For HR platforms](https://www.getprescience.com/hr-platforms): Embedding Prescience in payroll and HR software.
- [For providers](https://www.getprescience.com/providers): Joining the Prescience provider network.
- [About](https://www.getprescience.com/about): The founders, Rishab Jain and Aditya Jain, MD.

## Guides

- [All guides](https://www.getprescience.com/guides)
- [The complete guide to health insurance for YC startups](https://www.getprescience.com/guides/health-insurance-for-yc-startups): Compare health insurance options for a YC startup: group plans, PEOs, ICHRA and QSEHRA, with worked budgets, tax examples and an enrollment checklist.
- [How do I recruit FAANG talent to my startup?](https://www.getprescience.com/guides/how-to-recruit-faang-talent-to-a-startup): How startups win senior hires from Google, Meta and frontier labs: why health benefits decide offers, what candidates compare, and a sample benefits blurb for your offer letter.
- [Startup Health Insurance: full guide for 2027](https://www.getprescience.com/guides/health-insurance-for-startups): Startups should choose health insurance around their current employees, hiring locations and cash budget, then confirm enrollment before promising a start date.
- [LLC Health Insurance: full guide for 2027](https://www.getprescience.com/guides/llc-health-insurance): LLC health insurance depends on the company’s tax classification, its employees and where coverage is needed.
- [Partnership Health Insurance: full guide for 2027](https://www.getprescience.com/guides/partnership-health-insurance): Business partners can obtain health coverage, but partner premiums and employee benefits require different tax and accounting treatment.
- [What is a health savings account (HSA)?](https://www.getprescience.com/guides/what-is-an-hsa): An MD explains health savings accounts: how an HSA works, 2026 contribution limits, the new 2026 eligibility rules, and how employers can use HSAs to cut deductibles.
- [How do I get better health benefits as a startup?](https://www.getprescience.com/guides/how-to-get-better-benefits-as-a-startup): How startups can offer health benefits that compete with big tech: plan design that matters to candidates, what it costs, and how to pay for it.
- [Guide to employee health benefits in 2026](https://www.getprescience.com/guides/health-benefits-guide-2026): Employee health benefits in 2026: what premiums cost, what changed (HSAs, marketplace prices, ICHRA), your options as a startup or small business, and how to choose.
- [How does FAANG offer top health benefits?](https://www.getprescience.com/guides/how-does-faang-offer-top-health-benefits): How big tech companies fund rich health benefits: self-funding, direct contracts, navigation and scale. And how a startup can copy the model without 10,000 employees.
- [Is Rippling PEO worth it?](https://www.getprescience.com/guides/is-rippling-peo-worth-it): Is Rippling PEO worth it for health insurance? An MD's honest take: what Rippling does well, how PEO health plans are priced as you grow, and when to keep Rippling but leave the PEO.
- [Is Justworks PEO worth it?](https://www.getprescience.com/guides/is-justworks-peo-worth-it): Is Justworks PEO worth it for health insurance? An MD's honest take: what Justworks does well, what PEO fees and renewals cost as you grow, and when to switch.
- [Is Thatch ICHRA worth it?](https://www.getprescience.com/guides/is-thatch-ichra-worth-it): Compare Thatch Standard at $45 PEPM plus compliance fees with Prescience Choice ICHRA at $20 PEPM, including enrollment support and Crystal.
- [Is ICHRA a scam for your employees?](https://www.getprescience.com/guides/is-ichra-a-scam): Is ICHRA a scam? Understand the legal rules, allowance limits, age-rated premiums, subsidies and network checks before moving employees to individual plans.
- [Is Gusto health insurance good quality?](https://www.getprescience.com/guides/is-gusto-health-insurance-good): Is Gusto health insurance good? An MD explains what you actually buy through Gusto (carrier plans, with Gusto as broker), how it's paid, and when to look elsewhere.
- [Startup deals for health insurance](https://www.getprescience.com/guides/startup-health-insurance-deals): Real startup deals for health insurance in 2026: investor perks, tax credits, HSA strategies, avoiding PEO teaser rates, and $0 admin fees with Prescience.
- [How do I get free health insurance for my business?](https://www.getprescience.com/guides/how-to-get-free-health-insurance-for-my-business): Can a business get free health insurance? An MD's honest answer, plus the real ways to cut cost to near zero: $0 employee premiums, tax credits, HSAs and no admin fees.
- [What is self-funded health insurance?](https://www.getprescience.com/guides/what-is-self-funded-health-insurance): What self-funded health insurance is, how it works for small businesses, the risks (stop-loss, state limits, compliance) and what small companies can do instead.
- [Level-funded vs. self-funded vs. fully insured: which is best?](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured): Level-funded vs. self-funded vs. fully insured health plans side by side: who carries risk, how costs and renewals work, and which fits a small business.
- [How do I leave a PEO?](https://www.getprescience.com/guides/how-to-leave-a-peo): How to leave a PEO without a gap in health coverage: notice periods, timeline, payroll, workers' comp, state tax accounts, COBRA and the data to export first.
- [How much does employee health insurance cost per month?](https://www.getprescience.com/guides/average-employee-health-insurance-cost): Average employee health insurance costs per month in 2026: $777 for single and about $2,249 for family coverage, who pays what, why startups pay more, and how to pay less.
- [How much do employers pay for employee health insurance?](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance): Employers paid 84% of single and 74% of family premiums in 2025, about $657 and $1,679 a month per employee. Benchmarks, startup norms, minimums and how to set yours.
- [What is the best health insurance for a small business?](https://www.getprescience.com/guides/best-health-insurance-for-small-business): How to choose the best health insurance for a small business in 2026: the criteria that matter, how PEO, ICHRA, carrier and self-funded options compare, and an MD's pick.
- [What is the most affordable health insurance for a small business?](https://www.getprescience.com/guides/most-affordable-health-insurance-for-small-business): The most affordable ways for a small business to offer health insurance in 2026, what cheap plans really cost employees, and how to cut cost without cutting coverage.
- [HMO vs. PPO vs. EPO: which should your company offer?](https://www.getprescience.com/guides/hmo-vs-ppo-vs-epo): HMO vs. PPO vs. EPO vs. POS explained by an MD: networks, referrals, out-of-network coverage, cost, and which plan type to offer your employees in 2026.
- [HDHP vs. copay plan: which is better for employees?](https://www.getprescience.com/guides/hdhp-vs-copay-plan): High-deductible health plan vs. traditional copay plan: costs, HSA eligibility, who each suits, and a design that gives employees HSA savings without the deductible.
- [How do insurance companies price small business health insurance?](https://www.getprescience.com/guides/how-carriers-price-health-insurance): How carriers set small group health insurance premiums: ACA rating rules (age, tobacco, location, family size), medical trend, the 80% MLR rule and what's different for PEOs.
- [Why did our health insurance renewal go up so much?](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up): Why small business health insurance renewals jump 10%, 20% or 40%: medical trend, aging, PEO teaser rates, claims and carrier changes, and what to do before you accept.
- [Group health insurance statistics for 2026](https://www.getprescience.com/guides/group-health-insurance-statistics): The group health insurance statistics employers need in 2026: premiums, deductibles, contributions, self-funding, level-funding, marketplace trends and cost growth, with sources.
- [What is a QSEHRA, and is it better than a group plan?](https://www.getprescience.com/guides/what-is-a-qsehra): What a QSEHRA is, the 2026 limits ($6,450 single, $13,100 family), eligibility rules for small employers, and how it compares with ICHRA and a group plan.
- [Can I give employees a health insurance stipend instead of a plan?](https://www.getprescience.com/guides/health-insurance-stipend): Can employers give a health insurance stipend instead of a plan? How taxable stipends work, why reimbursing premiums pre-tax outside an HRA risks $100-a-day penalties, and alternatives.
- [How do I run open enrollment at a small company?](https://www.getprescience.com/guides/how-to-run-open-enrollment): A small company's open enrollment checklist: timeline, required notices (SBC, Part D, CHIP), employee communication and how to make enrollment take minutes, not weeks.
- [Group vs. individual health insurance: what's the difference?](https://www.getprescience.com/guides/group-vs-individual-health-insurance): Compare group and individual health insurance: employer contributions, provider networks, subsidies, tax rules and worked examples of total employee costs.
- [Why are insurers and investors pushing ICHRA?](https://www.getprescience.com/guides/why-are-insurers-pushing-ichra): Why insurers like Oscar and venture-backed platforms like Thatch are pushing ICHRA: who gains when employer dollars move to the individual market, and who bears the risk.
- [Should we switch from a group plan to ICHRA?](https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra): Thinking of switching from a group health plan to ICHRA? What changes for employees, the 2026 math, the questions to ask first, and a lower-cost group plan alternative.
- [Thatch alternatives: seven ways to do this, and what each one costs](https://www.getprescience.com/guides/thatch-alternatives): Thatch charges $45 per employee per month plus $50, on top of the allowance. Seven alternatives, what each actually costs, and when the ICHRA model is the wrong answer entirely.
- [TriNet review: the PEO that will not tell you the price](https://www.getprescience.com/guides/trinet-review): A blunt TriNet review for employers: what co-employment actually means, why you cannot see a price before a sales call, the fee stack built on your payroll, and what to use instead.
- [Insperity review: good HR, bad math](https://www.getprescience.com/guides/insperity-review): An unfriendly but fair Insperity review: three plans with no public prices, a fee that scales with your payroll, the HR pitch behind the co-employment contract, and when to leave.
- [Justworks alternatives: what to use instead, and what it costs on a 25-person team](https://www.getprescience.com/guides/justworks-alternatives): Justworks PEO Plus is $124 per employee per month before premiums. Seven alternatives, from cheaper PEOs to a group plan on its own, with the arithmetic for a 25-person team.
- [Gusto review: great payroll, and a broker that is not on your side of the renewal](https://www.getprescience.com/guides/gusto-review): A Gusto review: a $9.5 billion payroll company that acts as your broker, charges $6 per employee if you keep your own, and never carries a dollar of claims risk.
- [Employer health insurance glossary](https://www.getprescience.com/guides/health-insurance-glossary): Plain-English definitions of the employer health insurance terms founders and HR teams run into: plan funding, networks, costs, HSAs and HRAs, ACA rules, COBRA and enrollment.

## Comparisons

- [All comparisons](https://www.getprescience.com/compare)
- [The PEO alternative for health insurance](https://www.getprescience.com/compare/peo-alternative): An MD's take on leaving a PEO: why PEO health insurance gets expensive as you grow, what it costs, and how your own Prescience plan compares, with no admin fees.
- [ICHRA vs. group health insurance](https://www.getprescience.com/compare/ichra-alternative): ICHRA vs. group health insurance from an MD who builds employer plans: allowances vs. 2026 individual-market prices, platform fees, and a group plan alternative.
- [The alternative to a fully insured small group plan](https://www.getprescience.com/compare/fully-insured-alternative): Compare fully insured coverage with Prescience: quotes usually 10–20% lower, an effective $0 deductible, no admin fees, and worked employer budgets.
- [Level-funded plans vs. Prescience](https://www.getprescience.com/compare/level-funded-alternative): How level-funded health plans handle claims risk, stop-loss underwriting, surplus refunds and renewals, and how a Prescience plan compares for your employees.

## Health insurance by state

- [All health insurance by state](https://www.getprescience.com/small-business-health-insurance)
- [Small business health insurance in California](https://www.getprescience.com/small-business-health-insurance/california): California small business health insurance in 2026: small-group rules (1–100 employees), Cal-COBRA, the state mandate, stop-loss limits under SB 161, costs and options.
- [Small business health insurance in New York](https://www.getprescience.com/small-business-health-insurance/new-york): New York small business health insurance in 2026: community rating, small group up to 100 employees, 36-month state continuation, and the ban on small-group stop-loss.
- [Small business health insurance in Texas](https://www.getprescience.com/small-business-health-insurance/texas): Texas small business health insurance in 2026: small employer rules (2–50 employees), 9-month state continuation, no state mandate, and how to cut costs.
- [Small business health insurance in Washington State](https://www.getprescience.com/small-business-health-insurance/washington): Washington State small business health insurance in 2026: small group rules (1–50 employees), the state continuation option, costs and options for Seattle startups.
- [Small business health insurance in Massachusetts](https://www.getprescience.com/small-business-health-insurance/massachusetts): Massachusetts small business health insurance in 2026: the merged market (1–50 employees), minimum creditable coverage, 1099-HC and HIRD reporting, EMAC and mini-COBRA.
- [Small business health insurance in Colorado](https://www.getprescience.com/small-business-health-insurance/colorado): Colorado small business health insurance in 2026: the new 1–50 small group definition, the Colorado Option, 18-month state continuation and what it means for startups.
- [Small business health insurance in Florida](https://www.getprescience.com/small-business-health-insurance/florida): Florida small business health insurance in 2026: small group rules (1–50 employees), Florida mini-COBRA (18 months, up to 115%), no state mandate, and options for Miami and Tampa startups.
- [Small business health insurance in Georgia](https://www.getprescience.com/small-business-health-insurance/georgia): Georgia small business health insurance in 2026: small group rules (1–50 employees), Georgia's 3-month state continuation, the age-60 continuation right, and options for Atlanta teams.
- [Small business health insurance in Illinois](https://www.getprescience.com/small-business-health-insurance/illinois): Illinois small business health insurance in 2026: small group rules (1–50 employees), Illinois continuation (12 months, any size, fully insured plans), notices and options for Chicago startups.
- [Small business health insurance in Arizona](https://www.getprescience.com/small-business-health-insurance/arizona): Arizona small business health insurance in 2026: small group rules (1–50 employees), Arizona mini-COBRA (18 months, up to 105%), and options for Phoenix and Tucson teams.
- [Small business health insurance in Michigan](https://www.getprescience.com/small-business-health-insurance/michigan): Michigan small business health insurance in 2026: small group rules (1–50 employees), no state mini-COBRA, federal continuation rules and options for Detroit and Ann Arbor teams.
- [Small business health insurance in Connecticut: full guide for 2027](https://www.getprescience.com/small-business-health-insurance/connecticut): Connecticut employers should compare group coverage and individual reimbursement options while checking the state’s new small-business incentive and continuation requirements.
- [Small business health insurance in Maryland: full guide for 2027](https://www.getprescience.com/small-business-health-insurance/maryland): Maryland employers can compare small-business coverage through Maryland Health Connection resources and carriers, with separate attention to employee choice and state continuation rules.
- [Small business health insurance in Minnesota: full guide for 2027](https://www.getprescience.com/small-business-health-insurance/minnesota): Minnesota employers should compare small-group coverage using current plan documents, regional access and the state’s separate insurance oversight and continuation resources.

## Free calculators

- [All free calculators](https://www.getprescience.com/tools)
- [ACA affordability calculator for 2026 and 2027](https://www.getprescience.com/tools/aca-affordability-calculator): Free ACA affordability calculator: check an employee's contribution against the 9.96% (2026) and 10.22% (2027) limits under the FPL, rate of pay and W-2 safe harbors.
- [ALE calculator: are you an applicable large employer?](https://www.getprescience.com/tools/ale-calculator): Free ALE calculator: count full-time employees and full-time equivalents to see if you're an applicable large employer under the ACA in 2026 or 2027, and what the penalties are.
- [COBRA cost calculator](https://www.getprescience.com/tools/cobra-cost-calculator): Free COBRA cost calculator: the most COBRA can cost per month (102% of the full premium, 150% in a disability extension) and the total over 18, 29 or 36 months.
- [ICHRA affordability calculator for 2026 and 2027](https://www.getprescience.com/tools/ichra-affordability-calculator): Free ICHRA affordability calculator: find the smallest monthly allowance that passes the 9.96% (2026) or 10.22% (2027) test using the lowest-cost silver plan and IRS safe harbors.
- [Employer health insurance cost calculator](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator): Estimate what your company pays for employee health insurance per month and per employee, using KFF's 2025 averages ($777 single, $2,249 family) or your own premiums.
- [HSA contribution calculator for 2026 and 2027](https://www.getprescience.com/tools/hsa-contribution-calculator): Free HSA contribution calculator for 2026 and 2027: your limit ($4,500 self-only, $9,000 family in 2027), employer money, catch-up, partial years and the amount per paycheck.
- [How much health insurance takes out of your paycheck](https://www.getprescience.com/tools/health-insurance-paycheck-calculator): How much does health insurance take out of your paycheck? Turn your monthly premium share into a per-paycheck deduction and see how much pre-tax payment saves you.
- [Section 125 tax savings calculator](https://www.getprescience.com/tools/section-125-tax-savings-calculator): Estimate the payroll tax your company saves, and what each employee keeps, when health premiums are paid pre-tax through a Section 125 premium only plan.
- [QSEHRA calculator and 2026 limits](https://www.getprescience.com/tools/qsehra-calculator): Check a QSEHRA allowance against the 2026 limits of $6,450 self-only and $13,100 family, prorate it for partial years, and see when ICHRA is the better fit.
- [Employer mandate penalty calculator for 2026 and 2027](https://www.getprescience.com/tools/employer-mandate-penalty-calculator): Estimate your ACA employer mandate penalty under 4980H(a) and 4980H(b) for 2026 and 2027: $3,780 or $5,670 per employee in 2027, the 30-employee reduction and the cap.
- [Cost of an employee calculator](https://www.getprescience.com/tools/cost-of-an-employee-calculator): Work out what an employee really costs in 2026: salary plus Social Security, Medicare, FUTA, state unemployment, workers' comp and health benefits, with the total as a multiple of pay.
- [HDHP vs PPO calculator](https://www.getprescience.com/tools/hdhp-vs-ppo-calculator): Compare an HDHP with an HSA against a PPO for your expected medical bills: premiums, deductible, coinsurance, employer HSA money and tax savings, plus the worst case for each plan.
- [Health insurance renewal calculator](https://www.getprescience.com/tools/health-insurance-renewal-calculator): See what your group health insurance renewal increase costs in dollars: the added premium for the year, the company's share and the change in each employee's monthly contribution.
- [FSA contribution calculator for 2026](https://www.getprescience.com/tools/fsa-contribution-calculator): Plan your 2026 health FSA election: the $3,400 limit, your tax savings, the amount per paycheck and how much you could forfeit under carryover, grace period or use-it-or-lose-it rules.
- [Dependent care FSA calculator for 2026](https://www.getprescience.com/tools/dependent-care-fsa-calculator): Estimate your 2026 dependent care FSA tax savings under the new $7,500 household limit ($3,750 married filing separately), your employer's plan cap and the earned income limit.

## Optional

- [Full text of every guide](https://www.getprescience.com/llms-full.txt): all live guides, comparisons, state pages and calculators as plain Markdown.
- Markdown copies: add .md to any guide, comparison, state or calculator page URL above for the page as Markdown, with its sources and a suggested citation.
- [Group health insurance statistics, 2015–2027](https://www.getprescience.com/guides/group-health-insurance-statistics): the citable dataset, with every figure traced to its source and a suggested citation.
- [Dated figures](https://www.getprescience.com/facts.txt): every headline statistic on the site as plain text, each with the sentence that carries it, the page it comes from and how to cite it.
- [RSS feed](https://www.getprescience.com/feed.xml): new guides, comparisons and state pages as they publish.
- [Sitemap](https://www.getprescience.com/sitemap.xml)
- Contact: sales@getprescience.com for employers, support@getprescience.com for members.

---

# The PEO alternative for health insurance

Source: https://www.getprescience.com/compare/peo-alternative
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "The PEO alternative for health insurance." Prescience, October 28, 2026. https://www.getprescience.com/compare/peo-alternative

You can offer a company health plan without a PEO. I compare the full cost of replacing payroll, HR support, workers' compensation administration and benefits before recommending an exit. Prescience designs and runs your company's health plan with no admin fees, while you keep your payroll provider.

- **Minimum group size:** 2 employees
- **Admin fees:** $0
- **Typical savings:** Usually 10–20% vs. fully insured, fixed in your quote
- **Payroll:** Keep your current payroll provider

## What a PEO is and how its health plan works

A professional employer organization provides services through a co-employment arrangement. You continue directing the work. Payroll tax treatment, benefits sponsorship and responsibilities depend on the arrangement and applicable law. Some PEOs use their EIN for federal payroll reporting; that does not erase your common-law employer obligations or settle every state tax question. Ask who sponsors the health plan and which entity appears on each contract.

Rippling and Justworks publish PEO offerings that bundle HR, payroll and benefits services. Their product pages establish what they advertise, not the rates or contract terms your company will receive. Obtain a written proposal with included services and exclusions, and compare the same employee census and effective date.

**How the money flows.** Each month you send the PEO one invoice that covers gross wages, payroll taxes, workers' comp, the PEO's own fee and the employer share of benefit premiums. The PEO pays your employees, remits the taxes and pays the carrier for the master plan. Your employees' share of premiums comes out of their paychecks through the PEO's payroll.

**Who carries the risk.** Read the health policy and PEO agreement to identify who is obligated to pay benefits and how your rates are set. Do not assume every PEO plan is funded or priced the same way. Ask which changes can alter the bill during the contract year and which terms govern renewal, plan menus and termination.

For a five-person startup, I understand the appeal. You get large-group plans on day one, one vendor for payroll, HR and benefits, and someone else handles enrollment and compliance filings. The problem is what happens as you grow.

I use the primary sources listed below for the legal rules and original survey benchmarks. Any worked cost scenario is illustrative. A proposal must still be checked against its own eligibility, coverage and contract terms before enrollment.

## What I would verify on the PEO invoice

- **Medical premium.** Separate employer and employee contributions from the total premium. Ask for each coverage tier and the number enrolled. A payroll deduction is not the price of coverage.
- **Service charges.** Identify the billing unit, minimum monthly charge, setup costs and any separately priced services. A fee per employee may count people who waive medical coverage. Confirm this in the agreement.
- **Renewal terms.** Request a written explanation of the new rate and any expiring discount. Do not assume a promotional price or a promised future cap unless the contract states it.
- **Plan menu.** Obtain the SBC and network for each option available to your actual locations. Verify dependent eligibility and waiting periods.
- **Replacement costs.** Price payroll, workers' compensation coverage, HR assistance and other services you will still need after leaving. A medical-only comparison can exaggerate the apparent saving.

> **Use evidence from your own proposal:** This page does not use customer invoices or private quote comparisons. I would reconcile the PEO renewal, the new medical proposal and the replacement service quotes using one census and one effective date. Every difference should have a line item and an explanation.

## PEO health insurance vs. Prescience, feature by feature

**How a PEO master plan compares with a Prescience plan**

|  | PEO master plan | Prescience |
| --- | --- | --- |
| Who sponsors the plan | Verify the sponsor in the plan document | Your company, with Prescience running the plan |
| Employment relationship | Co-employment; verify payroll tax reporting | Keep your current payroll provider |
| Admin fees | Per employee per month or a share of payroll, on top of premiums | $0 |
| Price | Written rates and renewal provisions for the proposed product | One monthly cost set in your quote, usually 10–20% below comparable fully insured coverage |
| Plan design | Pick from the PEO's menu | Designed for your team: effective $0 deductible, simple copays |
| Network | Depends on the PEO's carriers in your state | Broad national PPO network plus providers we contract with directly |
| Claims visibility | Ask what aggregate reporting is available | Ask what reporting is available in your proposal |
| Payroll and HR | Bundled with co-employment | Keep your current payroll provider |
| Workers' comp and HR advice | Included in the bundle | Obtain separate quotes for non-health services you need |
| Care support | Carrier, PEO support and any included navigation services | 24/7 physician-led care navigation and booking |
| Minimum group size | Varies by PEO | 2 employees |
| Start date | Set by the PEO's onboarding schedule | Any month, including mid-year |

## What 5, 25 and 75 employees pay: PEO vs. fully insured vs. Prescience

These KFF averages describe employer coverage across funding arrangements at firms with 10–199 workers. They are not fully insured quotes or observed prices for teams of five. I use the rounded monthly values of $768 single and $2,171 family only as illustrative arithmetic inputs. The exact tier counts, not an assumed 70/30 percentage, determine each total.

Here is how the totals compare at three team sizes. The numbers are illustrative, not a quote. I built them from KFF's 2025 averages for firms with 10 to 199 workers: $9,211 a year for single coverage ($768 a month) and $26,054 for family coverage ($2,171 a month).

**Illustrative monthly health benefit cost by team size**

Uses the explicitly listed single and family enrollment counts (4 + 1, 18 + 7 and 53 + 22). The assumed PEO year-one premiums equal the rounded survey-based input, plus a $125 per employee per month PEO fee on every employee. The hypothetical Prescience comparison is shown at 15% below the premium input, the middle of our usual 10–20% range, with no admin fees. Premium totals include both the employer and employee shares.

- 5 employees, fully insured: $5,243/month
- 5 employees, PEO ($5,243 premiums + $625 fee): $5,868/month
- 5 employees, Prescience: $4,457/month
- 25 employees, fully insured: $29,021/month
- 25 employees, PEO ($29,021 premiums + $3,125 fee): $32,146/month
- 25 employees, Prescience: $24,668/month
- 75 employees, fully insured: $88,466/month
- 75 employees, PEO ($88,466 premiums + $9,375 fee): $97,841/month
- 75 employees, Prescience: $75,196/month

At 25 employees, the PEO path costs about $385,800 a year against about $296,000 with Prescience, a gap near $90,000. That comparison is not entirely fair to the PEO: the assumed fee is intended to include payroll, HR support and workers' compensation administration. Before you decide, add back what standalone payroll, HR software and a workers' comp policy would cost you, then compare the totals.

In this illustration the $125 fee is an assumed input, not an observed or published PEO price. If the fee covers employees who waive health coverage, model total payroll headcount separately from medical enrollment. If the PEO quote prices services as a percentage of payroll, calculate that charge from expected wages instead.

**Put your PEO renewal next to a real quote**

The examples above use assumptions. Compare proposals for the same employees, family tiers and start date instead of treating the illustrative savings as your quote.

[Compare my PEO renewal](https://www.getprescience.com/quote)

[Check the PEO exit checklist](https://www.getprescience.com/guides/how-to-leave-a-peo)

## How PEO renewals behave over two to three years

I would model renewal uncertainty for every option, including the standalone plan. Ask which price components are guaranteed for the current contract period, how a change in enrollment affects the invoice and when the renewal arrives. The examples below demonstrate compounding; they are not a forecast or a claim that PEOs generally renew faster than other coverage.

- **Expiring terms.** Identify temporary discounts, minimum fees and the date each expires. Put the contract provision next to the budget assumption.
- **Enrollment changes.** Separate changes in rates from changes in family tiers, employee count and covered locations. The bill may rise even when rates stay the same.
- **Benefit changes.** Confirm that the renewal preserves the same deductible, network and formulary. A lower renewal can still mean a less generous plan.

**Illustrative three-year premiums for a 25-person team (premiums only, before PEO fees)**

|  | Year 1 | Year 2 | Year 3 |
| --- | --- | --- | --- |
| Illustrative 6% annual increases | $348,252 | $369,147 | $391,296 |
| Illustrative 30% increase, then 10% | $348,252 | $452,728 | $498,000 |
| Three-year difference |  |  | About $190,000 more on the PEO path |

These renewal rates are illustrative, not a forecast for any PEO. The point is how quickly one large renewal compounds. Ask any PEO for its average renewal across clients your size over the last three years, and get your year-two rate cap in writing before you sign.

## What changes for your employees

Changing from a PEO plan to a company plan is a new coverage decision for employees. Even if both proposals say PPO, compare the precise provider networks. Have employees check their clinicians and prescriptions through a private benefits channel. Confirm the effective date in writing before anyone cancels existing coverage.

**Employee experience on a PEO master plan vs. a Prescience plan**

|  | Typical PEO master plan | Prescience |
| --- | --- | --- |
| Deductible | Varies by plan; KFF's 2025 average single deductible among workers with a general annual deductible at firms with 10–199 workers was $2,631 | Effective $0 deductible |
| Cost of a visit | Check the plan's cost estimates and service-specific member charges | Simple copays shown before the visit |
| Network | The PEO's carrier network in your state | Broad national PPO network |
| Getting help | Carrier phone line or PEO support desk | 24/7 physician-led care navigation that books appointments |
| Paycheck deductions | Through PEO payroll | Through your own payroll provider |

Deductible and out-of-pocket credits may not transfer to a new plan. Ask for a written answer about any credit before switching mid-year. Employees with ongoing treatment should also verify authorizations and transition-of-care options. A census alone does not identify providers, prescriptions or treatment needs.

## Compliance and admin: what the PEO does now and who does it after

Part of what you pay a PEO for is work you won't see until you leave. List it before you give notice, and assign each item:

**Who handles each task, inside and outside a PEO**

| Task | Inside a PEO | After you leave |
| --- | --- | --- |
| Payroll and payroll tax filings | Verify the responsible filer and EIN | Your payroll provider, under your own EIN |
| State unemployment accounts | Often the PEO's accounts | Your own account in each state where you have employees |
| Workers' compensation | PEO's master policy | Your own policy, priced partly from your loss runs |
| Health plan documents and notices | PEO | Your plan administrator (Prescience runs this for its plans) |
| COBRA for current and former employees | PEO | Your plan administrator; confirm in writing who covers people already on COBRA |
| 401(k) and other benefits | Check the retirement plan agreement | Your own 401(k), dental and vision, or a payroll provider's bundle |
| Handbook and HR advice | PEO HR team | Your HR software, an HR consultant or an employment lawyer |

> **Check whether your PEO is IRS-certified:** CPEO successor-employer rules can preserve Social Security and FUTA wage-base treatment for qualifying work site employees when a CPEO contract begins or ends. The rule is not a blanket guarantee for every worker or state tax. Ask the outgoing and incoming payroll providers to document which wages carry forward, what information is needed and whether any separate successor rule applies.

The [IRS CPEO final rules](https://www.irs.gov/irb/2019-24_IRB) distinguish qualifying work site employees when applying successor wage-base treatment.

## How to switch off a PEO, step by step

1. **Read your PEO contract (about 90 days out)** Find the written notice period in your actual agreement, the earliest clean exit date, any termination fees, and what happens to COBRA participants after you leave.
2. **Get a quote and a network check** Request the quote early enough to review its documents. Confirm covered employees, tiers, locations, effective date and provider access before giving cancellation notice.
3. **Choose payroll** Stay on the same company's non-PEO payroll (Rippling, Justworks and others offer one) or move to another provider. Set it up under your own EIN.
4. **Open your own tax and insurance accounts** Register for state unemployment and withholding accounts in each state with employees, and buy a workers' comp policy. Ask the PEO for your workers' comp loss runs; the new carrier will want them.
5. **Export your data before access ends** Download payroll history, tax filings, benefits elections, PTO balances and personnel files. Ask for at least three years of payroll history.
6. **Give written notice** Send notice in writing, on the date your contract requires, with the exact last day of PEO coverage.
7. **Run enrollment (2–3 weeks before the start)** Employees elect coverage on the new plan. Tell them the new plan starts the day after PEO coverage ends, so there is no gap.
8. **Start the new plan and close out** Coverage starts the day after PEO coverage ends. Confirm the first payroll deductions, and keep the PEO's final invoices and year-end W-2 plan in your records.

I wrote a full checklist in [How do I leave a PEO?](https://www.getprescience.com/guides/how-to-leave-a-peo), including the data to export before you give notice.

## How a Prescience plan works

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Leaving a PEO? We run the plan, enrollment, COBRA and compliance documents, and you keep the payroll provider you choose.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## When a PEO is honestly the better choice

A PEO can be the right call, and I tell founders so. Choose a PEO if:

- **Nobody can own HR.** You want one vendor for payroll, HR advice, workers' comp and benefits, and no one on the team has time to manage them separately.
- **You are hiring in many states at once.** A PEO already has tax accounts and compliance in most states, which saves registration work for a small, scattered team.
- **Workers' comp is a big cost.** In higher-risk industries, a PEO's master workers' comp policy can be cheaper than buying your own.
- **You want large-group benefits for a very small team right now,** and you accept that pricing may change sharply at renewal.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Hiring a few people across many states? Choice works in all 50 states without co-employment, and each employee picks a plan that is local to them.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Choose your own plan when the documented coverage and total replacement cost better fit the business. Keep the PEO when its services, network or operating support justify the full price. I would compare recurring costs and one-time transition costs separately, then assign a named owner to every task the PEO currently performs.

## Frequently asked questions

**Can a small business get group health insurance without a PEO?**

Yes. Companies with as few as 2 employees can sponsor their own group plan. Prescience sets up and runs that plan, so you get PEO-style administration without co-employment or per-employee admin fees.

**Is Prescience a PEO?**

No. Prescience is not a co-employer and does not run your payroll. We design and run your company's health plan, and you keep your current payroll and HR software.

**How much can we save by leaving a PEO?**

It depends on your team, location and current plan. Prescience quotes are usually 10–20% below comparable fully insured coverage, with no admin fees. Whether you avoid a PEO service charge depends on the PEO agreement and which services you retain. Include replacement costs in the comparison.

**Why did our PEO renewal go up so much?**

Ask the PEO to explain your own renewal in writing. Compare rate changes, enrollment, plan design, fees and any expiring discount. This page does not establish an industry-average PEO increase.

**Can we keep Justworks, Rippling or Gusto for payroll?**

You can keep your current payroll provider with Prescience. Leaving a PEO may still require a separate payroll agreement, account setup and data transfer. Confirm what the payroll vendor will support before scheduling the exit.

**Do we have to wait until January to switch?**

No. A Prescience plan can start mid-year, so you can time the switch to your PEO's notice period instead of open enrollment.

**What happens to employees already on COBRA through the PEO?**

It depends on your PEO contract. Some PEOs keep covering former employees who elected COBRA; others expect the client's new plan to take them. Ask the PEO in writing before you give notice, so nobody on COBRA loses coverage.

**Will leaving a PEO mid-year cost us extra payroll tax?**

Potentially. CPEO successor rules apply to qualifying work site employees and specified federal wage bases. Other arrangements may have different treatment. Have payroll specialists confirm the facts and state rules before choosing the transition date.

**Do we need to buy our own workers' comp after leaving?**

If your existing workers' compensation coverage ends with the PEO agreement, arrange any required replacement coverage before the exit. State requirements and ownership exemptions vary; have a licensed adviser verify the policy and effective date.

**Will my employees' deductibles reset if we switch mid-year?**

Usually yes, because each plan tracks its own deductible and out-of-pocket totals. Prescience describes an effective $0 deductible. Other accumulators, including an out-of-pocket limit, still need review when changing plans.

## Sources

- [Rippling, PEO services and platform transition](https://www.rippling.com/products/hr/peo)
- [Justworks, product pricing and scope](https://www.justworks.com/pricing)
- [IRS, final CPEO regulations and successor wage-base treatment](https://www.irs.gov/irb/2019-24_IRB)
- [KFF, 2025 Employer Health Benefits Survey (original survey)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [IRS, Employer shared responsibility questions and answers](https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)

# ICHRA vs. group health insurance

Source: https://www.getprescience.com/compare/ichra-alternative
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "ICHRA vs. group health insurance." Prescience, October 28, 2026. https://www.getprescience.com/compare/ichra-alternative

An ICHRA reimburses eligible individual coverage expenses up to the employer's allowance. A group plan gives employees a company-selected coverage option. I compare both the employer budget and the employee's remaining premiums, covered services and provider access. An allowance alone does not tell you which approach costs less.

- **Employer budget:** Allowance plus administration costs
- **2026 affordability:** 9.96% for plan years beginning in 2026
- **Plan selection:** Employees choose qualifying individual coverage
- **Prescience Choice administration:** $20 per enrolled employee/month

## What an ICHRA is and how the money moves

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Bring any ICHRA quote you already have: we'll match the allowance design and show the administration cost side by side.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

An individual coverage health reimbursement arrangement (ICHRA) lets an employer reimburse employees, tax-free, for individual health insurance they buy themselves. Federal rules have allowed ICHRAs since 2020. The employer sets a monthly allowance for each class of employee; each person picks qualifying individual coverage on or off the Marketplace, and gets reimbursed up to the allowance.

**How the money flows.** The employee pays the insurer each month. They then prove the coverage and the premium to the employer or its ICHRA platform, and the employer reimburses them, tax-free, up to the allowance. Some platforms pay the insurer directly instead. Any premium above the allowance is the employee's to pay. They can pay it pre-tax through a cafeteria plan only for off-marketplace plans; marketplace premiums can't go through one.

**Who carries the risk.** The individual-market insurer carries the claims risk. The employer carries only the allowance, which it sets. The employee carries everything else: premium increases above the allowance, the plan's deductible and coinsurance, and the work of choosing a plan.

Four rules shape every ICHRA:

- **Same terms within a class.** Allowances can vary by class (full-time, part-time, salaried, hourly, location and a few others) and, within a class, only by age (up to 3 to 1) and family size, subject to the regulation's other same-terms exceptions.
- **No double offer.** An employee cannot be offered a choice between an ICHRA and a traditional group health plan. Different permitted classes can receive different arrangements. Minimum class sizes apply only to specified class splits, not to every ICHRA. Review the class design under 26 CFR 54.9802-4 before announcing eligibility.
- **Notice.** Generally give eligible employees the ICHRA notice at least 90 days before the plan year. Special timing applies to newly eligible employees and employers that establish the ICHRA less than 120 days after they first come into existence. Include the allowance and premium-tax-credit explanation; do not substitute a short enrollment email.
- **Affordability.** For plan years starting in 2026, compare the applicable self-only lowest-cost silver premium minus the self-only ICHRA allowance with 9.96% of household income. The 2027 percentage is 10.22%. Employer penalty safe harbors and Marketplace household eligibility are different determinations. An affordable offer generally blocks premium tax credits; accepting an ICHRA also blocks credits even when the offer is unaffordable.

I use the primary sources listed below for the legal rules and original survey benchmarks. Any worked cost scenario is illustrative. A proposal must still be checked against its own eligibility, coverage and contract terms before enrollment.

## What a $583 allowance buys a 27, 40 and 64-year-old

I start with actual premiums available in each employee's area, not a national average. A single allowance can produce very different employee bills when premiums differ by age, location and coverage tier. Individual-market insurers cannot charge more because someone is ill. Age rating and local plan availability are separate from health status. A lower premium also does not establish that a plan covers a particular specialist or prescription.

**One allowance, three hypothetical individual premiums**

Illustrative arithmetic only. Assume a premium-only ICHRA allowance of $600 monthly and three employees with eligible premiums of $500, $700 and $1,100. These are invented calculation inputs, not prices for any age, county or insurer.

- Employee A: $500 premium: Employer reimburses $500; employee pays $0
- Employee B: $700 premium: Employer reimburses $600; employee pays $100
- Employee C: $1,100 premium: Employer reimburses $600; employee pays $500
- Total monthly employer reimbursement: $1,700
- Total annual employee premiums: $7,200

The employer authorizes $1,800 per month but reimburses $1,700 in this premium-only scenario. Unused allowance treatment depends on the document. Deductibles and other member costs are additional. If other eligible expenses are reimbursable, the unused $100 might be used for them.

The practical question is whether the contribution policy works for the whole eligible class. An age-based allowance may reduce premium differences, subject to the same-terms rules and the 3-to-1 maximum age variation. It does not remove geographic differences or guarantee equal employee spending. I would test the policy using the actual census and plan options before setting next year's budget.

## Check the class split before budgeting

The minimum class-size rule is narrower than a universal ten-person requirement. It applies when traditional group coverage and an ICHRA are offered to different classes and the ICHRA class uses certain distinctions, including specified full-time versus part-time, salaried versus non-salaried, or rating-area divisions. A geographic class covering an entire state or combination of entire states is generally exempt from that minimum. Seasonal and other classes require their own review; combining class definitions can change the result.

**Minimum size when the rule applies**

| Employer employees expected at plan-year start | Minimum ICHRA class |
| --- | --- |
| Fewer than 100 | 10 |
| 100 through 200 | 10% of employees, rounded down |
| More than 200 | 20 |

Count employees offered the ICHRA in the class, not only those who enroll. The new-hire subclass rule is another exception with conditions. Do not create a class from medical conditions or use class labels to steer expensive members away from group coverage. I would ask the administrator to document why every proposed class is permitted and whether a minimum applies. That written analysis is more useful than a sales statement that an ICHRA works for any company size.

The controlling details are in [26 CFR 54.9802-4](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.9802-4), including minimum-class exceptions and the new-hire subclass rule.

## ICHRA vs. a Prescience group plan, feature by feature

**How an ICHRA compares with a Prescience group plan**

|  | ICHRA (including Prescience Choice) | Prescience group plan |
| --- | --- | --- |
| What employees get | An allowance to buy an individual plan | One company plan with an effective $0 deductible and simple copays |
| Employer cost | Allowance per class, plus platform fees | One monthly cost set in your quote, $0 admin fees |
| Platform or admin fees | Prescience Choice: $20 per enrolled employee/month; other vendors vary | $0 |
| Exposure to individual-market prices | Individual premiums determine the employee shortfall | Compare the group quote and annual renewal terms |
| Network | The chosen individual policy; check local providers and out-of-area care | Broad national PPO network plus direct-contract providers |
| Deductible | Varies by the individual policy and eligibility for cost-sharing reductions | Effective $0 deductible |
| Employee effort | Shop, enroll, submit proof, request reimbursement | Enroll in the company plan; simple copays shown before a visit |
| Plans per company | Employees may select different policies | Company health plan; confirm available options |
| Care support | Carrier support; Prescience Choice also includes Crystal | 24/7 physician-led care navigation |
| Budget control | Hard cap per employee, set by you | Fixed monthly cost set in your quote before the plan starts |
| Multi-state teams | Each employee buys locally | Broad national PPO network; confirm local providers |
| Minimum group size | None | 2 employees |

## What 5, 25 and 75 employees pay: ICHRA vs. group plans

A fair comparison separates authorized allowance, actual reimbursements, platform fees and employee spending. I would also compare the networks, drugs and out-of-pocket limits before calling two offers equivalent. The following budget exercise intentionally uses hypothetical premiums and fees so it does not mix different survey years, ages or benefit levels and present the result as a market quote.

**A 25-person premium-only budget**

Illustrative only. All 25 employees enroll in self-only coverage for 12 months. Each eligible individual premium is $700 per month. The employer allowance is $600. Assume an administration charge of $30 per enrolled employee plus $50 per company monthly. The comparison group premium is an assumed $800 with the employer paying 75%. None of these inputs is a vendor price.

- ICHRA annual reimbursement: 25 × $600 × 12: $180,000
- Assumed annual administration: (25 × $30 + $50) × 12: $9,600
- ICHRA total employer budget: $189,600
- ICHRA employee premium balance: 25 × $100 × 12: $30,000
- Group employer budget: 25 × $800 × 75% × 12: $180,000
- Group employee premiums: 25 × $800 × 25% × 12: $60,000

In this example the ICHRA costs the employer $9,600 more while employees pay $30,000 less in premiums. That does not establish the better benefit. If the individual policies have larger member costs or exclude an essential provider, the premium comparison is incomplete. Replace every assumption with matched quotes before deciding.

> **Affordability is a separate calculation:** The $700 selected premium in this example is not necessarily the lowest-cost silver benchmark. An ALE must evaluate its offer using the applicable ICHRA affordability rules. Run the ALE count using the prior calendar year and related entities. Do not infer compliance from a 25-person enrollment list or from the employee accepting the offer.

**Compare an allowance and a group plan for your employees**

A national example cannot tell you what each employee would pay locally. Start a quote with your company details, create an account and add the census so you can compare a Prescience proposal with the allowance budget.

[Compare options for my team](https://www.getprescience.com/quote)

[Check ICHRA affordability](https://www.getprescience.com/tools/ichra-affordability-calculator)

## How costs change over two to three years

A fixed allowance limits the stated contribution per eligible person, but total employer spending still changes with headcount, participation, permitted age or family adjustments, and reimbursed expenses. Employees experience the difference between renewal premiums and the allowance. I would show them that difference before enrollment rather than describing the benefit only as a fixed monthly amount.

**Illustrative premium renewal with a fixed $600 allowance**

| Scenario | Premium | Employer reimbursement | Employee premium |
| --- | --- | --- | --- |
| Current year | $700 | $600 | $100 |
| Premium rises 10% | $770 | $600 | $170 |
| Allowance also rises to $650 | $770 | $650 | $120 |

The 10% increase is a sensitivity test, not a forecast. It increases the employee's premium balance by 70% when the allowance stays fixed. If the employer raises its allowance instead, update both the budget and affordability calculation. Compare renewal notices for the actual individual plans and verify that providers and covered drugs remain available. Employees may have to change policies even if the allowance does not change.

## What it is like to be the employee

- **Shopping.** Compare premiums, deductible structure, specialist access, prescriptions and maximum member spending. A familiar insurer name does not identify the exact network. Save the policy name and network identifier.
- **Ongoing treatment.** Ask the insurer about an existing authorization, scheduled procedure or prescription before changing plans. An authorization from the old insurer does not automatically transfer. Have employees use a private benefits channel rather than giving health details to a manager.
- **Cash flow.** Confirm whether the employee must pay the premium first and when reimbursement arrives. A tax-favored allowance is less useful if an employee cannot advance the monthly bill. Ask the platform about missed payments and rejected substantiation.
- **Tax credits.** An affordable ICHRA generally prevents premium tax credits even if declined. With an unaffordable offer, the employee must opt out and meet the other credit requirements. Taking the ICHRA and a credit for the same month can create a tax problem.
- **Medicare.** ICHRAs can integrate with Medicare Part A and Part B together, or Part C, under the regulation. Verify the document and substantiation process. Do not assume an employee must buy an individual Marketplace policy at Medicare age.

Some employees value individual choice; others prefer a company-selected plan and a shared support process. I do not assume either preference from age or job title. Ask about priorities without collecting diagnoses, then compare the actual policy options. A plan that works well in one county may be unavailable to a new remote hire in another county.

## Compliance and admin burden

**Who does what under an ICHRA vs. a Prescience plan**

| Task | ICHRA | Prescience |
| --- | --- | --- |
| Plan document and notices | Employer, usually through the ICHRA platform; advance notice, with regulatory timing exceptions | Prescience prepares and runs them |
| Class design and minimum class sizes | Employer | Confirm eligibility in the plan documents |
| Proof of coverage and reimbursements | Platform and employees, monthly | Not needed |
| Affordability testing (50+ full-time employees) | Per employee, by location | Standard group plan test against the employee's own premium share |
| COBRA | Applies to the ICHRA itself for employers with 20+ employees | Prescience handles COBRA |
| Employee support | Each insurer separately | One 24/7 physician-led care team |

## How to move from an ICHRA to a group plan

1. **Pick a start date (60–90 days out)** A Prescience plan can start mid-year. Choose the first of a month, and give employees enough time to cancel their individual plans for the day before.
2. **Get a quote from your census** Send ages, ZIP codes and coverage tiers. Compare the quote against your current allowances plus platform fees, and against what employees pay above the allowance.
3. **Check networks** Have employees confirm provider participation and any transition-of-care requirements privately with the administrator before changing coverage.
4. **Notify the ICHRA platform** End the ICHRA the day before the group plan starts. Ask the platform for the deadline to submit final reimbursements.
5. **Run enrollment** Employees elect the group plan. Tell them to cancel their individual plans effective the last day before the group plan starts, and to report the change to the marketplace if they bought there.
6. **Close out** Pay final reimbursements for months the ICHRA covered, and keep the records. Deductibles reset when people change plans, which matters less with an effective $0 deductible.

## How a Prescience plan works

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** If the math above points to a group plan, this is the one we run, with one monthly cost set before the plan starts.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## When an ICHRA is honestly the better choice

- **You need a hard per-employee budget** and accept that employees will end up on very different plans, with some paying a lot more than others.
- **Your employees have suitable local options** and lives in states with competitive individual markets, where benchmark premiums are low.
- **You want a class you don't put on the group plan,** such as part-time or seasonal staff, while full-time staff stay on a group plan. Watch the minimum class-size rules.
- **Your employees want specific individual plans,** such as a regional HMO they already use.
- **You are not an ALE and do not offer a group health plan.** Also evaluate a [QSEHRA](https://www.getprescience.com/guides/what-is-a-qsehra), including its annual caps, eligible-employee rules, substantiation and premium-tax-credit interaction.

Compare a Prescience quote with total ICHRA reimbursements, platform costs and employee premium balances. I would choose the arrangement with the most suitable documented coverage and a sustainable contribution policy, not the one with the most attractive allowance headline. Keep the comparison for the next renewal so you can distinguish price changes from changes in benefits or enrollment.

## Frequently asked questions

**Can I offer an ICHRA and a group health plan at the same time?**

Yes, to permitted different classes, subject to the ICHRA rules. An individual cannot choose between the two offers. Class-size minimums apply only to specified splits; when applicable they are 10, 10% rounded down, or 20 depending on employer size. Entire-state geographic classes generally have no minimum.

**Is an ICHRA cheaper than group health insurance?**

Either can cost less. Compare actual reimbursements, administration, employee premium balances and the benefits purchased. A lower employer allowance may simply shift more spending to employees.

**How should I set an ICHRA allowance?**

Use local individual premiums, the permitted class rules and the employee affordability calculation. There is no universal allowance that produces equivalent coverage for every age, county and family size.

**What does ICHRA affordability mean for 2026?**

For plan years beginning in 2026, compare the applicable self-only lowest-cost silver premium after the allowance with 9.96% of household income. ALE penalty safe harbors need a separate review. The 2027 percentage is 10.22%.

**Can we move from an ICHRA to Prescience mid-year?**

Usually yes. A Prescience plan can start mid-year. We set the start date with you so employees can cancel their individual plans without a gap or overlap in coverage.

**Can an ICHRA allowance vary by age?**

Yes. The same-terms rules permit age and family-size adjustments. Within a class the oldest participant's age-based maximum cannot exceed three times the youngest participant's maximum. Carryovers and certain other regulatory exceptions also need review.

**How much notice do employees need before an ICHRA starts?**

Generally 90 days before the plan year. Newly eligible employees and certain newly established employers have special timing rules. Use the regulatory notice requirements and CMS model notice.

**What do ICHRA platforms charge?**

Ask for a dated quote. Check whether fees count eligible employees, enrolled employees or accounts, and whether company charges, setup, cancellation or support fees apply. I have not treated any unverified advertised price as a current quote.

**Do employees on an ICHRA keep their own doctors?**

Only if the chosen policy covers the provider under its network and benefit terms. Check the exact network, location and accepting-new-patients status. Also verify prescriptions and authorizations.

**Can an employee turn down an ICHRA and get marketplace subsidies?**

An unaffordable ICHRA can permit credits only if the employee opts out and meets the other Marketplace credit requirements. An affordable offer generally blocks credits even if declined; accepting an ICHRA blocks credits for those months.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [CMS, individual coverage HRA resources](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [26 CFR 54.9802-4, ICHRA integration, classes and notices](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.9802-4)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Revenue Procedure 2026-26, 2027 affordability](https://www.irs.gov/pub/irs-drop/rp-26-26.pdf)
- [IRS, Employer shared responsibility questions and answers](https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act)
- [IRS Publication 15-B (2026), employer health benefits and QSEHRA limits](https://www.irs.gov/publications/p15b)
- [CMS, ACA market rating rules](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)
- [HealthCare.gov, plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)

# The alternative to a fully insured small group plan

Source: https://www.getprescience.com/compare/fully-insured-alternative
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "The alternative to a fully insured small group plan." Prescience, October 28, 2026. https://www.getprescience.com/compare/fully-insured-alternative

A fully insured plan transfers covered claims risk to an insurer in exchange for premiums. I compare that certainty with the actual network, member costs and renewal terms. Prescience designs and runs company health plans with an effective $0 deductible, simple copays and a quote usually 10–20% below comparable fully insured coverage.

- **Average 2025 family premium:** $26,993 (KFF)
- **Prescience admin fees:** $0
- **Typical savings:** Usually 10–20% vs. fully insured, fixed in your quote
- **Deductible your team sees:** Effective $0 deductible

## How a fully insured plan works

A fully insured plan is the traditional setup: you pick a carrier plan, pay a monthly premium per enrolled employee, and the carrier pays claims. It is what most people mean by "group health insurance," and it is still the default for small businesses that buy through a broker or a payroll platform.

**How the money flows.** Each month you pay the carrier one premium bill, made up of the employer share and the employee shares you deduct from payroll. The carrier pays doctors and hospitals from that pool of premiums, along with its own costs and profit. Your employees pay their deductibles, copays and coinsurance at the point of care.

**Who carries the risk.** The insurer pays covered claims under the policy. Rates are normally set for the contract period, but the total invoice can change when employees enroll, leave or change tiers. Exclusions, network rules and member cost-sharing still apply. Fixed rates do not mean a fixed total annual budget regardless of hiring.

**How the price is set.** ACA-compliant small-group premiums may vary by age, tobacco use, geography and family enrollment, within federal and state limits. Federal adult age variation is capped at 3 to 1 and tobacco variation at 1.5 to 1; states may impose tighter rules. Health status and your own claims history are not permitted rating factors. Small-group eligibility and owner-only coverage depend on state rules, so I verify the market category before comparing quotes.

KFF's 2025 survey put the average employer family premium at **$26,993** and single coverage at **$9,325**, with family premiums up 6% in a year, the third straight year of 6% or more. At firms with 10 to 199 workers, the averages were $26,054 and $9,211.

I use the primary sources listed below for the legal rules and original survey benchmarks. Any worked cost scenario is illustrative. A proposal must still be checked against its own eligibility, coverage and contract terms before enrollment.

## Where the premium goes

Under the ACA, insurers generally must devote at least 80% of adjusted premium revenue in the individual and small-group markets, or 85% in the large-group market, to claims and qualifying quality improvement. The medical loss ratio calculation uses regulatory adjustments and a multiyear reporting basis. A shortfall can generate rebates. It does not establish an insurer's profit margin or a guaranteed rebate for a particular employer with low claims.

I separate three questions: what premium is being charged, what benefits that premium purchases, and what spending the insurer reports for its regulated market. A company's own low claims do not prove that its renewal is wrong. Ask the broker to identify age, enrollment, geography and benefit changes before attributing an increase to profit.

**Where $1,000 of small group premium can go**

Illustrative, using the ACA's 80% minimum loss ratio for small group plans. The test applies to premium after taxes and regulatory fees, and actual splits vary by carrier and state.

- Claims and quality spending at the assumed 80% standard: $800 of adjusted premium revenue
- Remaining share at that assumed standard: $200 before applying the full regulatory calculation
- Employer-specific rebate: Cannot be calculated from this illustration

This simplified $1,000 example assumes adjusted premium revenue of $1,000 and an 80% standard. The actual rebate calculation includes regulatory adjustments and generally three reporting years. It is measured for the insurer's relevant state market, not separately for each employer. It is not a prediction of a policyholder rebate.

CMS explains the [medical loss ratio calculation](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio), including its reporting framework.

## What a medical price comparison needs

A hospital list price is not a member cost estimate. Before comparing an MRI price, I would identify the procedure, facility, professional reading fee, network, authorization requirement and benefit terms. A cash price may not count toward the deductible. An insurer-negotiated amount can still be split between the plan and member. Ask the plan for a written estimate for the actual service and provider; do not use an unrelated published charge as a promise about what an employee will pay.

## Fully insured vs. Prescience, feature by feature

**How a fully insured small group plan compares with a Prescience plan**

|  | Fully insured | Prescience |
| --- | --- | --- |
| Price | Carrier rate filing, renewed each year | One monthly cost set in your quote, usually 10–20% below comparable coverage |
| What sets the price | Carrier's state pool, plus your team's ages, ZIP codes and tiers | Monthly cost fixed in your quote before the plan starts |
| Cost certainty in the plan year | Rates set for the contract period; total bill changes with enrollment | Fixed monthly cost set in your quote |
| Admin fees | Built into the premium | $0 |
| Deductible your team sees | Often thousands of dollars ($2,631 average among workers with a general annual single deductible at firms with 10–199 workers in 2025) | Effective $0 deductible |
| Cost of a visit | Service-specific deductible, copay or coinsurance; some care covered before deductible | Simple copays shown before the visit, capped by a low out-of-pocket maximum |
| Network | The carrier's HMO, EPO or PPO network | Broad national PPO network plus direct-contract providers |
| Care support | Carrier member services | 24/7 physician-led care navigation |
| Start date | Usually the first of a month, any time of year | Any month, including mid-year |
| Minimum group size | 1 or 2 employees depending on the state, plus carrier participation rules | 2 employees |
| Payroll | Any provider | Keep your current payroll provider |

**Get a proposal you can compare with your current plan**

Use the same employee list, family tiers and effective date for the comparison. Create your account through the quote flow, then add your census and compare the written benefits and total cost.

[Compare my current plan](https://www.getprescience.com/quote)

[Estimate the current employer cost](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

## What 5, 25 and 75 employees pay in a year

These KFF averages describe employer coverage across funding arrangements at firms with 10–199 workers. They are not fully insured quotes or observed prices for teams of five. I use the rounded monthly values of $768 single and $2,171 family only as illustrative arithmetic inputs. The exact tier counts, not an assumed 70/30 percentage, determine each total.

Here is the yearly cost of a fully insured plan at three team sizes, next to a plan priced 10% and 20% lower, the usual range for a Prescience quote. These are illustrative numbers, not a quote.

**Illustrative annual premiums, KFF 2025 small-firm averages ($768 single, $2,171 family per month), the enrollment counts shown below**

| Team | Fully insured | 10% lower | 20% lower | Yearly difference |
| --- | --- | --- | --- | --- |
| 5 employees (4 single, 1 family) | $62,916 | $56,624 | $50,333 | $6,292–12,583 |
| 25 employees (18 single, 7 family) | $348,252 | $313,427 | $278,602 | $34,825–69,650 |
| 75 employees (53 single, 22 family) | $1,061,592 | $955,433 | $849,274 | $106,159–212,318 |

**A 25-person team: who pays what**

Illustrative, not a quote. Use the $348,252 annual premium above and assume employees pay exactly 20% of every tier. Compare a hypothetical quote 15% lower with the same contribution policy.

- Total premium: $348,252.00/year
- Employees at 20%: $69,650.40/year
- Employer at 80%: $278,601.60/year
- Hypothetical premium 15% lower: $296,014.20/year
- Employer at 80% of lower premium: $236,811.36/year

The employer difference is $41,790.24 and the employee difference is $10,447.56 annually. These are premium differences only. They do not value deductibles, networks or exclusions, and no actual quote is implied.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** The 10% and 20% columns above are the range our quotes usually land in. Send your renewal and see where your team falls.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## How fully insured renewals behave over two to three years

A fully insured small group renewal usually arrives a month or two before your plan year ends. Three things drive it:

- **The carrier's pool trend.** Medical and drug price inflation across the carrier's small group pool. KFF found family premiums rose 6% in 2025.
- **Your team's ages.** Everyone is a year older at renewal, and age-rated premiums rise with age. A team that hires older, senior people pays more per head.
- **Plan changes.** Carriers retire plans and map you to the closest replacement, sometimes with a higher deductible.

**Illustrative renewals for the 25-person team at 6% a year**

|  | Year 1 | Year 2 | Year 3 |
| --- | --- | --- | --- |
| Fully insured premium | $348,252 | $369,147 | $391,296 |
| Increase over year 1 |  | $20,895 | $43,044 |

Your own claims don't drive a small group renewal, because the ACA bars pricing on health. That cuts both ways: a bad year won't spike your rate, and a great year won't lower it. Large group plans, by contrast, are often priced partly on the group's own claims. With a Prescience plan, your cost for each plan year is fixed in your quote before the plan starts; ask for the renewal terms in writing, as you would with any carrier.

## What it is like to be the employee

- **Deductibles.** Among workers with a general annual deductible, KFF's 2025 average single deductible at firms with 10 to 199 workers was $2,631, much higher than the $1,670 at larger firms. Until it's met, an MRI or an ER visit can cost hundreds or thousands of dollars.
- **Networks.** Small group plans may be HMOs, EPOs or PPOs. HMOs and EPOs generally don't cover out-of-network care except emergencies.
- **Claims.** Providers bill the carrier, the carrier sends an explanation of benefits, and the employee gets a bill for the rest, often weeks later.
- **Support.** Member services and navigation vary by carrier and product. Ask which services are included.

On a Prescience plan, the team sees an effective $0 deductible, copays shown before a visit and a 24/7 physician-led care team that books appointments. The network is a broad national PPO.

## Compliance and admin burden

Full insurance moves some compliance work to the carrier, but not all of it. This is who usually does what:

**Compliance tasks on a fully insured small group plan**

| Task | Who handles it | Notes |
| --- | --- | --- |
| Summary of Benefits and Coverage | Carrier prepares it; employer distributes it | Required at enrollment and renewal |
| ERISA plan document and summary plan description | Employer (often a wrap document from a broker) | The carrier's certificate alone may not satisfy ERISA |
| PCORI fee | Carrier | $3.84 per covered life for plan years ending Oct. 2025–Sept. 2026 |
| Form 5500 | Employer, if 100+ participants | Insured welfare plans under 100 participants are generally exempt |
| COBRA or state continuation | Employer or its administrator (20+ employees); carrier for many state laws | See [COBRA for small employers](https://www.getprescience.com/guides/cobra-for-small-employers) |
| Section 125 plan for pre-tax premiums | Employer | A written plan document is required |
| Medicare Part D creditable coverage notices | Employer | To Medicare-eligible members each year, and a disclosure to CMS |
| ACA Forms 1094-C and 1095-C | Employer, if an applicable large employer (50+) | Due early each year |

On a Prescience plan, we run setup, enrollment, claims, compliance and COBRA for you.

## How to switch from a fully insured plan, step by step

1. **Find your renewal and cancellation terms (90 days out)** Read your carrier policy for the plan year end and the written notice needed to cancel. You don't have to wait for renewal if the policy allows a mid-year cancellation.
2. **Get a quote from your census** Send ages, ZIP codes and coverage tiers. Compare the quote against your current premium and your renewal, line by line.
3. **Check networks and active treatment** Have employees privately confirm their providers, prescriptions and active treatment with the plan administrator. Check transition-of-care rules without promising uninterrupted treatment before the new plan confirms it.
4. **Pick the start date** Choose the first of a month. The new plan starts the day after the carrier plan ends, so there is no gap.
5. **Run enrollment (2–3 weeks before the start)** Employees elect coverage on the new plan. Update payroll deductions with your payroll provider.
6. **Cancel the old plan in writing** Send the carrier written notice with the exact last day of coverage, and confirm the final premium bill.
7. **Move COBRA participants** When an employer replaces its plan, people on COBRA generally move to the new plan. Include them in the switch.

More on timing in [How to switch health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year).

## How a Prescience plan works

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

## How I assess the protections in a proposal

I would not declare two plans equally safe from a marketing summary. Compare the written benefits, exclusions, member out-of-pocket rules, appeals process, termination terms and renewal provisions. At Prescience, the monthly cost is set in the quote before the plan starts. The proposal and plan documents are the place to resolve any questions before enrollment.

> **Compare equivalent promises:** A lower premium is useful only if the proposal covers the people and services you need. Ask for written confirmation of eligibility, network and prescription coverage. Keep both the quote and the benefit documents with the decision record.

## When a fully insured plan is honestly the better choice

- **Your team depends on one integrated system,** such as a Kaiser Permanente HMO, and everyone wants to stay in it.
- **You want to buy through a broker you trust** who bundles medical, dental, vision and life with one carrier and handles service for you.
- **Your state's small group market is unusually cheap** for your team's ages. Compare a real quote against a real renewal.
- **Your team has an older age mix** and a carrier plan's pooled rates come out lower than any alternative's quote.

In all of these cases, get a Prescience quote anyway and compare. The decision should rest on the full cost to your company and your team, including deductibles, not just the premium.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Under about 15 people, or spread across several states? A fixed allowance through Choice can beat small-group rates, especially for a young team.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Is a Prescience plan real health insurance?**

Yes. Prescience plans are real group health coverage with a broad national PPO network. Your plan documents spell out exactly what's covered.

**How is Prescience cheaper than a fully insured plan?**

Prescience quotes are usually 10–20% below comparable fully insured coverage, fixed before the plan starts, with no admin fees. Compare your written quote with coverage of similar scope; the percentage is not a guarantee for every employer.

**What happens if our team has a very expensive year?**

The monthly company cost is fixed in the quote before the plan starts. Members have a low out-of-pocket maximum under the benefit terms. Premiums, excluded services and some out-of-network charges can fall outside an out-of-pocket limit.

**Will we still get a broad network?**

Yes. Members typically keep a broad national PPO network, plus our direct-contract providers.

**Can we switch before our renewal date?**

Often yes. Prescience plans can start mid-year. Check your current policy's cancellation terms, and we'll time the start date so coverage is continuous.

**Why are small group premiums so high for a young team?**

ACA-compliant small-group rates cannot depend on health status or your own claims. Age, location, enrollment and plan design can affect the price, subject to state rules. Compare actual quotes instead of assuming a young team necessarily overpays.

**Does our claims history affect our small group renewal?**

Not directly. ACA rules bar small group carriers from pricing on health, so renewals follow the carrier's pool trend, your team's ages and plan changes.

**What benchmark can I use when comparing premiums?**

KFF reported $9,211 for single and $26,054 for family coverage at firms with 10–199 workers in 2025. These include different funding arrangements and are not a fully insured rate quote or a forecast for a five-person company.

**Do we need a Form 5500 for a fully insured plan?**

Generally only if the plan has 100 or more participants at the start of the plan year. Smaller insured welfare plans are usually exempt, though they still need ERISA plan documents.

**What happens to employees on COBRA when we switch?**

When an employer replaces its health plan, people on COBRA generally move to the new plan for the rest of their COBRA period. Include them in the switch.

## Sources

- [KFF, 2025 Employer Health Benefits Survey (original survey)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, medical loss ratio requirements](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)
- [CMS, ACA market rating rules](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)
- [IRS, PCORI fee questions and answers](https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers)
- [29 CFR 2520.104-20, small welfare plan reporting exemption](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104-20)
- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)
- [DOL, ERISA scope and exemptions](https://www.dol.gov/general/topic/health-plans/erisa?lang=en)
- [CMS, Part D creditable coverage disclosures](https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage)
- [IRS Publication 15-B (2026), employer health benefits and QSEHRA limits](https://www.irs.gov/publications/p15b)
- [HealthCare.gov, plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)

# Level-funded plans vs. Prescience

Source: https://www.getprescience.com/compare/level-funded-alternative
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Level-funded plans vs. Prescience." Prescience, October 28, 2026. https://www.getprescience.com/compare/level-funded-alternative

A level-funded arrangement combines a scheduled monthly payment with employer responsibility for a self-funded health plan. I compare the contract limits, surplus rules, run-out claims and renewal terms before comparing price. Prescience offers a monthly cost set in your quote, an effective $0 deductible and physician-led care navigation.

- **Small-firm workers in level-funded plans:** 37% (KFF, 2025)
- **Prescience admin fees:** $0
- **Deductible your team sees:** Effective $0 deductible
- **Minimum group size:** 2 employees

## What a level-funded plan is

A level-funded plan is a self-funded plan packaged to feel like insurance. You pay the same amount each month. That payment funds a claims account, the administrator's fees and a stop-loss policy that covers claims above set limits. If claims come in low, some plans refund part of the surplus; higher claims may affect renewal pricing.

They're now common: KFF's 2025 survey found 37% of covered workers at firms with 10 to 199 workers are in a level-funded plan.

I use the primary sources listed below for the legal rules and original survey benchmarks. Any worked cost scenario is illustrative. A proposal must still be checked against its own eligibility, coverage and contract terms before enrollment.

## How the money moves and who carries the risk

Each monthly payment is split three ways:

- **The claims fund.** The largest share. It pays your employees' medical and pharmacy claims as they come in. Legally, this is the employer's money paying the employer's plan.
- **Fixed costs.** The third-party administrator's fee for processing claims, network access, the pharmacy benefit manager and member services.
- **The stop-loss premium.** Insurance bought by the employer, not by the plan. **Specific** stop-loss reimburses claims for any one person above a set amount (the specific deductible or attachment point). **Aggregate** stop-loss covers total claims above a ceiling, as specified in the policy.

**Who carries the risk.** The employer remains responsible for benefits promised by its self-funded plan. Stop-loss reimburses the employer only for eligible claims within its policy terms. Exclusions, payment timing, an individual higher attachment point and claims outside the policy period can leave additional employer obligations. A scheduled monthly payment is not, by itself, proof that every liability is capped.

**The year-end settlement.** After the plan year ends, the administrator waits for late claims (the run-out period, often a few months), then compares total claims with the claims fund. A surplus may be refunded, credited to next year or kept, depending on the contract. Some contracts pay a refund only if you renew. Eligible claims above the aggregate attachment point may be reimbursed under the policy. Check exclusions and whether the employer must pay first; renewal pricing is separate.

## The trade-offs

- **Underwriting.** Stop-loss carriers price your group from health questionnaires or claims. One employee with a serious diagnosis can raise your rate or get you declined. Having trained in medicine, I find it uncomfortable that a colleague's cancer diagnosis can become a pricing input for the whole company.
- **Lasering.** At renewal, a stop-loss carrier can set a much higher specific deductible for one known high-cost person, leaving the employer to fund more of that person's care.
- **Renewals can reflect claims.** Ask which factors affect the new quote and whether any renewal cap or protection against individual higher attachment points is contractual.
- **Your team still has a deductible.** Most level-funded designs look like a standard PPO or HDHP to employees.
- **Several vendors.** Administrator, stop-loss carrier, network and pharmacy benefit manager are often separate, each with a fee.
- **Run-out and terminal liability.** If you leave, claims incurred before the end date but paid after it may not be covered unless the contract includes run-out protection. Read that clause before you sign, not when you want to leave.
- **State limits.** New York Insurance Law 3231(h) restricts stop-loss coverage for small groups. Other states regulate attachment points and availability differently. Have the broker identify the current law that applies to your employer and proposed policy. A product advertised nationally is not evidence that it is available to your group.

The [DOL stop-loss guidance](https://www.dol.gov/node/63762) explains why state regulation and the employer's plan obligations need separate attention.

## Level-funded vs. Prescience, feature by feature

**How a typical level-funded plan compares with a Prescience plan**

|  | Level-funded | Prescience |
| --- | --- | --- |
| Monthly cost | Scheduled payment; check additional liability and renewal terms | One monthly cost set in your quote, usually 10–20% below comparable fully insured coverage |
| Underwriting | Stop-loss policy underwritten to your group | Ask for the written quote and eligibility terms |
| Admin fees | Administrator and stop-loss fees built into the payment | $0 |
| Year-end surplus | May be refunded, credited or kept, per contract | Compare the monthly cost set in your quote |
| Leaving | Run-out claims and contract terms to settle | Set out in your plan documents |
| Deductible your team sees | Usually a standard deductible | Effective $0 deductible |
| Cost of a visit | Service-specific deductible, copay or coinsurance | Simple copays shown before the visit |
| Network | A carrier or rented PPO network | Broad national PPO network plus direct-contract providers |
| Care support | Varies by administrator | 24/7 physician-led care navigation |
| Claims reporting | Often detailed group claims reports | Ask what reporting is available in your proposal |
| Minimum group size | Varies by carrier and state | 2 employees |

## What 5, 25 and 75 employees pay: a good year and a bad year

These KFF averages describe employer coverage across funding arrangements at firms with 10–199 workers. They are not fully insured quotes or observed prices for teams of five. I use the rounded monthly values of $768 single and $2,171 family only as illustrative arithmetic inputs. The exact tier counts, not an assumed 70/30 percentage, determine each total.

Level-funded pricing depends heavily on the group, so these numbers are illustrative only. To isolate the mechanics, I set the level-funded payment equal to a fully insured plan's premium, using illustrative premiums of $768 single and $2,171 family a month, rounded from KFF's 2025 averages for firms with 10–199 workers.

**A 25-person team on a level-funded plan, two ways the year can go**

Illustrative assumptions, not a quote: annual payment $348,252; 70% for expected claims and 30% for fixed costs and stop-loss; 50% of surplus returned. The lower-claims scenario uses 80% of expected claims. The higher-claims scenario assumes all excess claims qualify for protection and no extra employer obligation remains. Actual contracts can leave additional liability.

- Level payment for the year: $348,252
- Claims fund (70%): $243,776
- Fixed costs and stop-loss premium (30%): $104,476
- Good year: claims at 80% of the fund: $195,021
- Good year: surplus: $48,755
- Good year: refund at 50%: $24,378, paid after run-out
- Good year: net cost: $323,874
- Bad year: extra cost during the year: $0 assumed; only if all excess claims qualify and contract obligations are satisfied
- Bad year: next year's payment at a 25% renewal: $435,315

Under these assumptions the refund reduces annual cost by about 7%. The hypothetical 25% renewal adds $87,063 next year. Neither outcome is a prediction or a maximum liability calculation. Before accepting a quote, ask the administrator to show a scenario with excluded claims, delayed reimbursement and termination during run-out.

**Illustrative annual cost at three team sizes, same assumptions**

| Team | Fully insured | Level-funded, good year (after refund) | Level-funded, next year after a bad year (+25%) | Prescience (15% below fully insured) |
| --- | --- | --- | --- | --- |
| 5 employees | $62,916 | $58,512 | $78,645 | $53,479 |
| 25 employees | $348,252 | $323,874 | $435,315 | $296,014 |
| 75 employees | $1,061,592 | $987,281 | $1,326,990 | $902,353 |

The Prescience column uses the middle of the usual 10–20% range. The 25% bad-year renewal is an assumption to show the shape of the risk, not a market average. A very small group feels this most: at 5 employees, one hospitalization can be a large share of a year's claims fund.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** No year-end settlement to wait for: your monthly cost is set in your quote before the plan starts, and employees see an effective $0 deductible instead of a standard PPO deductible.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## How level-funded renewals behave over two to three years

A renewal can change administration charges, expected claims funding and stop-loss pricing. Ask for each component separately. The following paths are arithmetic scenarios, not a claim about what a diagnosis causes or how often employers receive any particular increase.

**Illustrative renewal paths for the 25-person team**

| Path | Year 1 | Year 2 | Year 3 |
| --- | --- | --- | --- |
| Hypothetical steady renewal (6% each year) | $348,252 | $369,147 | $391,296 |
| Hypothetical higher renewal (+25%, then +6%) | $348,252 | $435,315 | $461,434 |
| Fully insured small group (pool trend, not your claims) | $348,252 | Set by the carrier's filing | Set by the carrier's filing |

Compare a level-funded renewal against current fully insured alternatives and the cost of leaving. ACA-compliant small-group coverage cannot be priced using your company's health status. However, enrollment rules, effective dates and benefits still require review. Do not cancel the existing plan before replacement coverage is confirmed.

## What it is like to be the employee

- **The card and network.** Most level-funded plans use a big carrier's network and ID card, so the plan looks like ordinary insurance.
- **Deductibles.** Designs usually mirror standard PPOs or HDHPs. Among workers with a general annual deductible, KFF's 2025 average single deductible at firms with 10 to 199 workers was $2,631.
- **Claims and support.** The administrator processes claims and runs member services. Quality varies.
- **Health questionnaires.** If underwriting requires health information, ask how employees submit it privately, who can access it and when the quote becomes final.
- **Benefits.** ERISA generally preempts state benefit mandates for private self-funded plans. Federal requirements and their exceptions still matter. Do not assume this treatment applies to government or church plans, or that every mental health parity provision applies to every small employer.

## Compliance and admin burden

Because the employer is the self-insured plan sponsor, more of the compliance work lands on the employer than with a fully insured plan. The administrator does much of it, but the legal responsibility stays with you.

**Compliance tasks on a level-funded plan**

| Task | Who is responsible | Notes |
| --- | --- | --- |
| ERISA plan document and summary plan description | Employer, usually drafted by the administrator | Identify each fiduciary by the functions performed |
| Summary of Benefits and Coverage | Employer, usually prepared by the administrator | At enrollment and renewal |
| PCORI fee | Employer, on IRS Form 720 by July 31 | $3.84 per covered life for plan years ending Oct. 2025–Sept. 2026 |
| Form 5500 | Employer, if 100+ participants or if plan assets are held in trust | Small unfunded or insured welfare plans are generally exempt |
| HIPAA privacy and security | Covered health plan and responsible parties; verify applicability | Small plans with fewer than 50 participants administered solely by the employer have a HIPAA covered-plan exception |
| COBRA | Employer or its administrator (20+ employees) | COBRA premiums are set from the plan's cost |
| Year-end settlement and run-out | Administrator and employer | Track refund timing and any terminal liability |

Level-funded plans also sit outside the ACA's small group rating rules and the medical loss ratio rules that apply to fully insured carriers. That is part of why they can be cheaper for healthy groups and pricier for sick ones.

## How to switch off a level-funded plan, step by step

1. **Read the contract (90–120 days out)** Find the notice period, the run-out terms, any terminal liability, and whether a surplus refund requires renewal. These decide your real exit cost.
2. **Get a quote from your census** Compare it against your level-funded renewal, plus the refund you would give up and any run-out charges.
3. **Check networks and active treatment** Confirm the doctors and hospitals your team uses, and flag anyone in active treatment so their care continues.
4. **Give written notice** Notify the administrator and stop-loss carrier in writing with the exact last day of coverage.
5. **Run enrollment (2–3 weeks before the start)** Employees elect the new plan, which starts the day after the old one ends. Update payroll deductions.
6. **Close out the old plan** Track run-out claims and the final settlement, file the last PCORI fee and any Form 5500, and confirm the retention periods for plan documents, filings, claims and participant records.

## Seven questions to ask before you sign a level-funded quote

1. What are the specific and aggregate attachment points, and can they change at renewal?
2. Is the quote final, or can it change after employees complete health questionnaires or after a new hire with a known condition joins?
3. How is a surplus calculated, what share comes back, when is it paid, and do we lose it if we don't renew?
4. How long is the run-out period, and who pays claims incurred before we leave but paid after?
5. Is there a cap on the renewal increase, or a promise not to laser anyone?
6. Which network and pharmacy benefit manager does the plan use, and what does each charge?
7. What does the claims fund cover if total claims exceed it before the aggregate stop-loss pays?

Get the answers in writing. A low first-year payment matters less than these terms, because they decide what the plan costs in a bad year and what it costs to leave.

**Put the contract questions next to another proposal**

Keep the level-funded renewal, refund conditions and exit obligations in your comparison. Start a Prescience quote with your company details, then add the census after creating your account.

[Compare my renewal options](https://www.getprescience.com/quote)

[Review the funding-model comparison](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured)

## How a Prescience plan works

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

## When a level-funded plan is honestly the better choice

- **Your team is stable and healthy, and you can absorb a bad renewal.** The refunds in good years can make it cheaper than full insurance.
- **You want detailed claims data** to manage your own plan, and you have someone who will use it.
- **You are growing toward 100+ employees** and plan to move to a fully self-funded plan later; level funding is a common first step.
- **You need one uniform plan design across many states** and a carrier's level-funded product gives you that.

It is a poor fit if one diagnosis would make next year's renewal unaffordable, if you can't stomach health questionnaires, or if you are in New York, where small group stop-loss isn't allowed. For the full comparison of funding types, read [level-funded vs. self-funded vs. fully insured](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** For a very small team, where one claim could swing a level-funded renewal, an allowance through Choice caps the company's cost per person and leaves claims risk with individual-market insurers.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Is Prescience a level-funded plan?**

This page compares decision factors rather than describing Prescience funding. At Prescience, we design and run your company's health plan, with a monthly cost fixed in your quote and an effective $0 deductible. Ask for the written terms of each proposal.

**Are level-funded plans cheaper than fully insured plans?**

They can be for healthy groups, especially in a low-claims year. The savings are less predictable because renewals and refunds depend on your own claims.

**What happens to unused money in a level-funded plan?**

It depends on the contract. Some plans refund part of the surplus after the year closes, some roll it into next year and some keep it. Read the surplus terms before you sign.

**Can a 5-person company get a level-funded plan?**

Some carriers offer level-funded plans to very small groups, but eligibility and underwriting vary and state rules may limit stop-loss. Prescience works with groups of 2 or more employees.

**What is a stop-loss attachment point?**

The amount of claims after which stop-loss insurance starts paying. A specific attachment point applies to one person's claims; an aggregate attachment point applies to the group's total claims for the year.

**What is lasering?**

When a stop-loss carrier sets a higher specific deductible for one person with known high costs at renewal. The employer funds more of that person's care until the higher limit is reached.

**What are run-out claims?**

Claims for care received during the plan year that are paid after it ends. Level-funded contracts set how long the run-out period lasts and who pays those claims if you leave.

**Do state insurance mandates apply to level-funded plans?**

Generally, state benefit mandates do not apply to a private single-employer self-funded ERISA plan. Government, church and multiple-employer arrangements can require different analysis. Federal requirements still apply, with scope and exceptions that depend on the plan and employer. Non-grandfathered plans are subject to applicable preventive-care rules; mental health parity requirements need a separate applicability review.

**Can we leave a level-funded plan mid-year?**

Often yes, but check the contract. Leaving early can mean giving up a surplus refund and paying run-out claims. Prescience plans can start mid-year, so you can time the switch to your contract.

## Sources

- [KFF, 2025 Employer Health Benefits Survey (original survey)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, ACA market rating rules](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)
- [IRS, PCORI fee questions and answers](https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers)
- [29 CFR 2520.104-20, small welfare plan reporting exemption](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104-20)
- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)
- [New York Insurance Law 3231(h), small-group stop-loss restrictions](https://www.nysenate.gov/legislation/laws/ISC/3231)
- [DOL, ERISA scope and exemptions](https://www.dol.gov/general/topic/health-plans/erisa?lang=en)
- [DOL Technical Release 2014-01, stop-loss and state authority](https://www.dol.gov/node/63762)
- [HHS, covered entities and group health plan exception](https://www.hhs.gov/hipaa/for-professionals/covered-entities/index.html)

# The complete guide to health insurance for YC startups

Source: https://www.getprescience.com/guides/health-insurance-for-yc-startups
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "The complete guide to health insurance for YC startups." Prescience, October 28, 2026. https://www.getprescience.com/guides/health-insurance-for-yc-startups

I choose startup health benefits by comparing employee access, the company budget and the work needed to run the plan. Funding stage alone does not decide the answer. Start with who is eligible, where employees live and what coverage begins when they join, then compare group coverage, a PEO and a compliant individual-coverage allowance.

- **2025 single premium benchmark:** $9,325 annually, KFF survey
- **2025 family benchmark:** $26,993 annually, KFF survey
- **2026 QSEHRA caps:** $6,450 self-only; $13,100 family
- **Prescience minimum group:** 2 employees

## What I compare before choosing a plan

> **Read the comparison with care:** The chart uses public KFF 2025 employer-plan averages for firms with at least 10 workers. It is a national benchmark, not a survey of YC companies or a quote for a smaller startup. Compare actual proposals for your census before setting a budget.

_Chart: Public KFF 2025 employer premium benchmark: average annual single coverage $9,325 and family coverage $26,993, at firms with 10+ workers._

I would build a comparison around employee premiums, covered-care costs, provider access and the employer's full operating cost. A cheaper premium can be valuable, but only if the plan covers the people and services the team needs. Family tiers deserve their own budget line. A company with mostly single enrollment today may have a very different contribution budget after its next hiring round.

- Ask for the exact network and formulary, not just the insurer name.
- Compare employee-only and family contribution policies separately.
- Keep medical premiums apart from payroll and HR service charges.
- Verify the proposed effective date and eligibility rules before promising coverage in an offer letter.

## Every option, compared

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Early YC teams are often a few people in different cities. Choice works in all 50 states, so a founder in SF and a first hire in Austin get the same allowance and their own local plans.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Health insurance options for YC startups**

| Option | What it is | Pros | Cons |
| --- | --- | --- | --- |
| **ACA Marketplace** | Employees buy individual coverage; an unconditional raise remains taxable compensation | Individual choice | No company group plan; subsidy eligibility depends on household circumstances |
| **ICHRA** | Reimburses qualifying individual coverage expenses | Defined allowance; employee choice | Class, notice and affordability rules; obtain current platform fees |
| **Small-group fully insured** | Insurer pays covered claims for premiums | Contract rates and standard plan documents | Local eligibility, participation and network rules |
| **PEO** | Co-employment with bundled HR, payroll and benefits services | One service relationship | Compare all fees, terms and replacement costs |
| **Large-group fully insured** | Coverage in the applicable state large-group market | Insurer assumes covered claims risk | Pricing and plan design differ from small-group rules |
| **Level-funded or self-funded** | Employer bears plan claims obligations, often with stop-loss protection | Flexibility in plan design | Contract exclusions, run-out and administration require review |
| **Prescience** | Company health plan designed and run for you | Effective $0 deductible; no admin fees; monthly cost set in quote | Confirm actual benefits and provider access in the proposal |

Two smaller options are worth knowing. A **QSEHRA** lets an eligible non-ALE employer that offers no group health plan reimburse substantiated medical expenses under its terms. Tax-free reimbursement requires minimum essential coverage. The 2026 annual caps, prorated for partial-year eligibility, are $6,450 a year for self-only and $13,100 for family coverage in 2026 ([what is a QSEHRA](https://www.getprescience.com/guides/what-is-a-qsehra)). A **taxable stipend** is the simplest of all, but it loses the tax advantage covered below ([health insurance stipends](https://www.getprescience.com/guides/health-insurance-stipend)).

## What a 10-person startup pays

Premiums depend on age, location and plan, so treat national averages as a starting point. KFF's 2025 survey puts the average employer plan at $9,325 a year for single coverage and $26,993 for family coverage. Here is what two common contribution policies cost a 10-person team at those averages.

**10 people: 6 on single coverage, 4 covering families**

Illustrative, using KFF 2025 average premiums. Policy A pays 100% of the employee's own coverage and 50% of the cost of adding dependents. Policy B pays 100% of each enrolled tier. Neither policy is presented as a tech-industry norm.

- Single premiums (6 × $9,325): $55,950
- Family premiums (4 × $26,993): $107,972
- Total annual premium: $163,922
- Policy A: company pays: $128,586 (families pay $8,834 each)
- Policy B: company pays: $163,922
- Cost of going from A to B: $35,336 a year

Covering families in full costs this team about $2,945 a month more, roughly $3,500 per employee per year. That is a budget choice, not a measured recruiting return. Check affordability, employee preferences and the effect of future family enrollment before adopting it.

Add administration using a current written vendor quote. For illustration only, an assumed $30 per enrolled employee monthly plus $50 per company would be $4,200 annually for 10 enrolled employees. That is not a Thatch or other vendor price. A PEO proposal also needs separate medical premium and service lines. Prescience has no admin fees.

## Why a plan beats a raise of the same size

Employer-provided accident and health benefits are generally excluded from an employee's federal income and employment-tax wages. Owners, more-than-2% S corporation shareholders and coverage for people who do not qualify for the tax exclusion need separate treatment. A raise is taxed on both sides. The tax difference is one factor to compare alongside eligibility, employee priorities and actual coverage.

**$10,000 of coverage vs. a raise that buys the same coverage**

Illustrative. An employee earning $150,000 (below the 2026 Social Security wage base of $184,500) would otherwise buy a $10,000 plan with after-tax money. Assumes a combined 27% income tax rate (federal and state) plus 7.65% employee payroll tax.

- Company pays the premium directly: $10,000
- Raise the employee needs to net $10,000: $10,000 ÷ (1 − 0.3465) = $15,302.22
- Company cost of that raise, with 7.65% employer payroll tax: $16,472.84
- Difference: $6,472.84 a year

Paying the premium costs the company about 39% less than paying the same value as salary. This illustration excludes FUTA, state payroll charges and other employer costs. Actual marginal taxes, wage limits and ownership status can change the result.

Employees' own premium share can also come out of their paycheck pre-tax through a Section 125 plan ([how Section 125 works](https://www.getprescience.com/guides/section-125-pre-tax-health-insurance)).

The federal tax treatment and QSEHRA rules are in [IRS Publication 15-B](https://www.irs.gov/publications/p15b).

## What to do at each stage

- **Solo founders.** Compare existing coverage and its end date with individual policies and any continuation option. Loss of dependent coverage at age 26 can create enrollment rights, but the exact end date and replacement effective date must be checked. Two owners alone may not qualify as an employer group.
- **First hires.** Start with group eligibility and a written effective date. Prescience's stated minimum is two employees, but eligibility for any proposal still needs confirmation. A PEO is another option if its broader HR services fit the company.
- **Post-seed to Series A, 5–50 people:** benefits start deciding offers. Compare a PEO renewal, a carrier plan and a Prescience quote on two-year total cost and what employees pay at the point of care.
- **Series B and beyond:** you're competing with big tech for senior hires. Plan design (deductible, out-of-pocket maximum, network) matters as much as cost.
- **Approaching the ALE threshold.** Count full-time employees and equivalents across the prior calendar year, including related entities. In 2026 the annual section 4980H(a) amount is $3,340 per full-time employee after the applicable 30-person reduction, but a payment requires the statutory trigger, including a subsidized full-time employee. It is calculated monthly. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) and review exceptions.

**A quick way to choose**

| If you... | Look first at |
| --- | --- |
| Have 2–5 people, mostly young and single, all in one state | Small group plan, ICHRA, or Prescience |
| Hire across many states | A plan with a national PPO network, or ICHRA |
| Are recruiting senior engineers with families | A low-deductible group plan with full family contributions |
| Want HR, payroll and benefits in one bill and accept the fees | A PEO, with a written exit plan |
| Need a hard, fixed budget per person above all | ICHRA or QSEHRA |

## Situations founders run into

- **Founders only.** Many carriers won't write a small group plan that covers only owners and their spouses. Until your first employee joins, individual marketplace coverage or a parent's plan is usually the answer.
- **Just left big tech.** You can keep your old employer's plan through COBRA for up to 18 months, but you'll pay the full premium plus 2%. Estimate it with the [COBRA cost calculator](https://www.getprescience.com/tools/cobra-cost-calculator), then compare marketplace plans during your 60-day special enrollment window.
- **Remote team in several states.** A small group plan is usually filed in your headquarters state. Check that the network works where your people live, especially HMO plans ([covering remote employees](https://www.getprescience.com/guides/health-insurance-for-remote-employees)).
- **Contractors and international hires.** A 1099 label does not decide eligibility. Verify common-law worker status and the plan's eligible classes; do not enroll a genuine independent contractor as an employee without checking the applicable rules. Employees abroad usually need local coverage or an employer of record ([health insurance for contractors](https://www.getprescience.com/guides/health-insurance-for-contractors)).
- **Waivers.** Group plans often require a minimum share of eligible employees to enroll. Employees covered through a spouse or parent usually count as valid waivers, so collect waiver reasons ([can employees opt out?](https://www.getprescience.com/guides/can-employees-opt-out-of-health-insurance)).
- **Starting mid-year.** You don't have to wait for January. A new group plan can start on the first of almost any month, and new hires can join after your waiting period ([waiting periods](https://www.getprescience.com/guides/health-insurance-waiting-period)).

## How to set up your first plan in about a month

1. **Collect a census (week 1)** For each eligible employee: date of birth, ZIP code, and whether they'd cover a spouse or children. Vendors may also require business eligibility, participation and other application information. Collect only what is needed and keep medical questions in the appropriate private channel.
2. **Set a budget and contribution policy (week 1)** Decide what share of employee and dependent premiums you'll pay. Use the 10-person example above as a sanity check.
3. **Get three quotes (weeks 1–2)** A carrier plan through a broker, a PEO quote if you're considering one, and an alternative such as ICHRA or Prescience. Compare total cost over two years, not only year one.
4. **Compare what employees pay at the point of care (week 2)** Deductible, out-of-pocket maximum, copays and network. A premium and deductible need to be evaluated together ([deductibles, copays and coinsurance](https://www.getprescience.com/guides/deductible-copay-coinsurance-explained)).
5. **Sign and run enrollment (weeks 3–4)** Give employees a short summary, a deadline and a way to ask questions. Record waivers ([running open enrollment](https://www.getprescience.com/guides/how-to-run-open-enrollment)).
6. **Connect payroll and calendar the renewal** Set up pre-tax deductions and mark the renewal date. Start comparing again 90 days before it.

**Start the benefits setup for your startup**

You have the checklist. Start with company details, verify your account and add the employee census. You can then compare the proposal with your budget and the coverage you want to offer.

[Start my startup's quote](https://www.getprescience.com/quote)

[Find my payroll census export guide](https://www.getprescience.com/integrations)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Our Launch YC video

## Where Prescience fits

We're a [Y Combinator company](https://www.ycombinator.com/companies/prescience-inc). For employers choosing group coverage, at Prescience we design and run your company's group health plan. Compare the written proposal against your team's priorities and the alternatives above.

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** We went through YC ourselves (S26). Diamond is the plan we built for teams like yours: an effective $0 deductible, a quote in about a minute, and a start date in any month.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What health insurance do YC startups use?**

There is no verified YC-wide usage distribution in this article. The main options are an eligible group plan, a PEO, or an ICHRA or QSEHRA where permitted. Compare current quotes and employee needs.

**When should a YC startup get health insurance?**

Usually around the first hires, especially anyone coming from a larger company. You can sponsor a group plan with as few as 2 employees.

**Do YC startups pay more for health insurance?**

This article does not establish that YC companies pay more. A meaningful comparison needs the same census, year, geography, benefits and contribution policy. National survey averages are context, not matched startup quotes.

**Is a PEO a good choice for a YC startup?**

It's convenient for a very small team, but per-employee fees and pooled renewals add up as you grow, and leaving can be painful. Compare your own plan before you're locked in ([how to leave a PEO](https://www.getprescience.com/guides/how-to-leave-a-peo)).

**How much does health insurance cost a startup per employee?**

At KFF's 2025 averages, a full premium is about $9,325 a year for single coverage and $26,993 for family coverage. What the company pays depends on its contribution policy; paying 100% of employee coverage and half of dependents averaged about $12,900 per employee in our 10-person example.

**Is it better to give employees a stipend instead of a plan?**

Usually not. A stipend is taxable income for the employee and subject to payroll tax for the company, so the same budget buys less coverage. ICHRA and QSEHRA keep the tax advantage if you want a fixed allowance.

**Do startups have to offer health insurance?**

The federal employer shared responsibility rules generally apply to ALEs based on the prior-year count, with related-employer and other exceptions. A penalty depends on the statutory trigger. Smaller employers may have other state or local obligations, and any plan offered still has applicable compliance duties.

**Can founders get on a group plan before hiring anyone?**

Often not: many carriers won't write a small group plan for owners and spouses alone. Most founders use the marketplace, COBRA from a prior job, or a parent's plan until the first employee joins.

**Can we start a plan in the middle of the year?**

Yes. Group plans can usually start on the first of a month, and the plan year runs 12 months from there.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [KFF, 2025 Employer Health Benefits Survey (original survey)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Publication 15-B (2026), employer health benefits and QSEHRA limits](https://www.irs.gov/publications/p15b)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [IRS Revenue Procedure 2025-26, 2026 employer penalties](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [CMS, individual coverage HRA resources](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [26 CFR 54.9802-4, ICHRA integration, classes and notices](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.9802-4)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)
- [SSA, contribution and benefit base](https://www.ssa.gov/oact/cola/cbb.html)
- [Y Combinator, Prescience company profile](https://www.ycombinator.com/companies/prescience-inc)
- [Y Combinator, Prescience launch](https://www.ycombinator.com/launches/Rjs-prescience-superintelligence-for-the-american-health-system)
- [HealthCare.gov, special enrollment and loss of coverage](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)

# How do I recruit FAANG talent to my startup?

Source: https://www.getprescience.com/guides/how-to-recruit-faang-talent-to-a-startup
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How do I recruit FAANG talent to my startup?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-to-recruit-faang-talent-to-a-startup

I make the health-benefits comparison concrete when recruiting an experienced hire: the employee premium, deductible, out-of-pocket limit, provider network and coverage start date. A startup does not need to copy every large-company perk. It needs an accurate offer that lets a candidate evaluate the coverage without disclosing private medical information.

- **Compare actual documents:** SBC, contribution sheet, network and formulary
- **Coverage timing:** Confirm the exact effective date
- **Illustrations:** Assumptions, not customer stories or quotes
- **Prescience deductible:** Effective $0 deductible

## What senior candidates actually compare

_Chart: Among employed adults whose primary insurance is employer-sponsored, 16% in 2021 and 24% in 2025 reported staying in an unwanted job to retain coverage. The 2025 survey was published in 2026._

I would ask a candidate which benefit features matter, without asking about diagnoses, pregnancy plans or family medical history. Provide the same accurate benefits packet to each candidate for the role. The decision can involve a partner's coverage, a specialist network or a medicine, but those details belong in a private conversation with the benefits administrator if the candidate chooses to share them.

A benefits comparison has several independent parts. Employee premiums recur even in a year with little care. Deductibles affect some services but not necessarily every visit. The out-of-pocket limit applies only to specified covered spending. Provider access and drug coverage can matter even when the premium is lower. I would put these items in separate rows so the candidate can see the trade-offs.

> **About the retained graphic:** West Health-Gallup published the 24% finding in July 2026, compared with 16% in 2021. The newer survey was fielded October 27 through December 22, 2025; the employment analysis included 2,322 respondents relying primarily on employer coverage. The graphic labels the observation year, 2025, separately from its 2026 publication. These population findings do not establish any particular candidate's motives or the value of a startup plan.

Read the [original West Health-Gallup survey](https://news.gallup.com/poll/712166/one-four-employees-locked-jobs-health-insurance.aspx) for the population and field dates behind the graphic.

## Compare the candidate's actual plan documents

There is no single FAANG benefits package. Plan options, contribution policies, employment classes and locations differ. Public recruiting pages often summarize available benefits without establishing the exact eligibility, exclusions or premium for a particular person. I would avoid promising to match an entire company and instead compare the option the candidate actually has with the option your startup will offer.

**Documents for a useful offer comparison**

| Question | Document or check | What to record |
| --- | --- | --- |
| What will leave each paycheck? | Employer contribution and rate sheet | Selected tier, pay frequency and annual employee premium |
| What happens in a high-use year? | SBC and full plan terms | In-network individual and family maximum; exclusions |
| Can I use my clinicians? | Exact network and provider confirmation | Provider location and relevant services |
| Is a medicine covered? | Formulary and pharmacy benefit terms | Drug, dose, tier, authorization and pharmacy |
| Are fertility or other specialized benefits included? | Benefit document and eligibility rules | Coverage limits, exclusions and required providers |
| When does coverage begin? | Eligibility rule and enrollment confirmation | Exact effective date, enrollment deadline and any gap |

> **The SBC does not show everything:** An SBC summarizes cost-sharing and coverage using a standard format. It generally does not provide the employee's payroll premium contribution. Supply the contribution sheet separately. Do not request a pay stub to learn the premium: it contains unrelated salary and personal information.

## The benefits gap in dollars

I would compare annual employee premiums and several care scenarios rather than add two single deductibles and call that a family's likely cost. Family policies can use embedded or aggregate deductibles. A member can also have copays or coinsurance after a deductible. The maximum is a useful covered-care stress test, but it is not an expected annual bill.

**A hypothetical family compares two offers**

Illustrative only. Plan A employee family premium is $300 monthly and its family in-network out-of-pocket maximum is $6,000. Plan B premium is $500 monthly and its comparable maximum is $8,000. Assume covered in-network spending reaches each maximum; ignore excluded and out-of-network costs.

- Plan A annual employee premium: $300 × 12 = $3,600
- Plan B annual employee premium: $500 × 12 = $6,000
- Premium difference: $2,400 annually
- Plan A premium plus covered-care maximum: $9,600
- Plan B premium plus covered-care maximum: $14,000
- Difference in this high-use scenario: $4,400

The low-use premium difference is $2,400; the modeled high-use difference is $4,400. Neither is a universal value for the offer. These are assumed plans, not actual big-tech or Prescience benefits. If a premium is paid pre-tax, its take-home-pay effect also differs from an after-tax medical bill.

Employer health benefits are generally excluded from federal employee income and payroll-tax wages, but tax treatment has exceptions. More-than-2% S corporation shareholders and some dependent coverage need separate review. I would not convert the entire difference into a salary demand using one tax percentage unless every input and tax assumption is stated.

## What a seed or Series A startup can realistically match

**Matching big tech, item by item**

| Benefit | Realistic at seed or Series A? | Rough cost |
| --- | --- | --- |
| 100% of employee premiums | Yes | About $9,325 per employee per year at the KFF 2025 average |
| 100% of dependent premiums | Yes, for a small team | $17,668 illustrative difference between KFF family and single averages, not an upper limit |
| Low deductible and out-of-pocket maximum | Yes, by choosing the plan | Often higher premiums on a standard carrier plan; compare alternatives |
| 12 or more weeks of paid parental leave | Yes, with a written policy | Model salary continuation and applicable offsets under the written policy |
| IVF and fertility coverage | Ask for a compliant plan option | Check covered services, exclusions and eligibility; do not promise an informal tax-free reimbursement |
| GLP-1s for weight loss | Depends on the plan | Ask each quote whether it's covered and with what rules |
| On-site clinics and large wellness budgets | Depends on business needs | Compare against access improvements employees would actually use |

**What it costs a 15-person Series A to cover families in full**

Illustrative, using KFF 2025 average premiums. The company pays 100% of employee coverage and 50% of dependent coverage today. Five employees cover families. It considers paying 100% of dependents too.

- Dependent cost per family ($26,993 − $9,325): $17,668
- Extra 50% the company would pay: $8,834 per family
- Five families: $44,170 a year
- Per month: about $3,681

About $44,000 a year makes the family premium $0 for every parent on the team. The $44,170 assumes five enrolled families throughout the year. Future hires and tier changes change the budget. Apply the contribution policy consistently to the eligible class rather than promising a private exception to one candidate.

## How I would handle a candidate comparison

Use a blank comparison sheet and let the candidate fill in the current-plan column voluntarily. The startup can complete its own column from approved documents. Mark anything not yet confirmed as pending. If the new policy has a lower premium but a missing provider, do not hide that difference inside an overall savings number.

- Send the exact plan name, SBC and employee contribution schedule. Include family tiers even if the candidate has not said whether they need them.
- Offer a confidential administrator contact for network, medication and transition questions. Managers should not collect diagnosis lists to evaluate a hire.
- Explain how an authorization or deductible credit is confirmed. A broad PPO network does not guarantee that every existing clinician participates.
- Record any enrollment deadline and effective-date assumption in the benefits packet. Ask the candidate to verify the last day of existing coverage.
- If a detail is unresolved, provide an answer from the plan administrator before presenting it as a benefit promise.

This process does not establish that better insurance will close the hire. It gives the candidate a reliable basis for comparing the offer. I would measure whether questions were answered and coverage began as stated, rather than claim a recruiting return from a story about one employee.

## Why startups usually lose on benefits

A startup can lose clarity by buying a plan and describing it only as medical, dental and vision. I would focus on the features employees can verify: their contribution, the benefit terms, the network and the support process. Those details are more useful than assumptions about how a large employer runs its plan.

- **The plan was picked for price, not for hiring.** The first plan is often the cheapest premium a broker or PEO offered, without enough attention to member costs or provider access.
- **Dependents are an afterthought.** Many small companies pay most of the employee's premium and little of the family's. Families notice first.
- **Nobody tells the story.** The offer letter says "medical, dental and vision" and nothing else, while the candidate's current plan is spelled out in their benefits portal.
- **A waiting period on day one.** A 30- or 60-day wait can leave the candidate paying COBRA to cover the gap. The federal waiting-period rule generally limits waiting to 90 calendar days once an employee is otherwise eligible. Confirm the approved eligibility policy and coverage start date; do not assume that the first of the next month eliminates a gap.

## How to compete

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** When a big-tech candidate puts their current plan next to yours, the deductible and out-of-pocket rows are where startups usually lose. An effective $0 deductible changes that comparison.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## How to build a benefits case into the offer

1. **Provide the benefits packet early** Give the candidate your SBC and contribution schedule. Invite questions about coverage without asking for private medical information. Any current-plan comparison is voluntary.
2. **Put a number on the difference** Use the example above: premium share, deductible and out-of-pocket maximum, for their family size. If your plan wins on some lines, show it.
3. **Close the gap with the plan before you use salary** Compare a contribution change, a different plan and salary using explicit assumptions. A benefits change may affect an entire eligible class, while a raise gives the employee flexible income. Choose based on the company budget and employee priorities.
4. **Confirm coverage timing** Check the old coverage end date, new plan effective date and enrollment deadline. Apply the written eligibility policy consistently. First-of-next-month coverage can leave a gap if the person starts or loses coverage mid-month.
5. **Write a benefits paragraph into the offer** Use the template below and attach your plan's SBC.
6. **Offer a call with whoever runs the plan** Offer a confidential conversation with the benefits administrator to verify providers, prescriptions and transition requirements. Do not promise that a short call will resolve every coverage question.

**Price the benefits before putting them in an offer**

Use the employee and family tiers you expect to cover, then compare a written proposal with the candidate-facing contribution sheet. Start the quote and create your account before completing the census.

[Price benefits for my team](https://www.getprescience.com/quote)

[Work through the benefits comparison](https://www.getprescience.com/guides/how-to-get-better-benefits-as-a-startup)

## A benefits blurb for your offer letter

Candidates rarely read plan documents until late in the process. Put the comparison in the offer. Here's a template you can adapt:

> **Health benefits:** We pay [confirmed contribution] for [confirmed coverage tiers]. Coverage begins [confirmed date] after timely enrollment. The attached SBC describes the deductible, copays and out-of-pocket limits. Please confirm your providers and prescriptions with the benefits administrator. Use this template only after replacing every placeholder with your actual plan terms.

Adjust the details to your actual plan documents; they control if anything differs.

## Frequently asked questions

**Do health benefits really matter for recruiting engineers?**

They can. Ask about benefit priorities without assuming all engineers value the same plan. Provide the contribution sheet, SBC, network and effective date so the candidate can decide.

**How much better are big tech health benefits?**

There is no single big-tech plan or verified universal dollar gap. Compare the candidate's actual option, if voluntarily shared, with your proposal. Do not treat a large-employer average as a promise about a specific company.

**Can a startup match FAANG health benefits?**

On the plan itself, often yes. A Prescience plan gives startups an effective $0 deductible, a low out-of-pocket maximum, a nationwide PPO network and a physician-led care team, usually for less than comparable fully insured coverage.

**What should I put about benefits in an offer letter?**

State the premium you cover, the deductible, the out-of-pocket maximum, the network and any care support, in plain language. Keep it consistent with your plan documents.

**Should I raise salary or improve the health plan?**

Compare both. Health benefits often have favorable federal tax treatment, while salary provides flexible income. Evaluate the actual contribution policy, tax exceptions and budget instead of assuming insurance is always the better choice.

**What does it cost to pay 100% of family premiums?**

At KFF's 2025 averages, family coverage costs $26,993 a year in total, $17,668 more than single coverage. Moving from paying half of that difference to all of it costs about $8,834 per family per year.

**How much parental leave do big tech companies offer?**

Policies vary by employer, worker class and location. Review the employer's current written policy. For your startup, coordinate paid leave, job protection and any state benefits rather than assume they simply add together.

**Do big tech companies cover IVF?**

Coverage varies. Ask for the exact covered services, authorization rules, provider requirements and financial limits. An informal promise to reimburse fertility expenses can create tax and benefit-plan issues; use a documented compliant arrangement.

**How do I avoid a coverage gap when someone leaves big tech?**

Confirm both plans' exact dates before the job transition. COBRA may bridge a qualifying gap if elected and paid on time, but eligibility and deadlines matter. Starting the new plan on the first of a later month does not automatically avoid a gap.

## Sources

- [KFF, 2025 Employer Health Benefits Survey (original survey)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Publication 15-B (2026), employer health benefits and QSEHRA limits](https://www.irs.gov/publications/p15b)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)
- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [CMS, medical bill rights when using insurance](https://www.cms.gov/initiatives/your-patient-rights/medical-bill-rights/know-your-rights/insurance)
- [29 CFR 2590.715-2708, waiting-period rules](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-L/part-2590/subpart-C/section-2590.715-2708)
- [West Health-Gallup, original job-lock survey and field dates](https://news.gallup.com/poll/712166/one-four-employees-locked-jobs-health-insurance.aspx)

# Startup Health Insurance: full guide for 2027

Source: https://www.getprescience.com/guides/health-insurance-for-startups
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-31
Updated: 2026-10-31
Cite as: Aditya Jain, MD. "Startup Health Insurance: full guide for 2027." Prescience, October 31, 2026. https://www.getprescience.com/guides/health-insurance-for-startups

Startups should choose health insurance around their current employees, hiring locations and cash budget, then confirm enrollment before promising a start date.

- **Planning year:** 2027
- **First decision:** Eligibility and coverage needs
- **Budget examples:** Illustrative, not insurance quotes
- **Before enrolling:** Verify current plan documents

## Build a benefit that works at your current stage

A startup’s first health plan is an operating decision as well as a recruiting decision. I would begin with the people already hired and the locations of the next likely hires. A founder-only company needs an eligibility check before shopping as an employer group. A company with employees needs a documented offer, a contribution policy and a process that works even when nobody has a full-time HR role.

This is the general startup guide. The [YC startup guide](https://www.getprescience.com/guides/health-insurance-for-yc-startups) covers that audience, while [founder coverage](https://www.getprescience.com/guides/health-insurance-for-founders) addresses the period before the first hire. Use this page to turn an approved budget into a launch plan. Do not assume venture funding, an accelerator membership or a payroll account establishes insurance eligibility.

## Translate hiring plans into monthly cash needs

An annual per-employee estimate misses the timing of a fast-growing team. Model current enrollment, the expected hire month and dependent tiers. Keep a conservative scenario in which more people select family coverage than expected. The employer contribution policy should say what the company pays for each tier so recruiters do not invent a new promise in each offer.

For a startup still validating its business, a modest benefit that can be maintained may be better than a generous contribution that must be cut after one quarter. Explain the tradeoff clearly. If a candidate asks for a particular doctor or treatment, arrange a private network check rather than collecting medical details in the recruiting process. Benefit discussions should not turn hiring managers into claim reviewers.

## A six-person startup hires four people in July

**A six-person startup hires four people in July**

Illustrative only: the company contributes $500 monthly per enrolled employee. Six enroll in January and four more enroll in July.

- January through June: 6 × $500 × 6 = $18,000
- July through December: 10 × $500 × 6 = $30,000
- Annual contribution budget: $48,000
- December monthly run rate: $5,000 before fees and dependent support

Using ten employees for all twelve months would overstate this scenario; using six for all twelve would understate it. Change the model when hiring or enrollment changes.

## Compare the first plan against the next stage

A group policy can provide a consistent benefit for a concentrated team. An individual coverage arrangement may fit a distributed workforce if the available local policies and employee contributions work. A PEO may be useful when the startup also needs employment administration. Evaluate the service actually needed and the contract required to get it. A bundled proposal should show what the business pays for insurance and what it pays for administration.

Ask what happens when the company adds another state, changes payroll or leaves the PEO. These are likely operating events, not remote edge cases. Check whether the plan supports the actual next hiring locations and whether the administrator can onboard employees without the founder manually forwarding every form. Document termination and renewal deadlines before the team becomes dependent on a service.

**Build a quote around your next stage of hiring**

Use today's employees and their locations to start the comparison. Create your account, complete the census and keep future hiring assumptions separate from the people being quoted now.

[Start my startup's quote](https://www.getprescience.com/quote)

[Get the census from my payroll platform](https://www.getprescience.com/integrations)

## Give one person ownership of the launch

The founder, finance lead or operations manager should maintain the application checklist, employee election status and carrier confirmation. Set a fallback communication plan if coverage is delayed. After activation, verify employee and dependent records against the first invoice. A successful launch means people can obtain care and payroll reflects the promised contribution. It does not end when the company signs the broker’s proposal or announces benefits in a team meeting.

## Compare the insurance contract and the administration separately

I would request a short written comparison before choosing an arrangement. Put the coverage effective date, eligible people, insurer, exact network, monthly premium, employer contribution and administrative fees on one sheet. Add the deductible, out-of-pocket maximum, prescription coverage and referral requirements. A cheaper premium is useful only after the coverage meets the needs of the people who will use it. An insurance brand alone does not identify the network or the benefits in the contract.

A traditional group policy lets the employer select a common set of benefits. An individual coverage HRA lets eligible employees select qualifying individual coverage with employer reimbursement under a formal arrangement. A PEO combines benefits access with an employment administration relationship. These are different purchases. If payroll and HR already work well, price insurance separately before paying for a broader package. If the company needs payroll, onboarding and HR support too, compare the complete service and the exit terms.

Ask who answers an enrollment problem, who corrects a payroll deduction and who handles an insurer dispute. One sales contact may introduce several service providers without taking responsibility for their work. Record the support route for each problem before the first bill. When considering a change, ask whether the old administrator will provide the enrollment history and documents needed by its replacement. Keep that handoff in the project budget.

## Test how people will actually get care

Give employees a private way to check an important physician, a hospital and a recurring prescription against each finalist. They should use the exact network name and plan year, and confirm participation with the insurer and provider. Do not collect diagnoses in a shared spreadsheet. HR generally needs to know whether a plan meets the employee’s access needs, not the details of the treatment. A broker or insurer can handle sensitive follow-up through its secure process.

For prescriptions, compare the drug, dose, pharmacy, tier, prior authorization and any specialty pharmacy requirement. A drug appearing in a directory does not tell you its final cost or whether authorization is required. For ongoing treatment, ask about transition-of-care procedures before changing coverage. An existing authorization may need to be reviewed again. Build time for that review into the switch rather than discovering it at the first appointment.

An employee with dependents may value family coverage more than the lowest employee-only deduction. Compare at least one employee-only household and one family household using the same assumptions. Show the annual payroll contribution and the in-network out-of-pocket maximum separately. Their sum is a useful insured-care stress case, but it is not a ceiling on every possible expense: excluded services, some out-of-network care and premiums follow different rules.

## Move from a proposal to active coverage

I would assign one owner to the enrollment project and work backward from the requested start date. A quote is not an approval, and an application is not proof of active insurance. Ask the carrier or administrator to specify the last date for a complete application, initial payment and employee elections. Keep the actual requirements in writing. If a deadline slips, revisit the start date before anyone cancels their current coverage.

Prepare a current census using the fields the quoting party requests. Confirm employment status, work and home locations, dependent tiers and requested effective dates. Keep personal identifiers out of email attachments when a secure upload is available. Reconcile the census against payroll, then record enrollments and valid waivers. Ask the insurer how it counts participation rather than assuming that every waiver counts against the group.

Before launch, obtain the benefit summary and the required plan and enrollment documents. Give employees the contribution schedule, election instructions, support contact and a clear deadline. The Department of Labor’s disclosure guide is a starting point for identifying documents; the employer and its adviser should determine which duties apply to the actual arrangement. Buying administration services does not by itself establish that every employer obligation has been performed.

After enrollment, compare the carrier’s active roster with payroll and the first invoice. Resolve a missing dependent, incorrect tier or wrong effective date immediately. Check the next payroll run too: a corrected insurer invoice does not automatically correct a wage deduction. Retain the confirmation and correction history so the next administrator can understand what happened without asking the employee to repeat a sensitive story.

## Keep the 2027 decision tied to current documents

This guide is for planning 2027 coverage. A year in the title does not make an older carrier directory, rate table or tax illustration current. Ask for documents that name the intended coverage year, the actual product and the quoted effective date. Where an annual limit matters, check the current IRS publication or the linked specialist guide before putting a number into payroll. A prior-year illustration is background, not a current quote.

Set a renewal review date when coverage starts. Keep the original comparison, contribution policy and enrollment assumptions so the next proposal can be measured against the same facts. Separate a rate change from a workforce change: hiring, dependents and employee moves can change the total bill even if the underlying rate does not move. Review unresolved access problems as well as premium changes. A plan that generated repeated enrollment work has an administrative cost even when no separate fee appears.

For a company approaching the employer-responsibility threshold, have payroll and the adviser review the preceding year’s full-time employees, full-time equivalents and related businesses. Counting enrolled people alone does not answer the federal applicable-large-employer question. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) to organize the inputs, then confirm the legal conclusion and reporting duties before finalizing the offer.

## Compare a Prescience proposal with your alternatives

If the company is shopping for employer coverage, request a proposal based on its actual workforce and locations. Compare the resulting benefits, employee costs and service responsibilities with the other options in this guide. For an owner-only business, establish eligibility before relying on any employer product. I would choose the arrangement that fits the people and the budget, even when that means keeping existing coverage.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.**
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**When should a startup offer health insurance?**

When it can establish eligible coverage and sustain the benefit promise; hiring needs and legal duties both matter.

**Does a startup need a PEO?**

No. Compare a PEO when the broader employment administration service is useful.

**Can founders enroll before hiring?**

Check owner-only eligibility and individual options before assuming a group is available.

**Can we keep our payroll provider?**

That depends on the arrangement. Ask whether insurance can be administered alongside existing payroll.

**Should we budget only premiums?**

Include administration, dependent support, any HSA contribution and the effect of hiring dates.

**Can we start midyear?**

Often employer coverage can start outside individual open enrollment, subject to the product’s application and effective-date rules.

## Sources

- [HealthCare.gov: SHOP eligibility and participation](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [HealthCare.gov: comparing group coverage and HRAs](https://www.healthcare.gov/small-businesses/learn-more/hra-guide/)
- [IRS: identifying applicable large employers](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [Department of Labor: health plan disclosures](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)
- [IRS Publication 15-B: fringe benefits](https://www.irs.gov/publications/p15b)
- [HealthCare.gov: self-employed coverage](https://www.healthcare.gov/self-employed/coverage/)

# LLC Health Insurance: full guide for 2027

Source: https://www.getprescience.com/guides/llc-health-insurance
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-29
Updated: 2026-10-29
Cite as: Aditya Jain, MD. "LLC Health Insurance: full guide for 2027." Prescience, October 29, 2026. https://www.getprescience.com/guides/llc-health-insurance

LLC health insurance depends on the company’s tax classification, its employees and where coverage is needed.

- **Planning year:** 2027
- **First decision:** Eligibility and coverage needs
- **Budget examples:** Illustrative, not insurance quotes
- **Before enrolling:** Verify current plan documents

## Start with the tax election, not the LLC name

An LLC is a legal structure, not a single federal tax category. The IRS generally treats a domestic single-member LLC as disregarded and a domestic multi-member LLC as a partnership unless a corporate election applies. An LLC may also be taxed as an S corporation when it makes the appropriate election and qualifies. I would ask the accountant for the current classification and effective date before asking payroll to reimburse an owner.

This matters because the same insurance invoice can take a different accounting route for different owners. A disregarded owner, a partner and a more-than-2% S corporation shareholder should not simply be placed in the ordinary employee benefit workflow. If the entity elected S corporation taxation, use the [S corp owner guide](https://www.getprescience.com/guides/s-corp-owner-health-insurance). If it is taxed as a partnership, use the [business partner guide](https://www.getprescience.com/guides/partnership-health-insurance). The state filing that created the LLC does not answer that question.

## Match each person to the right review

**Match each person to the right review**

| Situation | Coverage decision | Tax review |
| --- | --- | --- |
| Single-member LLC without a corporate election | Compare individual coverage and any state-specific group-of-one option. | Review self-employed deduction eligibility and business income. |
| LLC taxed as a partnership | Separate partners from common-law employees in the census. | Have the accountant map partner payments to the partnership return. |
| LLC taxed as an S corporation | Confirm shareholder ownership and family attribution. | Review company payment, reimbursement and W-2 reporting. |
| Non-owner employee | Apply the written employee eligibility policy. | Review employer-paid benefits and any pre-tax payroll elections. |

## Having an LLC does not establish group eligibility

A business bank account and an EIN do not by themselves create a qualifying employee group. SHOP requires a qualifying employee other than the owners and specified family members. Off-exchange rules can differ by state, so an owner-only LLC should ask a licensed broker to check the actual jurisdiction instead of treating the federal SHOP rule as the whole market. Do not change employment labels simply to obtain a quote.

When the LLC hires employees, compare the owner’s coverage and the employees’ coverage together for budgeting, but keep the tax treatment separate. A plan can be suitable for the workforce while the owner requires different reporting. Ask the administrator to document whether each owner can participate in a proposed HRA. An arrangement advertised for small businesses does not automatically treat a self-employed owner as an employee.

**Have employees to cover? Start with the company details**

The LLC name does not establish eligibility. If you are arranging employee benefits, create your account through the quote flow and identify owners separately when completing the census.

[Compare coverage for my LLC's team](https://www.getprescience.com/quote)

## An LLC budget with separate owner accounting

**An LLC budget with separate owner accounting**

Illustrative only: three employees each have a $600 monthly premium. The LLC pays 75%. A separately covered owner has a $700 monthly premium.

- Employee contribution from the LLC: 3 × $600 × 75% = $1,350 per month
- Employee payroll deductions: 3 × $600 × 25% = $450 per month
- Owner coverage cash cost: $700 per month
- Combined employer and owner cash planning: $2,050 per month before fees and tax effects

The $2,050 is a cash-planning figure, not a claim that the LLC can deduct every payment the same way. Have the accountant assign the owner payment correctly before recording it.

## Review ownership changes before the next payment

Adding a member, making a corporate election or changing the payroll provider can alter the reporting workflow. Keep the effective date with the insurance records and tell the benefits administrator what changed. Reconcile the final month under the old treatment and the first month under the new one. I would also retain the accountant’s instructions so a future bookkeeper does not replace a deliberate setup with a generic payroll category.

## Compare the insurance contract and the administration separately

I would request a short written comparison before choosing an arrangement. Put the coverage effective date, eligible people, insurer, exact network, monthly premium, employer contribution and administrative fees on one sheet. Add the deductible, out-of-pocket maximum, prescription coverage and referral requirements. A cheaper premium is useful only after the coverage meets the needs of the people who will use it. An insurance brand alone does not identify the network or the benefits in the contract.

A traditional group policy lets the employer select a common set of benefits. An individual coverage HRA lets eligible employees select qualifying individual coverage with employer reimbursement under a formal arrangement. A PEO combines benefits access with an employment administration relationship. These are different purchases. If payroll and HR already work well, price insurance separately before paying for a broader package. If the company needs payroll, onboarding and HR support too, compare the complete service and the exit terms.

Ask who answers an enrollment problem, who corrects a payroll deduction and who handles an insurer dispute. One sales contact may introduce several service providers without taking responsibility for their work. Record the support route for each problem before the first bill. When considering a change, ask whether the old administrator will provide the enrollment history and documents needed by its replacement. Keep that handoff in the project budget.

## Test how people will actually get care

Give employees a private way to check an important physician, a hospital and a recurring prescription against each finalist. They should use the exact network name and plan year, and confirm participation with the insurer and provider. Do not collect diagnoses in a shared spreadsheet. HR generally needs to know whether a plan meets the employee’s access needs, not the details of the treatment. A broker or insurer can handle sensitive follow-up through its secure process.

For prescriptions, compare the drug, dose, pharmacy, tier, prior authorization and any specialty pharmacy requirement. A drug appearing in a directory does not tell you its final cost or whether authorization is required. For ongoing treatment, ask about transition-of-care procedures before changing coverage. An existing authorization may need to be reviewed again. Build time for that review into the switch rather than discovering it at the first appointment.

An employee with dependents may value family coverage more than the lowest employee-only deduction. Compare at least one employee-only household and one family household using the same assumptions. Show the annual payroll contribution and the in-network out-of-pocket maximum separately. Their sum is a useful insured-care stress case, but it is not a ceiling on every possible expense: excluded services, some out-of-network care and premiums follow different rules.

## Move from a proposal to active coverage

I would assign one owner to the enrollment project and work backward from the requested start date. A quote is not an approval, and an application is not proof of active insurance. Ask the carrier or administrator to specify the last date for a complete application, initial payment and employee elections. Keep the actual requirements in writing. If a deadline slips, revisit the start date before anyone cancels their current coverage.

Prepare a current census using the fields the quoting party requests. Confirm employment status, work and home locations, dependent tiers and requested effective dates. Keep personal identifiers out of email attachments when a secure upload is available. Reconcile the census against payroll, then record enrollments and valid waivers. Ask the insurer how it counts participation rather than assuming that every waiver counts against the group.

Before launch, obtain the benefit summary and the required plan and enrollment documents. Give employees the contribution schedule, election instructions, support contact and a clear deadline. The Department of Labor’s disclosure guide is a starting point for identifying documents; the employer and its adviser should determine which duties apply to the actual arrangement. Buying administration services does not by itself establish that every employer obligation has been performed.

After enrollment, compare the carrier’s active roster with payroll and the first invoice. Resolve a missing dependent, incorrect tier or wrong effective date immediately. Check the next payroll run too: a corrected insurer invoice does not automatically correct a wage deduction. Retain the confirmation and correction history so the next administrator can understand what happened without asking the employee to repeat a sensitive story.

## Keep the 2027 decision tied to current documents

This guide is for planning 2027 coverage. A year in the title does not make an older carrier directory, rate table or tax illustration current. Ask for documents that name the intended coverage year, the actual product and the quoted effective date. Where an annual limit matters, check the current IRS publication or the linked specialist guide before putting a number into payroll. A prior-year illustration is background, not a current quote.

Set a renewal review date when coverage starts. Keep the original comparison, contribution policy and enrollment assumptions so the next proposal can be measured against the same facts. Separate a rate change from a workforce change: hiring, dependents and employee moves can change the total bill even if the underlying rate does not move. Review unresolved access problems as well as premium changes. A plan that generated repeated enrollment work has an administrative cost even when no separate fee appears.

For a company approaching the employer-responsibility threshold, have payroll and the adviser review the preceding year’s full-time employees, full-time equivalents and related businesses. Counting enrolled people alone does not answer the federal applicable-large-employer question. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) to organize the inputs, then confirm the legal conclusion and reporting duties before finalizing the offer.

## Compare a Prescience proposal with your alternatives

If the company is shopping for employer coverage, request a proposal based on its actual workforce and locations. Compare the resulting benefits, employee costs and service responsibilities with the other options in this guide. For an owner-only business, establish eligibility before relying on any employer product. I would choose the arrangement that fits the people and the budget, even when that means keeping existing coverage.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.**
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Can an LLC buy health insurance?**

Yes, but the available route depends on employees, location and carrier eligibility. LLC formation alone does not establish a group.

**Can my LLC pay my premiums?**

Payment and tax treatment are separate questions. Confirm the LLC’s classification and the owner’s reporting requirements first.

**Is every LLC owner an S corp shareholder?**

No. S corporation treatment requires the relevant election and eligibility.

**What if I have no employees?**

Start with individual coverage and check whether your state permits an applicable group-of-one option.

**Can an LLC offer employee benefits?**

Yes. Confirm the plan’s employer and employee eligibility requirements and document the contribution policy.

**Should I form an LLC just for insurance?**

Choose a business structure for the full legal and tax situation. An LLC alone does not guarantee cheaper insurance.

## Sources

- [HealthCare.gov: SHOP eligibility and participation](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [HealthCare.gov: comparing group coverage and HRAs](https://www.healthcare.gov/small-businesses/learn-more/hra-guide/)
- [IRS: identifying applicable large employers](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [Department of Labor: health plan disclosures](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)
- [IRS: LLC tax classification](https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership)
- [IRS: S corporation medical insurance issues](https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues)
- [IRS Publication 541: partnerships](https://www.irs.gov/publications/p541)
- [HealthCare.gov: self-employed coverage](https://www.healthcare.gov/self-employed/coverage/)

# Partnership Health Insurance: full guide for 2027

Source: https://www.getprescience.com/guides/partnership-health-insurance
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-30
Updated: 2026-10-30
Cite as: Aditya Jain, MD. "Partnership Health Insurance: full guide for 2027." Prescience, October 30, 2026. https://www.getprescience.com/guides/partnership-health-insurance

Business partners can obtain health coverage, but partner premiums and employee benefits require different tax and accounting treatment.

- **Planning year:** 2027
- **First decision:** Eligibility and coverage needs
- **Budget examples:** Illustrative, not insurance quotes
- **Before enrolling:** Verify current plan documents

## Identify partners before building the benefits census

This guide concerns owners in a business partnership, including an LLC taxed as a partnership. It does not concern domestic-partner dependent coverage or an insurer with “Partners” in its name. I would start by separating partners, common-law employees and dependents. The list used for quoting can contain all of them, but that does not make their payroll and tax treatment identical.

IRS Publication 541 explains that health insurance premiums a partnership pays for a partner’s services are treated as guaranteed payments and included in the partner’s gross income. An eligible partner may qualify for a self-employed health insurance deduction. The conditions and reporting should be reviewed with the partnership’s accountant. Paying through the business does not make the premium an ordinary tax-free employee benefit, and a partner should not receive a W-2 merely to imitate an employee benefit setup.

## Document whose coverage the partnership is paying for

Keep the policy, premium statement, proof of payment and the partnership’s reimbursement policy together. If a partner buys coverage personally, ask the accountant what payment and reporting steps are needed for a plan to be treated as established under the business. A year-end journal entry without the supporting payment history can leave both the partnership and the partner uncertain about what was actually provided.

If two partners have different family tiers, decide how the business will fund those costs under its agreement and obtain tax advice on the allocation. Do not silently change partner economics through the benefits account. A partner joining midyear also needs an effective date and a record of the coverage already held. Ownership percentages alone do not tell the administrator which people are enrolled or which household premium is being paid.

## Two partners and an employee benefit budget

**Two partners and an employee benefit budget**

Illustrative only: partner A has an $800 monthly premium, partner B has a $1,200 family premium, and four employees receive $400 each in monthly employer premium contributions.

- Partner premiums: $800 + $1,200 = $2,000 monthly
- Employee premium contributions: 4 × $400 = $1,600 monthly
- Total cash outlay: $3,600 monthly; $43,200 annually
- Tax deductions: Not calculated in this example

Keep the $24,000 annual partner premium total separate from the $19,200 employee contribution total in the accounting review. This example does not determine guaranteed-payment allocations or personal deductions.

## A partnership with no employees needs a separate eligibility check

Two partners are not automatically two qualifying employees for SHOP. An owner-only firm should compare individual policies and ask about state-specific alternatives. If the firm later hires a non-owner employee, obtain a fresh eligibility determination rather than assuming the old individual arrangement must continue unchanged. Conversely, losing the last qualifying employee can create a renewal issue that needs prompt attention.

For a partnership with employees, evaluate group coverage and formal employee reimbursement arrangements on their own terms. Partners generally are not employees for the tax-free HRA treatment offered to common-law employees. Before signing, ask the administrator to show how it handles excluded owners. A sales proposal that promises the same tax-free reimbursement to every person on the census needs clarification.

**Adding employees? Keep partner treatment separate**

A partner-only business needs its own eligibility review. When you are comparing coverage for an employee group, create your account and identify partners separately in the census rather than treating ownership as ordinary employment.

[Compare coverage for our employees](https://www.getprescience.com/quote)

## Give each partner a usable year-end record

Before the return is prepared, reconcile premiums by partner, coverage month and payer. Separate employee contributions, partner premiums, administrative fees and any reimbursements or refunds. Ask the accountant to explain how the partnership return and each partner’s return will agree. If an invoice was refunded after a dependent left, correct the record rather than carrying the original annual estimate forward. Keep insurance enrollment records separate from the confidential tax return workpapers.

## Compare the insurance contract and the administration separately

I would request a short written comparison before choosing an arrangement. Put the coverage effective date, eligible people, insurer, exact network, monthly premium, employer contribution and administrative fees on one sheet. Add the deductible, out-of-pocket maximum, prescription coverage and referral requirements. A cheaper premium is useful only after the coverage meets the needs of the people who will use it. An insurance brand alone does not identify the network or the benefits in the contract.

A traditional group policy lets the employer select a common set of benefits. An individual coverage HRA lets eligible employees select qualifying individual coverage with employer reimbursement under a formal arrangement. A PEO combines benefits access with an employment administration relationship. These are different purchases. If payroll and HR already work well, price insurance separately before paying for a broader package. If the company needs payroll, onboarding and HR support too, compare the complete service and the exit terms.

Ask who answers an enrollment problem, who corrects a payroll deduction and who handles an insurer dispute. One sales contact may introduce several service providers without taking responsibility for their work. Record the support route for each problem before the first bill. When considering a change, ask whether the old administrator will provide the enrollment history and documents needed by its replacement. Keep that handoff in the project budget.

## Test how people will actually get care

Give employees a private way to check an important physician, a hospital and a recurring prescription against each finalist. They should use the exact network name and plan year, and confirm participation with the insurer and provider. Do not collect diagnoses in a shared spreadsheet. HR generally needs to know whether a plan meets the employee’s access needs, not the details of the treatment. A broker or insurer can handle sensitive follow-up through its secure process.

For prescriptions, compare the drug, dose, pharmacy, tier, prior authorization and any specialty pharmacy requirement. A drug appearing in a directory does not tell you its final cost or whether authorization is required. For ongoing treatment, ask about transition-of-care procedures before changing coverage. An existing authorization may need to be reviewed again. Build time for that review into the switch rather than discovering it at the first appointment.

An employee with dependents may value family coverage more than the lowest employee-only deduction. Compare at least one employee-only household and one family household using the same assumptions. Show the annual payroll contribution and the in-network out-of-pocket maximum separately. Their sum is a useful insured-care stress case, but it is not a ceiling on every possible expense: excluded services, some out-of-network care and premiums follow different rules.

## Move from a proposal to active coverage

I would assign one owner to the enrollment project and work backward from the requested start date. A quote is not an approval, and an application is not proof of active insurance. Ask the carrier or administrator to specify the last date for a complete application, initial payment and employee elections. Keep the actual requirements in writing. If a deadline slips, revisit the start date before anyone cancels their current coverage.

Prepare a current census using the fields the quoting party requests. Confirm employment status, work and home locations, dependent tiers and requested effective dates. Keep personal identifiers out of email attachments when a secure upload is available. Reconcile the census against payroll, then record enrollments and valid waivers. Ask the insurer how it counts participation rather than assuming that every waiver counts against the group.

Before launch, obtain the benefit summary and the required plan and enrollment documents. Give employees the contribution schedule, election instructions, support contact and a clear deadline. The Department of Labor’s disclosure guide is a starting point for identifying documents; the employer and its adviser should determine which duties apply to the actual arrangement. Buying administration services does not by itself establish that every employer obligation has been performed.

After enrollment, compare the carrier’s active roster with payroll and the first invoice. Resolve a missing dependent, incorrect tier or wrong effective date immediately. Check the next payroll run too: a corrected insurer invoice does not automatically correct a wage deduction. Retain the confirmation and correction history so the next administrator can understand what happened without asking the employee to repeat a sensitive story.

## Keep the 2027 decision tied to current documents

This guide is for planning 2027 coverage. A year in the title does not make an older carrier directory, rate table or tax illustration current. Ask for documents that name the intended coverage year, the actual product and the quoted effective date. Where an annual limit matters, check the current IRS publication or the linked specialist guide before putting a number into payroll. A prior-year illustration is background, not a current quote.

Set a renewal review date when coverage starts. Keep the original comparison, contribution policy and enrollment assumptions so the next proposal can be measured against the same facts. Separate a rate change from a workforce change: hiring, dependents and employee moves can change the total bill even if the underlying rate does not move. Review unresolved access problems as well as premium changes. A plan that generated repeated enrollment work has an administrative cost even when no separate fee appears.

For a company approaching the employer-responsibility threshold, have payroll and the adviser review the preceding year’s full-time employees, full-time equivalents and related businesses. Counting enrolled people alone does not answer the federal applicable-large-employer question. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) to organize the inputs, then confirm the legal conclusion and reporting duties before finalizing the offer.

## Compare a Prescience proposal with your alternatives

If the company is shopping for employer coverage, request a proposal based on its actual workforce and locations. Compare the resulting benefits, employee costs and service responsibilities with the other options in this guide. For an owner-only business, establish eligibility before relying on any employer product. I would choose the arrangement that fits the people and the budget, even when that means keeping existing coverage.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.**
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Does this guide cover domestic partners?**

No. It covers business owners taxed as partners. Domestic-partner dependent eligibility is a separate plan question.

**Can partners join an employee group plan?**

Potentially, subject to the carrier and employer eligibility rules. Partner tax treatment still differs.

**Are partners employees for health benefit taxes?**

Generally no. Review partner payments under the partnership rules with the accountant.

**Can the partnership reimburse premiums?**

It can arrange payments, but documentation, reporting and the partner’s deduction eligibility require review.

**Can a partner use an employee HRA tax-free?**

Partners generally do not qualify as employees for that treatment.

**Is an LLC covered by these rules?**

Yes if it is taxed as a partnership; corporate elections can change the treatment.

## Sources

- [HealthCare.gov: SHOP eligibility and participation](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [HealthCare.gov: comparing group coverage and HRAs](https://www.healthcare.gov/small-businesses/learn-more/hra-guide/)
- [IRS: identifying applicable large employers](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [Department of Labor: health plan disclosures](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)
- [IRS Publication 541: partnerships](https://www.irs.gov/publications/p541)
- [IRS: instructions for Form 7206](https://www.irs.gov/instructions/i7206)
- [IRS Publication 15-B: fringe benefits](https://www.irs.gov/publications/p15b)

# What is a health savings account (HSA)?

Source: https://www.getprescience.com/guides/what-is-an-hsa
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-04
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "What is a health savings account (HSA)?." Prescience, October 28, 2026. https://www.getprescience.com/guides/what-is-an-hsa

A health savings account (HSA) is an individually owned account with federal tax advantages for qualified medical expenses. Contributions require HSA-eligible coverage and other eligibility conditions. For a fully eligible person in 2026, the limit is $4,400 for self-only coverage or $8,750 for family coverage, including employer contributions.

- **2026 limit, self-only:** $4,400
- **2026 limit, family:** $8,750
- **Catch-up (55+):** +$1,000
- **2026 HDHP minimum deductible:** $1,700 / $3,400

## How an HSA works

An HSA pairs with a high-deductible health plan (HDHP). You, your employer or both put money in. You spend it on qualified medical expenses, from doctor visits and prescriptions to dental and vision care, or you let it grow. The money is yours: it stays with you when you change jobs and never expires.

I value the combination of federal benefits: eligible contributions are excluded or deductible, earnings grow tax-free, and qualified withdrawals are tax-free. State rules may differ. Nonqualified withdrawals can be taxable, so the account is not a blanket exemption for any spending.

- **Anyone can contribute for you:** you, your employer or a family member. All of it counts toward one annual limit.
- **You choose when to spend it.** IRS Publication 969 lets you take tax-free money out for qualified expenses you had after you opened the HSA, and you don't have to take it out in the same year. Keep the receipts.
- **You may be able to invest it.** Some custodians offer investments, with their own cash minimums, fees and investment choices. Money invested can lose value, so keep expected near-term medical spending accessible.
- **After 65 it behaves like a traditional IRA.** Withdrawals for non-medical spending are taxed as income but no longer carry the 20% penalty. Before 65, non-medical withdrawals are taxed and penalized 20%, unless you're disabled.
- **Some premiums are allowed.** HSA money can pay COBRA premiums, coverage while you collect unemployment, qualified long-term care insurance within age-based annual limits and, from 65, Medicare premiums (not Medigap). Ordinary premiums are not qualified expenses.

## 2026 HSA limits

_Chart: 2026 HSA limits for full-year eligible individuals: $4,400 self-only, $8,750 family, plus $1,000 for an eligible person age 55+ at year-end._

**IRS limits for 2026 (Revenue Procedure 2025-19)**

|  | Self-only | Family |
| --- | --- | --- |
| HSA contribution limit | $4,400 | $8,750 |
| Catch-up contribution, age 55+ | +$1,000 | +$1,000 |
| HDHP minimum deductible | $1,700 | $3,400 |
| HDHP out-of-pocket maximum | $8,500 | $17,000 |

Employer and employee contributions count toward the same limit. If your employer puts in $1,000 and you have self-only coverage, you can add $3,400 more. You have until the tax filing deadline to contribute for a year, so 2026 contributions can be made until April 15, 2027.

The limit depends on the coverage you have, not on how many people live in your house. Family coverage means the HDHP covers you and at least one other person. If you switch from self-only to family coverage partway through the year, the limit is figured month by month (or with the last-month rule below).

## What changed for 2026

The One, Big, Beautiful Bill Act widened HSA eligibility starting January 1, 2026:

- **Bronze and catastrophic individual plans** now count as HSA-compatible, even if they don't meet the usual HDHP definition. The relief covers qualifying individual-market plans available through an Exchange, including off-Exchange purchases, with IRS good-faith relief described in Notice 2026-5. It does not make every employer bronze plan eligible.
- **Direct primary care:** certain qualifying arrangements no longer block contributions from January 1, 2026. To preserve contribution eligibility, aggregate monthly fees cannot exceed $150 for one person or $300 for an arrangement covering more than one person. Services must meet the statutory definition; not every concierge membership qualifies. Qualified DPC fees can be paid from an HSA even when the fee exceeds that eligibility threshold, but employer-paid fees cannot also be reimbursed tax-free.
- **Telehealth before the deductible** is permanently allowed without breaking HSA eligibility, for plan years starting on or after January 1, 2025.

The limits themselves rose by the usual inflation step: $100 for self-only coverage (from $4,300) and $200 for family coverage (from $8,550). The catch-up amount is set by statute and stays at $1,000.

## What an HSA saves you in real dollars

The savings depend on your tax bracket and on how the money goes in. Contributions through payroll under your employer's cafeteria plan avoid federal income tax and applicable FICA, generally 7.65% below the Social Security wage base. Contributions you make on your own at your bank are deductible on your return, but you still paid FICA on that pay. That difference is worth using payroll if you can.

**Single engineer maxing out through payroll**

Illustrative. A single employee with self-only HDHP coverage earning $140,000 in 2026, in the 24% federal bracket, living in a state with a 5% income tax that follows federal HSA rules. Assume she is HSA-eligible all year, has no other contributions and contributes $4,400 through a compliant cafeteria plan.

- Contribution: $4,400
- Federal income tax avoided (24%): $1,056
- Social Security and Medicare avoided (7.65%): $337
- State income tax avoided (5%): $220

About **$1,613** less tax in one year, a 37% discount on every dollar she spends on care. Paid instead from her own bank account and deducted at tax time, she'd save about $1,276 (no FICA savings).

**Family saving for future qualified expenses**

Illustrative. A fully eligible couple contributes an assumed constant $8,750 at each year-end for 15 years, makes no withdrawals and earns 6% annually before any fees. Returns and future contribution limits are not guaranteed.

- Yearly contribution: $8,750
- Years: 15
- Total put in: $131,250
- Balance at 6% a year: About $203,665

Contributions total $131,250 and hypothetical growth is about $72,415. Actual results depend on investment performance, fees and withdrawals. Federal tax-free treatment requires qualified expenses; ordinary nonmedical withdrawals are taxable even after age 65.

> **California doesn't follow the federal rules:** California does not recognize HSAs for state tax. Employer contributions are added back to state income, and interest, dividends and realized investment gains can be subject to state tax. The federal savings still apply. Check your own state before you count the state line in the example above.

## Eligibility edge cases that trip people up

You're eligible for a month if, on the first day of that month, you're covered by an HSA-eligible plan, you have no disqualifying other coverage, you're not enrolled in Medicare and nobody can claim you as a dependent. Most mistakes come from the second and third conditions.

**Situations that change what you can contribute**

| Situation | What happens to your HSA |
| --- | --- |
| You enroll in Medicare (Part A, B or both) | Your limit is zero from the first month you're enrolled. You keep and can spend the existing balance. |
| You apply for Medicare or Social Security after 65 | Premium-free Part A starts up to 6 months before you sign up (never before the month you turned 65). Contributions in those backdated months become excess contributions. |
| Your spouse has a general-purpose health FSA | If that FSA can pay your medical bills, you're not eligible, even though it's your spouse's employer's plan. A limited-purpose (dental and vision) FSA is fine. |
| You had a general-purpose FSA last year with a carryover | The carryover keeps you covered by that FSA into the new year and can block HSA eligibility unless the employer converts it to limited-purpose. |
| You join an HDHP mid-year | Prorate by month, or use the last-month rule if you're eligible on December 1 and stay eligible through the next year. |
| You use VA care for a service-connected disability | Doesn't disqualify you, per IRS Publication 969. |
| Both spouses are 55 or older | Each can add the $1,000 catch-up, but only into their own HSA. There are no joint HSAs. |
| Your adult child (under 26) is on your family plan | If they cannot be claimed as anyone’s tax dependent and meet all other eligibility rules, they can contribute to their own HSA based on their family coverage and eligible months. |

**The Medicare month-by-month limit**

An employee turns 65 on July 15, 2026, has otherwise qualifying self-only HDHP coverage and has Medicare effective July 1. The IRS prorates the limit by the months before Medicare.

- 2026 self-only limit plus catch-up: $5,400
- Eligible months (January–June): 6 of 12
- Calculation: $5,400 × 6 ÷ 12

His 2026 limit is **$2,700**, including anything his employer contributes. If he works past 65 and delays Medicare, he can keep contributing, but he should stop at least 6 months before he applies so the backdated Part A doesn't create excess contributions.

**The last-month rule and its trap**

An employee under 55 first becomes HSA-eligible on December 1, 2026 with family HDHP coverage. Under the last-month rule, eligibility on December 1 can allow a full-year contribution, subject to the testing period.

- Contribution allowed for 2026: $8,750
- Testing period: December 1, 2026 to December 31, 2027
- If she becomes HSA-ineligible in June 2027: Fails the test
- Amount added back to income: $8,750 − ($8,750 × 1 ÷ 12) ≈ $8,021

She'd owe income tax on about $8,021 plus a **10% additional tax**. Use the last-month rule only if you're confident you'll stay HSA-eligible for the whole next year. Death or disability doesn't trigger the penalty.

Excess contributions cost 6% a year until you fix them. If you catch the mistake by your tax return due date, including extensions, ask your HSA provider to remove the excess and its earnings.

## The catch: the deductible

An HSA balance and insurance coverage solve different budgeting problems. A qualifying HDHP generally has a deductible of at least $1,700 self-only or $3,400 family in 2026, subject to exceptions including the new individual bronze and catastrophic rules. You can keep an existing HSA without qualifying to make new contributions. Before choosing a plan, compare available cash with early-year medical exposure, not just the potential tax deduction.

An HSA can be useful for people with frequent or infrequent care needs. Compare premiums, covered services, employer contributions and the out-of-pocket maximum. A person with substantial expected care should not reject an HDHP solely because of the deductible, or select it solely for the tax benefit. The total annual cost and timing of bills determine whether it fits.

## How employers can make the deductible disappear

Employers can contribute to employees' HSAs too, and those dollars can cover the deductible so employees don't feel it. Employer money in an HSA belongs to the employee, so it's a benefit people actually notice. KFF's 2025 survey put the average employer HSA contribution at $690 a year for single coverage and $1,296 for family coverage, counting employers that give nothing.

**Common employer HSA contribution strategies**

| Strategy | How it works | Trade-off |
| --- | --- | --- |
| **Flat seed** | Same dollar amount for everyone in a coverage tier, e.g., $750 single and $1,500 family | Simple and fair; doesn't reward saving |
| **Match** | Match employee contributions up to a cap, e.g., 50% up to $1,000 | Rewards savers; lower earners often get less. Must run through a cafeteria plan |
| **Fund the deductible** | Contribute enough to cover all or most of the deductible | Offsets eligible expenses without changing the insurance deductible; uses more employer budget |
| **Front-load in January** | Deposit the full year on day one | Money is there for an early-year bill; the balance generally stays with the employee after departure, subject to narrow correction rules |
| **Per paycheck** | Spread contributions over the year | Lower risk for the employer; an early surgery can outrun the balance |

- **Comparability rules.** Contributions made outside a cafeteria plan generally must meet statutory comparability rules: the same dollar amount or the same percentage of the deductible for comparable participating employees. Coverage and employment categories matter, and special rules permit larger contributions for non-highly compensated employees. Breaking the rule triggers a 35% excise tax on what you contributed. Contributions through a cafeteria plan, including matches, are exempt from comparability but must pass cafeteria plan nondiscrimination tests.
- **Payroll taxes.** Employer HSA contributions aren't wages for income tax, Social Security, Medicare or FUTA. Payroll tax savings depend on wage levels and employee eligibility; ordinary employee rules do not apply to every owner.
- **Report it.** Employer contributions, including employee pre-tax deferrals, go on the W-2 in box 12, code W.
- **Owners are different.** More-than-2% S corporation shareholders and partners can't receive pre-tax employer HSA contributions the same way employees do. Their contributions are treated as pay, which they can then deduct on their own return.

**What seeding HSAs costs a 15-person team**

Illustrative. A 15-person company on an HSA-eligible plan: 9 employees with single coverage, 6 with family coverage. Assume all are eligible all year and below the Social Security wage base, with no disqualifying owner status. It seeds $750 for single and $1,500 for family, through payroll.

- Single: 9 × $750: $6,750
- Family: 6 × $1,500: $9,000
- Total employer contribution: $15,750
- Payroll tax avoided vs. paying it as bonus (7.65%): $1,205

The $750 single deposit covers about 44% of a $1,700 deductible; the $1,500 family deposit covers about 44% of a $3,400 family deductible. Funding the full minimum deductibles would cost $35,700 ($1,700 × 9 plus $3,400 × 6), which is why many teams look at plan designs with lower deductibles instead.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Seeding everyone's HSA to cover a $1,700 deductible gets expensive fast, as the example above shows. Diamond starts from an effective $0 deductible, so there's no gap to fill.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

Do not assume a Prescience proposal permits HSA contributions from the deductible description alone. Ask for a written eligibility determination for the actual coverage. Existing HSA funds remain yours even when new contributions are unavailable. Compare any tax advantage with premiums, copays and practical access to care.

**Compare the plan and the HSA contribution together**

Choosing benefits for a team? Compare the employer premium, employee costs and HSA contribution using your actual census. Confirm HSA eligibility for the specific coverage before making contribution decisions.

[Compare coverage for my team](https://www.getprescience.com/quote)

[Check the HSA contribution limit](https://www.getprescience.com/tools/hsa-contribution-calculator)

## HSA vs. FSA vs. HRA

**The three common health accounts in 2026**

|  | HSA | Health FSA | HRA |
| --- | --- | --- | --- |
| Who funds it | Employee and employer | Mostly employee | Employer only |
| Who owns it | Employee | Employer plan | Employer plan |
| 2026 limit | $4,400 self-only, $8,750 family | $3,400 per employee in salary reductions | Set by the employer (QSEHRA capped at $6,450 / $13,100) |
| Rolls over | Yes, forever | Up to $680 carryover, or a grace period, if the plan allows | Per plan design |
| Needs an HDHP | Yes (or an eligible bronze/catastrophic plan) | No | No |
| Can be invested | Yes | No | No |
| Leaves with the employee | Yes | No (COBRA may apply) | No, unless the plan allows |

You can pair an HSA with a limited-purpose FSA for dental and vision costs and stay eligible. A general-purpose FSA or HRA that pays medical bills before the deductible disqualifies you. For what each account can pay for, see [HSA and HRA eligible expenses](https://www.getprescience.com/guides/hsa-hra-eligible-expenses).

## How to open and use an HSA

1. **Confirm your plan qualifies** Check whether the plan meets all HDHP requirements, including the out-of-pocket limit and restrictions on early benefits, or qualifies for the individual bronze/catastrophic exception. A large deductible alone does not establish HSA eligibility.
2. **Check for disqualifying coverage** Ask your spouse whether they have a general-purpose health FSA. Check whether you're enrolled in any part of Medicare or about to apply.
3. **Open the account** Use your employer's HSA provider if it offers payroll deductions, since that saves FICA tax. Otherwise any bank or brokerage that offers HSAs works. Compare monthly fees and investment options.
4. **Set your contribution** Subtract your employer's contribution from the limit, then choose a per-paycheck amount. You can change it during the year.
5. **Decide: spend or invest** Keep enough cash for your deductible. If you can, pay small bills out of pocket, keep the receipts and invest the rest.
6. **File Form 8889** Report contributions and withdrawals on Form 8889 with your tax return. Your provider sends Form 5498-SA and Form 1099-SA.

## Frequently asked questions

**What is the HSA contribution limit for 2026?**

$4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up if you're 55 or older. Employer contributions count toward the limit.

**Who is eligible for an HSA?**

You need HSA-eligible coverage, generally a high-deductible health plan with at least a $1,700 deductible for self-only coverage in 2026, and no other disqualifying coverage. You can't be enrolled in Medicare or be someone else's tax dependent. From 2026, bronze and catastrophic individual plans also qualify.

**What happens to my HSA if I leave my job?**

It stays with you. The money is yours, including what your employer contributed, and you can keep spending or investing it. You can also use it to pay COBRA premiums.

**Can an employer pay my deductible with an HSA?**

Yes. Employer HSA contributions can cover the deductible, and they count toward the annual HSA limit. They aren't taxed as wages.

**Can I use an HSA for direct primary care?**

From 2026, certain defined DPC arrangements qualify. The $150 individual/$300 multiple-person monthly thresholds protect eligibility to contribute; qualified DPC fees above those thresholds can still be paid from existing HSA funds under IRS guidance. Employer-paid fees cannot be reimbursed again.

**Can I contribute to an HSA if my spouse has an FSA?**

Not if your spouse's FSA is general-purpose and can pay your medical expenses. The IRS treats that as disqualifying coverage. If the FSA is limited to dental and vision, you can still contribute.

**Can I keep contributing to an HSA after 65?**

Only if you're not enrolled in any part of Medicare. Once you apply, premium-free Part A can be backdated up to 6 months, so stop contributing at least 6 months before you sign up.

**What if I contributed too much?**

Excess contributions are taxed 6% a year while they stay in the account. Ask your HSA provider to withdraw the excess and its earnings by your tax return due date, including extensions to avoid the 6% tax.

**What is the deadline for 2026 HSA contributions?**

Your tax filing deadline, which is April 15, 2027 for most people. Tell your HSA provider the deposit is for 2026.

## Sources

- [IRS Revenue Procedure 2025-19, 2026 HSA and HDHP limits](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS Publication 969, HSA eligibility, contributions and distributions](https://www.irs.gov/publications/p969)
- [IRS Notice 2026-5, new HSA eligibility rules](https://www.irs.gov/irb/2026-02_IRB)
- [IRS Publication 15-B (2026), fringe benefits and owner exceptions](https://www.irs.gov/publications/p15b)
- [IRS Revenue Procedure 2025-32, 2026 tax adjustments](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [Medicare, when coverage starts](https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start)
- [California FTB, Schedule CA instructions and HSA adjustments](https://www.ftb.ca.gov/forms/2025/2025-540-ca-instructions.html)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)

# How do I get better health benefits as a startup?

Source: https://www.getprescience.com/guides/how-to-get-better-benefits-as-a-startup
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How do I get better health benefits as a startup?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-to-get-better-benefits-as-a-startup

Start by comparing paycheck contributions, medical cost sharing, provider access and help using care. Then price improvements against your actual enrollment and budget. A PEO, insured group plan or another arrangement may fit; the right choice depends on the written terms and your team's needs.

- **Deductible your team sees:** Effective $0
- **Prescience out-of-pocket maximum:** Low; see quoted plan terms
- **Admin fees:** $0
- **Minimum group size:** 2 employees

## Define better before asking for quotes

I would start with a short benefits brief, not a carrier name. Decide which problem you need to solve: employees declining coverage because of paycheck deductions, families facing too much financial exposure, a network that misses remote staff, or people struggling to arrange care. Each problem calls for a different change. Lowering the deductible will not fix a missing hospital, and adding a navigation service will not make an excluded prescription covered.

Ask employees about access preferences without collecting diagnoses in a company spreadsheet. An anonymous survey can ask whether dependent premiums are affordable, whether people can find appointments and whether they understand their benefits. Route specific treatment and medication questions to a confidential benefits contact. Include employees who waived coverage: the current enrollment mix does not tell you what people would choose under a better contribution policy.

Turn those answers into acceptance criteria. For example: cover the full employee-only premium, publish a predictable dependent contribution, verify the main hospitals in each employee region and provide a clear escalation route for billing problems. Rank the criteria before comparing prices. A written ranking stops an attractive headline rate from displacing the reason you started shopping.

## A 12-person team can improve paycheck cost first

This illustration changes only the contribution policy. It does not assume a cheaper insurer or different medical benefits. All 12 employees take employee-only coverage at an assumed $750 monthly premium. The employer currently pays 80%. Keep dependent coverage outside this example so the calculation stays visible; add actual family tiers separately before approving a budget.

**Moving from 80% to 100% of employee-only premiums**

Illustrative budget, not a quote. Assumes 12 enrolled employees, a $750 monthly employee-only premium and no rate change.

- Total annual premium: 12 × $750 × 12: $108,000
- Current employer contribution: 80% × $108,000: $86,400
- Current employee contribution: 20% × $108,000: $21,600
- Extra annual employer budget to pay 100%: $21,600
- Reduction in each employee monthly premium deduction: $150

The company spends $1,800 more each month. Each enrolled employee stops paying the $150 monthly premium contribution. Their deductible, copays and network stay the same; take-home pay changes also depend on tax treatment.

Now compare that $21,600 with the price of reducing the deductible or increasing dependent support. Ask the broker to quote each change independently. If a lower-deductible option costs another $30,000 a year, that is a separate decision about medical risk, not the same benefit as removing payroll deductions. Model likely enrollment increases too: a more generous offer may attract people who previously waived coverage.

For families, show the incremental dependent premium explicitly. Paying 100% of employee-only coverage does not mean paying 100% of family coverage. An employee who sees free coverage in a recruiting message should not discover a large family deduction after accepting the job. Publish the actual contribution by tier in the offer materials and enrollment guide.

**Price a benefits improvement for your own team**

The example shows how contribution choices change the budget. Start a quote with your company details, create an account and add the census to compare employee costs and employer costs using your actual team.

[Price better benefits for my team](https://www.getprescience.com/quote)

[Estimate the employer budget](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

## Compare access using actual plan documents

Collect the Summary of Benefits and Coverage for each finalist. Use it to compare deductibles, specialist visits, inpatient care, prescriptions and the out-of-pocket maximum. Then read the supporting plan documents for exclusions and authorization rules. The Department of Labor explains that the SBC is a standardized summary; it is useful for comparison but does not replace the full terms. Keep the exact plan name and network identifier beside each quote.

Check providers in the specific network, not merely whether a practice accepts the insurer brand. For a remote employee, test both the local hospital and routine care near home. Ask the provider and plan to confirm participation for the proposed effective date. A broad national directory still needs local validation. Document unresolved questions rather than marking the whole network approved because one doctor appeared in a search.

Prescription comparisons need the drug name, formulation, dose and relevant pharmacy. Employees should provide that information privately to the benefits specialist. Ask about formulary tiers, prior authorization, specialty pharmacy rules and continuity when changing plans. For someone in ongoing treatment, the transition arrangement may matter more than a small premium saving. Do not promise approval before the new plan reviews the request.

## Assign an owner to every part of the switch

Work backward from the intended effective date. Ask the existing provider for its cancellation terms and the new provider for enrollment, payment and documentation deadlines. A mid-year change may be possible, but it is not permission to cancel first and solve enrollment later. Obtain written confirmation that the replacement coverage is bound, who is enrolled and when it begins. Keep a plan for anyone whose application remains unresolved.

Give payroll a signed contribution schedule and confirm the first deduction date. Give employees the plan documents and the contact for individual questions. Give the administrator responsibility for continuation coverage and notices. Changes outside renewal that materially affect the SBC can require advance notice; have the administrator check the applicable requirements before setting a transition date. A short project checklist should name a person, not just a vendor, for each task.

After launch, reconcile the enrollment roster against payroll deductions and the first invoice. Check new hires, employees on leave, dependents and anyone who waived coverage. Ask employees whether they received usable ID cards and can reach support. Review these operational measures after the first month, then again before renewal. A benefit is only better if people can use it without repeatedly asking the founder to intervene.

## What candidates actually notice

I compare the employee premium, deductible, out-of-pocket maximum and provider access before optional perks. Different candidates value different benefits. Ask what matters to your team rather than assuming every engineer or parent has the same priorities.

- **$0 employee premium.** Nothing comes out of the paycheck for their own coverage.
- **A low or effective $0 deductible.** The plan helps from the first visit.
- **A low out-of-pocket maximum.** The worst case is a number they can live with.
- **A broad network.** Their current doctors are in it.
- **Someone to call.** A real care team, not a carrier phone tree.

## Why startup benefits usually lag

A PEO or small-group policy can be a useful starting point, but the original choice may no longer fit a growing team. At renewal, compare both total cost and benefit design. An employer can hold its contribution steady while employees absorb higher premiums or deductibles, so a stable company budget alone does not prove that benefits stayed competitive.

Large employers often self-fund, taking responsibility for claims costs. That changes who bears risk; it does not guarantee savings or a richer benefit. I explain how in [How does FAANG offer top health benefits?](https://www.getprescience.com/guides/how-does-faang-offer-top-health-benefits)

## A plan design that competes with big tech

I would compare written plan terms against these Prescience features. The employer decides its premium contribution; an effective $0 deductible does not mean every service is free.

**What to verify in each proposal**

| Feature | Comparison question | Prescience |
| --- | --- | --- |
| Deductible | When does coverage start paying? | Effective $0 deductible |
| Cost sharing | What are the copays and annual limits? | Simple copays and a low out-of-pocket maximum |
| Network | Are the needed providers participating? | Broad national PPO plus directly contracted providers |
| Support | Who helps book care and explain costs? | 24/7 physician-led care navigation |
| Employer budget | What is the total quoted monthly cost? | One monthly cost set before the plan starts; no admin fees |

## How to pay for it

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

Compare actual quotes on the same enrollment and coverage assumptions. Prescience’s usual 10–20% comparison is against comparable fully insured coverage, not a guarantee against every PEO, ICHRA or carrier proposal.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** "$0 premium, effective $0 deductible" is the line candidates remember. Diamond is built to let a startup say it without a big-company budget.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Five steps to better benefits

1. Pull your current renewal, including PEO or admin fees, so you know your true cost per employee.
2. Write down what you want candidates to hear: "$0 premium, effective $0 deductible" is a strong line.
3. Request a quote using a current census, coverage tiers and desired effective date.
4. Compare total annual cost and the plan your team would actually experience.
5. Switch mid-year if the numbers work. You don't have to wait for January.

## Check the family worst case before choosing

I use annual employee premiums plus the applicable in-network out-of-pocket maximum to show a high-use year. The deductible is normally included in that maximum, so adding it again exaggerates the risk. Premiums, noncovered services and many out-of-network charges are outside that limit. A family plan also needs an individual-limit check: one person should not have to reach the entire family maximum for covered in-network essential health benefits under a non-grandfathered plan.

Ask the administrator to explain embedded and aggregate deductibles with a written example. Then show the employee-only, spouse, children and family contribution tiers separately. A plan can improve a single employee’s position while increasing a family’s payroll deduction. Before approving the change, identify that trade-off and decide whether additional dependent support fits the budget. If the present plan already meets the team’s access needs, improving contributions may be the more useful change.

## Frequently asked questions

**Should we pay for employees or dependents first?**

Choose from your budget and workforce needs. Model each enrollment tier and ask employees about affordability. Paying the employee-only premium in full can still leave families with a substantial contribution.

**Does a national network guarantee my doctor is covered?**

No. Verify the exact network and provider participation for the effective date. Also check hospitals, prescriptions and any authorization requirements.

**Can we improve benefits without replacing our payroll software?**

Often yes. Check which payroll and benefits services are contractually bundled, what integration is available and who will maintain deduction and enrollment records.

**What should we measure after the change?**

Check enrollment accuracy, invoice reconciliation, employee contribution amounts, access problems and support response. Resolve individual medical questions through a confidential channel.

**Can a small startup offer benefits as good as Google or Meta?**

A startup can choose generous contributions and useful plan features, but compare current written benefits rather than promising equivalence to a named technology employer. Prescience offers an effective $0 deductible, a low out-of-pocket maximum and physician-led navigation.

**Do better benefits cost more?**

Not necessarily. Prescience quotes are usually 10–20% below comparable fully insured coverage, with no admin fees. Compare the actual offer and replacement HR costs before estimating savings.

**What benefits matter most for recruiting?**

I would ask candidates and employees about paycheck cost, medical exposure, network access and support, then compare the benefits they actually need.

**How many employees do we need?**

Prescience’s stated minimum group size is 2 employees. Eligibility and the quote need confirmation for the company.

## Sources

- [DOL, plan information and disclosure](https://www.dol.gov/general/topic/health-plans/planinformation)
- [DOL, ACA implementation FAQs Part 71, 2026 cost-sharing limits](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-71)
- [HealthCare.gov, preventive health services](https://www.healthcare.gov/coverage/preventive-care-benefits/)
- [IRS Publication 15-B (2026), fringe benefits and owner exceptions](https://www.irs.gov/publications/p15b)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)

# Guide to employee health benefits in 2026

Source: https://www.getprescience.com/guides/health-benefits-guide-2026
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Guide to employee health benefits in 2026." Prescience, October 28, 2026. https://www.getprescience.com/guides/health-benefits-guide-2026

For 2026, I would review health-plan costs alongside new HSA eligibility rules, updated tax limits and the company’s coverage obligations. National averages are useful context, but the decision should use your census, written quotes and employee costs. This guide separates those planning inputs from legal thresholds.

- **Average 2025 single premium:** $9,325 (KFF)
- **Average 2025 family premium:** $26,993 (KFF)
- **ACA employer threshold:** Generally 50 full-time employees plus equivalents
- **Group eligibility:** State, ownership and carrier rules apply

## What health benefits cost in 2026

KFF's 2025 Employer Health Benefits Survey put the average annual premium at **$9,325 for single coverage** and **$26,993 for family coverage**. Family premiums rose 6%, the third straight year of 6% or more, faster than wages and inflation. Employers paid most of the cost: workers contributed 16% of the single premium and 26% of the family premium.

Among covered workers with a general annual single deductible, KFF reports $2,631 at firms with 10–199 workers and $1,670 at firms with 200 or more. That is a cost-sharing comparison, not proof that every small-company policy is worse. The 2025 survey excludes firms with fewer than ten workers.

**Small firms (10–199 workers) vs. large firms (200+), KFF 2025**

|  | Small firms | Large firms |
| --- | --- | --- |
| Average single premium | $9,211 | $9,361 |
| Average family premium | $26,054 | $27,280 |
| Worker's yearly share, family coverage | $8,889 | $6,227 |
| Average single deductible among workers with one | $2,631 | $1,670 |
| Workers with a single deductible of $2,000+ | 53% | 28% |
| Covered workers in self-funded plans | 27% | 80% |
| Firms offering health benefits | 59% | 97% |

Premiums are about the same size. What differs is who carries the cost: small-firm employees pay more from each paycheck and face bigger deductibles. KFF found 28% of covered workers at small firms pay $12,000 or more a year toward family coverage. Ask employees which contribution and coverage differences matter to them.

## What changed this year

- **Price the local individual market.** For an ICHRA proposal, use actual plan-year premiums by age, location and family size. A national forecast is not a quote and should not automatically be applied to every employee.
- **Check actual cost sharing.** Deductibles vary by plan and metal level. Eligible Marketplace households may receive cost-sharing reductions on silver coverage; lower-premium bronze coverage is not automatically the lowest total-cost choice.
- **Premium tax credit repayment caps are gone.** For tax years starting after December 31, 2025, people who get more advance credit than they qualify for repay all of it, with no cap. Employees on marketplace plans should report income changes quickly.
- **HSA eligibility expanded.** Qualifying individual bronze and catastrophic coverage receives special treatment from 2026, including qualifying off-Exchange purchases under IRS guidance. Certain defined direct primary care arrangements no longer block contributions, subject to monthly fee thresholds. Permitted telehealth before the deductible is permanently allowed for plan years beginning in 2025 or later.
- **Dependent care FSAs grew.** The yearly limit rose from $5,000 to $7,500 ($3,750 if married filing separately) for 2026. Employers must amend their plan to offer the higher limit.
- **The affordability bar moved up.** For 2026, coverage is affordable under the ACA if the employee's share for self-only coverage is no more than 9.96% of household income, up from 9.02%.
- **Keep funding statistics separate.** KFF reports 37% of covered workers at firms with 10–199 workers in level-funded plans. Its 27% reported self-funded figure overlaps; the combined share is 51%, not 64%.

**2026 limits every benefits lead should know**

| Item | 2026 | 2025 | Source |
| --- | --- | --- | --- |
| HSA contribution limit (self-only / family) | $4,400 / $8,750 | $4,300 / $8,550 | Rev. Proc. 2025-19 |
| HDHP minimum deductible (self-only / family) | $1,700 / $3,400 | $1,650 / $3,300 | Rev. Proc. 2025-19 |
| HDHP out-of-pocket maximum (self-only / family) | $8,500 / $17,000 | $8,300 / $16,600 | Rev. Proc. 2025-19 |
| ACA out-of-pocket maximum (self-only / family) | $10,600 / $21,200 | $9,200 / $18,400 | HHS, revised June 2025 |
| Health FSA salary reduction / carryover | $3,400 / $680 | $3,300 / $660 | Rev. Proc. 2025-32 |
| Dependent care FSA | $7,500 | $5,000 | One, Big, Beautiful Bill Act |
| QSEHRA maximum (self-only / family) | $6,450 / $13,100 | $6,350 / $12,800 | Rev. Proc. 2025-32 |
| Excepted benefit HRA | $2,200 | $2,150 | Rev. Proc. 2025-19 |
| ACA affordability percentage | 9.96% | 9.02% | Rev. Proc. 2025-25 |
| Employer mandate penalty, no offer (per full-time employee, per year) | $3,340 | $2,900 | Rev. Proc. 2025-26 |
| Employer mandate penalty, unaffordable offer (per subsidized employee, per year) | $5,010 | $4,350 | Rev. Proc. 2025-26 |
| Social Security wage base | $184,500 | $176,100 | IRS Publication 15 |

The ACA maximum generally applies to covered in-network essential health benefits under non-grandfathered plans. Premiums, noncovered services and many out-of-network charges do not count. The conventional HSA-qualified HDHP limit is lower, but the 2026 individual bronze/catastrophic exception means that lower cap does not apply to every HSA-eligible policy. A family plan also applies the ACA individual limit to each covered person.

## What a 10-person team pays at national averages

**A 10-person company with four families**

Illustrative, built on KFF's 2025 national averages. 6 employees take single coverage and 4 take family coverage. The company pays the average employer share (premium minus the average worker contribution). Your premiums depend on state, ages and plan.

- Employer share, single: $9,325 − $1,440: $7,885 per employee
- Employer share, family: $26,993 − $6,850: $20,143 per employee
- 6 single × $7,885: $47,310
- 4 family × $20,143: $80,572
- Employer cost per year: $127,882
- Employee contributions per year: $36,040

About $10,657 monthly for the employer and $36,040 annually from employees, before additional administration charges. A hypothetical 6% increase with the contribution split unchanged adds $7,672.92 to employer cost; it is not a forecast. Employer contributions are generally deductible, and eligible employees can pay premiums pre-tax under a compliant Section 125 plan, subject to owner and nondiscrimination rules.

To see your own number, start from your census: each employee's age, ZIP code and who they cover. Our [average employee health insurance cost](https://www.getprescience.com/guides/average-employee-health-insurance-cost) guide breaks the averages down further.

**Replace the national example with your team's proposal**

Use the actual employee and family tiers rather than an assumed national mix. Start with company details, verify your account and complete the census before comparing written plan costs and benefits.

[Build my team's quote](https://www.getprescience.com/quote)

[Check the contribution budget](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

## Your options

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Individual premiums jumped for 2026, so we price every employee's actual local plans before you set a single allowance.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**How small companies buy health insurance in 2026**

| Option | How it works | Watch out for |
| --- | --- | --- |
| **PEO** | A co-employer puts you on its pooled master plan | Service fees, actual plan menu and contract-specific renewal terms |
| **ICHRA** | You reimburse employees for individual plans | Local individual premiums, provider access and premium-tax-credit interaction |
| **QSEHRA** | Eligible non-ALE employer with no group plan reimburses up to $6,450 / $13,100 annually in 2026 | Coverage substantiation, benefit limits and subsidy coordination |
| **Fully insured** | You buy a carrier's small group plan | High premiums and deductibles; carrier keeps unspent premium |
| **Level-funded** | Fixed payment funds claims plus stop-loss | Underwriting; renewals follow your claims |
| **Prescience** | Your own plan with an effective $0 deductible, designed and run by Prescience | Needs a census to quote; plan design set per company |

Each has a deeper comparison: [PEO](https://www.getprescience.com/compare/peo-alternative), [ICHRA](https://www.getprescience.com/compare/ichra-alternative), [fully insured](https://www.getprescience.com/compare/fully-insured-alternative) and [level-funded](https://www.getprescience.com/compare/level-funded-alternative). For a QSEHRA, see [what is a QSEHRA?](https://www.getprescience.com/guides/what-is-a-qsehra)

- **Choose a PEO** if you have under about five people, no one to run HR and you value the compliance bundle more than the plan.
- **Choose ICHRA or QSEHRA** when suitable individual plans, allowances and subsidy outcomes fit the team. Verify eligible classes or employees and employer qualifications; do not choose solely because workers are young or remote.
- **Choose your own group plan** if you're hiring against larger companies, have families on the team or are tired of pooled renewals.

## The rules that apply to you

- **Below the ACA applicable large employer threshold:** the federal shared-responsibility provision generally does not require an offer, but aggregation, seasonal-worker rules and state or local obligations need review.
- **ACA applicable large employers:** generally determine status from the prior calendar year’s average full-time employees plus equivalents, including aggregation rules. Full-time generally means 30 hours weekly or 130 monthly. Penalties depend on offers and premium tax credits, not simply crossing a current headcount. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a planning aid and verify the result.
- **COBRA:** private-sector plans generally become subject when the employer had at least 20 employees on more than half of typical business days in the preceding year; part-time workers count fractionally. Multiple-employer plans require additional review. State continuation generally concerns insured coverage.
- **Taxes:** employer contributions are tax-deductible, and employees can pay their share pre-tax through a Section 125 plan.
- **Medicare-age employees:** if your plan covers prescription drugs, send a creditable coverage notice to Medicare-eligible members before October 15 each year, and file the disclosure with CMS within 60 days of the plan year's start. See [employer health insurance and Medicare](https://www.getprescience.com/guides/employer-health-insurance-and-medicare).
- **Out-of-pocket limits:** for 2026 non-grandfathered plans, covered in-network essential-health-benefit cost sharing is generally capped at $10,600 per individual and $21,200 for other-than-self-only coverage. Premiums and noncovered services are separate; the individual cap also protects each family member.

## Edge cases founders hit in 2026

- **Part-time staff.** Follow the plan’s permitted eligibility classes and applicable law. The ACA full-time threshold is generally 30 hours weekly or 130 monthly, but variable-hour measurement methods and waiting-period limits require administration. Do not assume every employee below 30 hours is irrelevant to ALE status: their hours can create full-time equivalents.
- **Remote employees in other states.** A small group plan is filed in the state where the company is based, but its network has to work where employees live. Check the network for every ZIP code on your census before you sign.
- **Owners and spouses.** Many carriers won't write a group plan that covers only owners and their spouses; you usually need at least one employee who isn't an owner or spouse. Ask before you count a co-founder couple as a group of two.
- **Employees eligible for Medicare.** Age-based Medicare coordination generally depends on whether the employer meets the 20-employee test. Disability-based Medicare uses different rules, and ESRD has a separate coordination period. Do not steer workers away from an employer plan without checking Medicare Secondary Payer requirements.
- **Spouses on the marketplace.** With premium tax credit repayment caps gone in 2026, an employee's spouse who takes advance credits while eligible for your affordable family coverage may owe it all back. Make sure families know what you offer.
- **Mid-year changes.** You don't have to wait for January to switch plans. Employees' deductibles usually restart with a new plan, so ask how amounts already met are credited. See [switching mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year).

## Dates to put on the calendar

**Deadlines tied to 2026 and the 2027 plan year**

| When | What | Who |
| --- | --- | --- |
| Generally at least 90 days before plan year | ICHRA and QSEHRA notices; October 3, 2026 is 90 days before January 1, 2027. Newly eligible and new-employer exceptions differ. | Employer or administrator |
| Before October 15 each year | Medicare Part D creditable coverage notice | Employer or plan |
| Before the plan year | Open enrollment and Summaries of Benefits and Coverage | Employer and plan |
| Within 60 days of the plan year start | Creditable coverage disclosure to CMS | Employer or plan |
| Generally April 15, 2027 | 2026 HSA contribution deadline, without extensions; specific IRS postponements can apply | Employees (and employers) |

Open enrollment itself has no single federal date for employer plans. Work backward from carrier enrollment and notice deadlines for your renewal date. Our [open enrollment guide](https://www.getprescience.com/guides/how-to-run-open-enrollment) has a week-by-week plan.

## How we approach it at Prescience

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Small-firm employees pay more per paycheck and face bigger deductibles than large-firm employees, as the table above shows. Diamond is how a small company closes that gap.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## A 2026 checklist

1. List headcount, home states and who covers dependents.
2. Decide what you'll contribute for employees and dependents.
3. Pull your true cost, including PEO or admin fees, not just premiums.
4. Get at least two quotes, including one outside your current setup.
5. Compare what employees experience: deductible, out-of-pocket maximum, network and support.
6. Check how renewals are priced and how hard it is to leave.
7. Update payroll and plan documents for the 2026 limits: HSA, FSA, dependent care and commuter.
8. If you're near 50 full-time equivalents, test affordability at 9.96% with a safe harbor.

## Apply the employer rules in the right order

First determine whether the business is an applicable large employer, including related-employer aggregation and the prior-year calculation. Then identify full-time employees under the chosen measurement method and review the coverage offers. The 2026 section 4980H(a) annualized amount is $3,340 per full-time employee after the applicable 30-employee reduction if the offer test fails and at least one full-time employee receives a premium tax credit. The offer test generally includes at least 95% of full-time employees and their dependent children.

Section 4980H(b) uses an annualized $5,010 for a full-time employee receiving a credit when the offer is missing for that employee, unaffordable or lacks minimum value, subject to the statutory overall cap. Assessments are calculated monthly, so these annual figures are not automatic flat invoices. Employer affordability safe harbors can use W-2 wages, rate of pay or the federal poverty line. Employees’ own Marketplace eligibility generally uses household income, and traditional group-plan family affordability is a separate calculation.

For a plan year beginning in 2026, 9.96% is the relevant affordability percentage. Do not carry it into a 2027 plan year without checking that year’s published percentage. Similarly, the HSA contribution limit is calendar-year based, while many coverage, notice and cost-sharing provisions follow the plan year. Put the relevant year next to each number in the renewal worksheet to avoid applying a correct amount to the wrong period.

## Frequently asked questions

**How much do employee health benefits cost in 2026?**

KFF’s 2025 survey put average employer premiums at $9,325 a year for single coverage and $26,993 for family coverage, up 5–6% in a year. Your cost depends on location, ages, dependents and the plan.

**Do small businesses have to offer health insurance in 2026?**

Not under federal law until 50 full-time equivalent employees. Some states and cities have their own requirements, so check locally.

**Is ICHRA a good option in 2026?**

It can be appropriate when local individual plans, allowances and subsidy effects fit the workforce. Price current plans for employees and dependents and compare with a group proposal using the same census.

**What's the cheapest way for a small business to offer good benefits?**

Compare actual coverage, employee exposure and all administration costs. Prescience’s usual 10–20% savings claim is against comparable fully insured coverage, not a guarantee against every arrangement. An eligible SHOP tax credit can also change the calculation.

**What is the HSA limit for 2026?**

$4,400 for self-only coverage and $8,750 for family coverage, plus $1,000 if you're 55 or older. Conventional HDHP minimum deductibles are $1,700 self-only and $3,400 family, with additional eligibility requirements and exceptions for qualifying individual bronze and catastrophic plans.

**What is the ACA affordability percentage for 2026?**

9.96% of household income for the employee's share of the cheapest self-only, minimum-value plan, up from 9.02% in 2025. Employers use safe harbors such as W-2 wages because they don't know household income.

**What are the 2026 employer mandate penalties?**

$3,340 per full-time employee (minus the first 30) if you don't offer coverage to at least 95% of full-time staff and someone gets a premium tax credit, or $5,010 per subsidized employee if your offer is unaffordable or not minimum value.

**Did the dependent care FSA limit change for 2026?**

Yes. It rose from $5,000 to $7,500 per household ($3,750 if married filing separately). Your plan has to be amended to use the higher limit.

**What is the 2026 out-of-pocket maximum?**

$10,600 for self-only coverage and $21,200 for family coverage under the ACA. Conventional HSA-qualified HDHP limits are $8,500 and $17,000, but qualifying individual bronze and catastrophic coverage has a special exception.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Revenue Procedure 2025-19, 2026 HSA and HDHP limits](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS Notice 2026-5, new HSA eligibility rules](https://www.irs.gov/irb/2026-02_IRB)
- [IRS Publication 15-B (2026), fringe benefits and owner exceptions](https://www.irs.gov/publications/p15b)
- [IRS Publication 15 (2026), payroll taxes](https://www.irs.gov/publications/p15)
- [IRS Revenue Procedure 2025-32, 2026 tax adjustments](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Revenue Procedure 2025-26, employer shared responsibility amounts](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [IRS, employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)
- [DOL, employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [DOL, ACA implementation FAQs Part 71, 2026 cost-sharing limits](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-71)
- [HealthCare.gov, individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [HealthCare.gov, cost-sharing reductions](https://www.healthcare.gov/lower-costs/save-on-out-of-pocket-costs/)
- [CMS, Part D creditable coverage disclosures](https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage)
- [IRS, premium tax credit repayment caps eliminated from 2026](https://www.irs.gov/tax-professionals/eitc-central/repayment-caps-eliminated-for-excess-advance-payments-of-the-premium-tax-credit)
- [IRS Notice 2017-67, QSEHRA notice and benefit rules](https://www.irs.gov/pub/irs-drop/n-17-67.pdf)

# How does FAANG offer top health benefits?

Source: https://www.getprescience.com/guides/how-does-faang-offer-top-health-benefits
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-09
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How does FAANG offer top health benefits?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-does-faang-offer-top-health-benefits

Large employers often pay health claims directly through self-funded plans and hire administrators to manage benefits. KFF found that 80% of covered workers at firms with at least 200 employees were in self-funded plans in 2025. Funding, employer contributions and plan design are separate decisions; self-funding alone does not guarantee richer benefits.

- **Large-firm workers in self-funded plans:** 80% (KFF, 2025)
- **Average deductible, large firms:** $1,670
- **Average deductible, small firms:** $2,631
- **Large firms offering coverage:** 97%

## What the large-employer data does and does not prove

FAANG is a shorthand for several technology companies, not a single health plan. Benefits vary by employer, country, employment category and year. I would not promise a candidate that every technology company offers the same deductible, fertility benefit or family contribution. Ask for the current benefits materials when making a specific comparison. A national employer survey describes a market pattern; it cannot establish the terms of an individual company plan.

KFF defines large firms here as those with at least 200 workers. Its deductible comparison is for covered workers in plans with a general annual deductible for single coverage. That qualifier matters: the figures are not the average medical spending of all employees, and they do not include every possible plan design. The survey also excludes employers with fewer than ten workers in 2025. A five-person startup should use these results as context, not a predicted quote.

Most importantly, the survey does not prove that self-funding causes richer benefits. Employer budgets, workforce composition, contribution policy and purchasing choices can differ at the same time. A company can self-fund a high-deductible plan or purchase a generous insured plan. The funding arrangement tells you who bears claims risk; the benefit schedule tells you what the employee pays. Keep those questions separate when assessing an offer.

## Separate the financing decision from the benefit decision

Consider a hypothetical company comparing two designs for 100 employees, all with employee-only enrollment. Assume the total annual plan budget is unchanged at $900,000. This is a contribution illustration, not a claims projection or a market quote. It shows why two employers buying similar coverage can produce very different employee experiences.

**The same plan budget, two contribution policies**

Illustrative: 100 employee-only enrollments and $900,000 annual total cost. No dependent coverage or change in plan terms is assumed.

- Annual total per enrolled employee: $9,000
- Employer pays 80%: $720,000 employer; $180,000 employees
- Employee monthly contribution under 80% policy: $150
- Employer pays 100%: $900,000 employer; $0 employee premiums
- Extra employer budget for the second policy: $180,000 a year

Removing the premium deduction costs the employer $1,800 per employee each year in this example. It does not change the deductible, covered services or network. The same contribution choice can exist under different funding arrangements.

A founder should therefore request three separate comparisons: total employer expense, employee payroll contributions and employee medical exposure. Add dependent tiers and realistic enrollment assumptions before using the budget. If richer contributions cause people to join who previously waived coverage, the enrollment increase belongs in the forecast. A comparison using the old enrollment count can understate the cost of an otherwise sensible improvement.

For a self-funded employer, expected claims are not a guaranteed annual bill. Administrative charges, network costs and any risk protection also belong in the budget. Compare a plausible high-claims scenario with available cash, not just the expected result. For an insured employer, understand renewal uncertainty and the services included in the premium. Neither arrangement removes the need to plan for next year.

## The operational work behind a rich benefit

A benefits team needs more than purchasing power. Someone must maintain eligibility records, review invoices, explain enrollment, coordinate payroll and monitor service quality. Vendors can perform those tasks, but the employer still needs an accountable owner. A startup can copy this discipline before it has the scale to copy a large employer financing arrangement. Name the owner of each process and keep an escalation path for employees.

Navigation is useful when it helps a person act: find an appropriate in-network provider, understand a referral, arrange an appointment or resolve a confusing bill. Ask a potential navigation vendor what it can actually do and what depends on the plan. Support does not override coverage exclusions or guarantee authorization. A friendly service that cannot connect with the plan administrator may leave the employee doing the same work twice.

Special programs need the same scrutiny. For fertility care, mental health or weight management, ask about eligibility, covered services, clinical requirements, limits and geographic availability. Do not compare programs only by their names. One program may provide coaching while another covers medical treatment. Request the current written benefit terms and give employees a private channel for checking their circumstances before enrollment.

## What a small company can copy this quarter

First, write a benefits promise that fits the company budget. Describe the employee contribution, financial exposure, provider access and support experience you want. Second, collect comparable quotes using one census and the same effective date. Third, test the details in the Summary of Benefits and Coverage and full plan documents. These steps work whether you keep a PEO, buy insured coverage or evaluate another arrangement.

Before switching, review treatment continuity and deductible credit. An employee who has already met a deductible can be worse off if the replacement plan resets it mid-year. Ask for written terms rather than assuming credits transfer. Confirm prescription access and any pending authorizations privately with the employee and administrator. A transition that preserves care may justify a later start date even when an earlier switch looks cheaper.

Finally, measure the employee experience after enrollment. Did the correct dependents receive coverage? Do deductions match the contribution policy? Can people find appointments and get billing help? Review those questions alongside renewal cost. The point of borrowing from large employers is to make healthcare easier to use and financially manageable, not to acquire the largest possible collection of benefit vendors.

**Price the benefit your small company can actually offer**

Use the checklist to specify contributions, employee costs and access. Then start a quote, create an account and complete your census so you can compare a proposal with those priorities.

[Compare benefits for my team](https://www.getprescience.com/quote)

[Build an accurate candidate comparison](https://www.getprescience.com/guides/how-to-recruit-faang-talent-to-a-startup)

## The secret is self-funding

When a large company self-funds, the employer bears claims costs rather than buying a conventional insured group policy. The company pays the actual cost of its employees' care, plus a fee to an administrator (often the same carriers, acting as administrators). It can retain favorable claims results, subject to its vendor contracts, but also bears adverse claims experience. Access to claims reporting and flexibility in design still come with federal compliance duties.

KFF's 2025 survey shows the gap clearly: 80% of covered workers at larger firms are in self-funded plans, compared with 27% at firms with 10–199 workers. The average deductible at larger firms was $1,670; at small firms, $2,631.

_Chart: Among covered workers with a general annual deductible in 2025, average single-coverage deductibles were $1,670 at firms with 200+ workers and $2,631 at firms with 10–199 workers._

## What large employers layer on top

- **Lower employee cost sharing,** if the employer funds that benefit in its budget.
- **Navigation and advocacy** so employees get to the right doctor the first time.
- **Direct contracts and centers of excellence** for expensive procedures, at negotiated prices.
- **Coverage choices smaller plans skip.** KFF found 43% of firms with 5,000 or more workers cover GLP-1 drugs for weight loss.

## Why startups usually can't copy it

Self-funding works at scale because thousands of employees average out. A 20-person company can have one premature birth or cancer diagnosis that costs more than its whole expected year. Small employers who self-fund buy stop-loss insurance to cap that risk, but stop-loss carriers underwrite your group, and some states restrict it: New York bans stop-loss for small groups entirely.

I would copy the large employer’s purchasing discipline before copying its financing. Assign an owner for enrollment, benefits questions and vendor reviews, and measure whether employees can use the coverage they were promised.

## Where Prescience fits for a startup

Prescience designs and runs company health plans starting at 2 employees.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Big-company benefits without a big-company benefits team: an effective $0 deductible, 24/7 physician-led care navigation and one monthly cost set in your quote.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

The quoted plan documents determine your benefits. Compare employee contributions, copays, network access and the out-of-pocket maximum against the alternatives your team is considering.

## How to compare a specific technology-company offer

If a candidate compares your offer with a former employer, ask for the current benefit summary they are comfortable sharing, without requesting medical information. Record the coverage year, employee contribution tier and exact plan option. A company may offer several options, and a former employee’s recollection may describe a different year or location. Do not turn a national average into a claim about Google, Apple, Amazon, Meta or Netflix.

Build a short comparison that includes specialist visits, prescriptions, inpatient care, fertility services if relevant, and dependent premiums. Mark any missing information as unknown. For a family expecting substantial care, compare annual payroll contributions plus the in-network out-of-pocket limit rather than simply comparing deductibles. Add access checks for hospitals and treating clinicians. That gives a candidate something concrete to evaluate without claiming that your plan reproduces another employer’s entire benefits package.

## Frequently asked questions

**Does self-funding automatically mean a low deductible?**

No. Funding describes who pays claims. An employer chooses its benefit design separately, within applicable rules. Both insured and self-funded plans can have substantial deductibles.

**Are KFF large-firm averages specific to FAANG?**

No. The 2025 survey groups employers with 200 or more workers as large firms. It is not a survey of the benefits offered by five technology companies.

**What can a startup copy without a large benefits team?**

A clear contribution policy, careful network checks, accurate enrollment and a named support contact. These improve the employee experience without depending on company size.

**Does paying the full premium remove all employee healthcare costs?**

No. Employees can still owe deductibles, copays, coinsurance and charges for excluded services. Compare the full benefit schedule alongside payroll contributions.

**Do big tech companies self-fund their health insurance?**

Most large employers do. KFF's 2025 survey found 80% of covered workers at larger firms are in self-funded plans.

**Why are deductibles lower at large companies?**

Contribution policy, budgets and plan design all matter; self-funding alone does not establish the cause. Among covered workers with a general annual single deductible, KFF found averages of $1,670 at large firms and $2,631 at small firms in 2025.

**Can a small company self-fund like a large one?**

Small companies can evaluate self-funding, but claims volatility, stop-loss terms and state restrictions matter. Compare insured coverage and other proposals before deciding which obligations the business can carry.

## Sources

- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [DOL, plan information and disclosure](https://www.dol.gov/general/topic/health-plans/planinformation)
- [New York Insurance Law section 3231](https://www.nysenate.gov/legislation/laws/ISC/3231)
- [New York DFS, small-group expansion and stop-loss restrictions](https://www.dfs.ny.gov/apps_and_licensing/health_insurers/small_group_expansion_to_1_100_employees_faqs)
- [DOL, ACA implementation FAQs Part 71, 2026 cost-sharing limits](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-71)

# Is Rippling PEO worth it?

Source: https://www.getprescience.com/guides/is-rippling-peo-worth-it
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Is Rippling PEO worth it?." Prescience, October 28, 2026. https://www.getprescience.com/guides/is-rippling-peo-worth-it

Rippling PEO combines payroll, HR support and access to benefits in a co-employment service. It can be worth the price when your team needs the full bundle. Rippling quotes PEO pricing individually, so I would compare its written fees, medical plan terms and exit costs with standalone payroll and coverage before deciding.

- **Best for:** Very small teams wanting one bundle
- **PEO price:** Custom quote; premiums and fees need review
- **Can you keep Rippling without the PEO?:** Yes
- **Prescience admin fees:** $0

## What Rippling PEO is

Rippling PEO is a co-employment arrangement: Rippling shares employer responsibilities with you and puts your team on health plans it sponsors for PEO customers. Rippling doesn't publish PEO pricing; its pricing page asks for your headcount and sends a custom quote. Rippling also runs payroll and HR without the PEO, and advertises a move off the PEO without replacing its underlying system. Confirm the conversion process and product pricing in your agreement.

According to Rippling's PEO page, the bundle includes access to its sponsored benefit plans with online enrollment, HR support from PHR- and SHRM-certified advisors, automated federal and state compliance filings, employment practices liability insurance (EPLI) and workers' compensation coverage. Add-ons include a handbook builder, compliance training and benefits support through Rightway's clinical team.

Co-employment means the PEO reports wages and pays employment taxes for your team, usually under its own tax IDs, while you still direct the work. Your employees' W-2s come from the PEO. That structure is what lets a five-person company join a large group health plan, and it's also what makes leaving take a few weeks of planning.

**Rippling with the PEO vs. Rippling without it**

|  | Rippling PEO | Rippling payroll + your own plan |
| --- | --- | --- |
| Employer of record for taxes | Shared with the PEO | You |
| Health plan | The PEO's pooled plans | A plan sponsored by your company |
| How rates renew | Carrier, census and PEO renewal terms | With your own group and market |
| Workers' comp and EPLI | Included | You buy your own policies |
| Software | Rippling | Rippling (same system) |

## What Rippling does well

- **Integrated software.** Payroll, HR, device management, expenses and app permissions run on one employee record. Onboarding a hire can create their payroll, laptop order and accounts in one step.
- **Large-group plan options for a team of three or four people.** Without a PEO, a tiny group buys small group plans with fewer choices.
- **Fast setup when you have no one to run benefits.** Enrollment, deductions and compliance filings are handled in the same system.
- **Risk coverage bundled in.** EPLI and workers' comp come with the PEO, which saves a very small team from shopping those policies separately.
- **A real exit path.** Because Rippling's payroll and HR products work without the PEO, you can leave co-employment without changing software. Confirm which subscriptions and data remain available after conversion.

## Who Rippling PEO is a good fit for

Rippling PEO makes the most sense when the bundle replaces work nobody on your team has time to do. Choose it if most of these are true:

- You have two to about five employees and no operations or HR hire.
- You're hiring your first employees in several states and need unemployment and tax accounts handled quickly.
- You want EPLI and workers' comp without buying them yourself.
- You already use Rippling, or want to, for payroll, devices and apps.
- You have compared next-year cost scenarios even if your headcount stays unchanged.

It's a weaker fit when health insurance is the main reason you're on the PEO, when your team is older or has many families (pooled rates and per-employee fees add up fastest there), or when you're competing for engineers who compare deductibles with their last job at a large company.

## Where the proposal needs scrutiny

- **Service charges.** Request the charge per employee, every minimum, implementation costs and optional modules. Clarify whether employees who waive medical coverage still count for the PEO fee.
- **Medical renewal.** Ask which rates are guaranteed, for how long, and what events allow repricing. National premium averages do not predict a particular PEO customer’s renewal.
- **Plan choice.** Read each Summary of Benefits and Coverage, network directory and drug list. Ask whether the menu meets the needs of employees in every hiring location.
- **Exit obligations.** Identify cancellation notice, final payroll filings, continuation coverage and replacement insurance responsibilities before signing.

I would not infer introductory pricing, a claims problem or a headcount penalty from a large renewal alone. Ask for a written explanation showing changes in rates, enrollment tiers, ages and service fees. Then collect competing quotes using the same census. That makes the comparison auditable without relying on another company’s confidential bill.

## What a 15-person team pays over two years

The following is a sensitivity test using invented budgeting assumptions, not Rippling prices, a customer quote or a forecast. It shows how a medical increase affects the total bill when service fees stay constant.

**15 enrolled employees, year one and the first renewal**

Illustrative only: 15 enrolled employees, an assumed $575 monthly medical premium each, an assumed $100 monthly service charge each, and a hypothetical 40% premium increase in year two. These are not actual or typical Rippling rates. The employer is assumed to pay the full amounts.

- Year one medical: 15 × $575 × 12: $103,500
- Year one PEO fees: 15 × $100 × 12: $18,000
- Year one total: $121,500
- Year two medical after 40%: 15 × $805 × 12: $144,900
- Year two PEO fees (unchanged): $18,000
- Year two total: $162,900

The same 15 people cost **$41,400 more** in year two, a 34% jump in the total bill. If the company also grows to 25 people, the fee line alone rises to $30,000. This is the moment to price a plan of your own: before you sign the renewal, not after.

Your real bill has more lines: dental, vision, workers' comp (priced by job class) and state unemployment insurance, which a PEO may bill at its own rates. Ask for each one separately so you can compare like with like.

## How to evaluate a Rippling PEO quote

**Questions to ask before you sign or renew**

| Ask for | Why it matters |
| --- | --- |
| The PEO service fee, separate from premiums | Bundled quotes hide what you pay for administration. You need both numbers to compare with any alternative. |
| Rates for every coverage tier (employee, plus spouse, plus children, family) | Family-heavy teams pay far more than the single-employee rate suggests. |
| How long the rates are guaranteed | If rates can change at a headcount threshold or mid-year, model that now. |
| Last two years of renewal increases for the pool | Past renewals provide context, not a guarantee. Ask how this contract determines renewal prices and which changes can trigger repricing. |
| Summary of Benefits and Coverage for each plan | Compare deductible, out-of-pocket maximum, coinsurance and network, not only premium. |
| Workers' comp and unemployment rates | Identify taxes, insurance charges and service charges separately. Ask which rates apply to your company before comparing them with independent coverage. |
| Termination terms and notice period | Know how much notice you must give and which date coverage ends before you need to leave. |
| Who handles COBRA and 401(k) when you leave | Former employees on COBRA and a PEO-sponsored 401(k) both need a plan for the exit. |

Then get at least one quote outside the PEO with the same census, and compare total annual cost per employee and what employees will pay out of pocket. Our [guide to renewals](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up) explains what drives the number.

## So is it worth it?

**My take by company stage**

| Your situation | My take |
| --- | --- |
| 2–4 people, no ops help, need everything bundled | Rippling PEO is reasonable for now |
| 5+ people, health insurance is the main reason you're on the PEO | Keep Rippling, move the health plan to your own |
| Just got a 20%+ renewal | Get a quote before you accept it |
| Hiring from big tech | Compare the deductible and out-of-pocket max candidates will see |
| Employees in many states, no HR hire, staying small | The PEO's compliance help may be worth the fee |

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Staying small with employees in many states? Choice gives each person a local individual plan without co-employment, for $20 per enrolled employee per month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## How to leave Rippling PEO and keep Rippling

As a planning allowance, start at least six to eight weeks ahead, and earlier if the contract or state registrations require it. The goal is one clean handoff on the first of a month, with no gap in coverage and no double payroll.

1. **Read your PEO agreement** Find the notice period and how a termination date is set. Note any fees tied to leaving.
2. **Get your new health plan quoted and approved** Send your census to an alternative and pick a start date on the first of a month. Don't give notice until the new plan is confirmed.
3. **Give notice in writing** Tell Rippling the date co-employment and PEO benefits end. Ask them to confirm the last day of coverage and the last PEO payroll.
4. **Set up your own tax accounts** You'll report wages under your own EIN again. Register state unemployment and withholding accounts in every state where you have employees. Rippling's payroll product keeps running payroll.
5. **Replace workers' comp and EPLI** Confirm each policy’s end date and any claims-reporting terms. Arrange replacement policies before the current coverage ends.
6. **Handle retirement plans and COBRA** If your 401(k) is the PEO's multiple-employer plan, set up your own and arrange the transfer. Ask who keeps former employees already on COBRA.
7. **Run open enrollment** Give employees the new plan details two to three weeks before the start date. Ask the new plan how it credits deductible amounts already met this year.
8. **Check the first payroll** Confirm new deductions, that PEO deductions stopped and that year-to-date wages carried over correctly.

> **Mid-year exits and payroll tax wage bases:** Federal CPEO successor rules generally protect wage-base continuity for qualifying work site employees. The IRS active report dated August 7, 2026 did not list an entity named Rippling. That name search does not establish the status of every possible contracting affiliate. Get the legal entity name, EIN and certification status in writing, and have payroll confirm whether the successor rules apply.

The full checklist, with timing, is in [How do I leave a PEO?](https://www.getprescience.com/guides/how-to-leave-a-peo) and [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year).

**Keep Rippling and compare a separate health plan**

Export the employee list while you still have access. Start a quote and create your account, then review the census before comparing the replacement plan and confirming the PEO exit timeline.

[Compare my Rippling PEO renewal](https://www.getprescience.com/quote)

[Follow the Rippling census export guide](https://www.getprescience.com/integrations/rippling)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Keep Rippling, leave the PEO

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Keep Rippling for payroll, devices and apps, and move only the health plan. Diamond plugs into the payroll you already run.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

You can keep your current payroll provider with Prescience. The full checklist is in [How do I leave a PEO?](https://www.getprescience.com/guides/how-to-leave-a-peo)

## What I would require before approving a change

Put the final PEO proposal and standalone alternative in one decision record. Use the same employee census, enrollment mix and effective date. Separate medical premiums from workers’ compensation, payroll taxes, software, HR assistance and retirement services. Mark any unquoted replacement service as an unresolved cost. An apparent saving is incomplete if one option leaves a necessary service out.

For employees, compare the contribution per paycheck, out-of-pocket limit and access to providers. For the company, compare first-year expense, a renewal sensitivity range and exit obligations. Keep the PEO if the bundle solves a real staffing need at an acceptable price. Keep Rippling software and change the benefits arrangement if the documented alternative fits better. Neither conclusion follows automatically from having five, fifteen or fifty employees.

## Frequently asked questions

**How much does Rippling PEO cost?**

Rippling publishes quote-based PEO pricing. Obtain a written proposal separating service fees, payroll and other modules, premiums, workers’ compensation and tax charges. This guide’s numerical scenario is illustrative, not a vendor rate.

**Can I keep Rippling if I leave Rippling PEO?**

Yes. Rippling runs payroll and HR without the PEO, and says you can move off the PEO without replacing the underlying system. Prescience lets you keep your current payroll provider. Confirm the deduction setup before enrollment.

**Why did my Rippling PEO renewal go up so much?**

Ask Rippling for the renewal calculation and the contract terms that allow changes. Check rates, coverage tiers, employee ages, service charges and enrollment. A large increase alone does not identify its cause.

**Is Prescience cheaper than Rippling PEO?**

Compare actual proposals. Prescience usually quotes 10–20% below comparable fully insured coverage and charges no admin fees; that is not a guaranteed saving against Rippling PEO. Include replacement HR and insurance services.

**What does Rippling PEO include?**

According to Rippling, access to its sponsored benefit plans, HR advisors, compliance filings, EPLI and workers' comp, with add-ons such as a handbook builder, compliance training and Rightway benefits support.

**How much notice do I need to give to leave Rippling PEO?**

It's set in your PEO agreement, so check the termination section. Line up your new health plan first, then give written notice with a clean end date on the last day of a month.

**Will my employees lose coverage if we leave the PEO?**

Not if you time it right. The PEO plan ends on one date and the new plan starts the next day, usually the first of a month. Employees enroll in the new plan before the switch.

**Do we lose our deductible progress if we switch mid-year?**

Usually yes, because the deductible belongs to the old plan. Ask the new plan whether it credits amounts already met. A plan with an effective $0 deductible makes this matter much less.

**Is Rippling PEO a certified PEO?**

The IRS report dated August 7, 2026 did not show the name Rippling. Confirm the actual entity and EIN on your agreement against the IRS list. A brand-name search alone is not conclusive.

## Sources

- [Rippling, PEO services](https://www.rippling.com/products/hr/peo)
- [Rippling, quote-based pricing](https://www.rippling.com/pricing)
- [IRS, active certified PEO list (report dated August 7, 2026)](https://www.irs.gov/pub/irs-sbse/active-cpeos.pdf)
- [26 CFR 31.3511-1, CPEO successor rules](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/subpart-F/section-31.3511-1)
- [DOL, employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [DOL, plan information and disclosure](https://www.dol.gov/general/topic/health-plans/planinformation)

# Is Justworks PEO worth it?

Source: https://www.getprescience.com/guides/is-justworks-peo-worth-it
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Is Justworks PEO worth it?." Prescience, October 28, 2026. https://www.getprescience.com/guides/is-justworks-peo-worth-it

Justworks PEO can be useful when its payroll, HR and compliance services replace work your team needs help doing. PEO Plus lists at $124 per employee per month, with health premiums separate. I would compare the full bundle with standalone payroll, insurance and replacement services before deciding whether it is worth the fee.

- **Best for:** 2–5 person teams
- **Pricing model:** Per employee per month, plus premiums
- **Can you keep Justworks payroll?:** Yes, without the PEO
- **Prescience Choice administration:** $20 per enrolled employee/month

## How Justworks PEO health insurance works

Justworks is a co-employer and offers health benefits through its PEO service. Compare the PEO service charge, insurance premiums and optional services separately. The service agreement and benefit documents determine what your company and employees receive.

Justworks also sells payroll without the PEO. That's your exit path: drop co-employment, keep running payroll on Justworks, and move the health plan.

The IRS active CPEO report dated August 7, 2026 lists Justworks Employment Group LLC and several related entities. Match your exact contracting entity and effective certification date. Federal successor treatment for Social Security and FUTA generally applies to qualifying work site employees under a CPEO contract; it is not automatic for every person on payroll.

## What Justworks charges in 2026

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

These are Justworks' published US list prices as shown on its pricing page in October 2026. Premiums for medical, dental and vision are billed on top of every PEO tier.

**Justworks plans and add-ons (justworks.com/pricing, October 2026)**

| Plan or add-on | Price | What it adds |
| --- | --- | --- |
| **Payroll** | $8 per employee per month + $50 base fee | Payroll, HR tools, support. Not a PEO |
| **PEO Basic** | $79 per employee per month, no base fee | Co-employment, compliance, HR consulting, 24/7 support, 401(k), workers' comp access |
| **PEO Plus** | $124 per employee per month, no base fee | Everything in Basic plus medical, dental and vision administration, HSA/FSA accounts, mental health and fertility benefits |
| Payroll + Health Insurance add-on | $8 per benefits-eligible employee per month | Access to medical, dental and vision plus COBRA admin, on the Payroll plan |
| Health Insurance Reimbursements (CHOICE) add-on | $25 per enrolled employee per month | An ICHRA-style alternative to a group plan, through partner Thatch |
| Dedicated HR consulting | $30 per employee per month | A named HR advisor (Basic and Plus) |

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Justworks lists its CHOICE add-on at $25 per enrolled employee per month. Prescience Choice is $20, and you can keep Justworks Payroll.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Justworks also says there is no implementation fee. Prices for time tracking, contractors and international hiring are listed separately on the same page.

## What Justworks does well

- **Simple, transparent PEO tiers** compared with most PEOs, which quote privately.
- **Good payroll and compliance support** for teams without an ops hire, including multi-state payroll and state unemployment administration.
- **Large-group plan choices for very small teams.** A three-person company gets plan options it couldn't buy on its own.
- **Certified entities,** with federal wage-base continuity for qualifying work site employees; verify your contracting entity.
- **Clear ways to step down.** You can drop to Payroll, add health insurance access for $8 per eligible employee, or try CHOICE, without leaving the platform.

## Who Justworks PEO is a good fit for

- **Two to five employees** with nobody to run HR, payroll compliance or benefits.
- **First hires in new states,** where you'd otherwise register tax and unemployment accounts yourself.
- **Founders who value predictable pricing** and want to see the fee before they talk to sales.
- **Teams that want EPLI and workers' comp handled** as part of one bill.

It's a weaker fit once you have an operations person, when most of the PEO fee is paying for benefits access you could get elsewhere, or when you need plan design the PEO menu doesn't offer, such as a lower deductible or a richer out-of-pocket maximum.

## Where it gets expensive

- **The fee scales with headcount.** At $124 per employee per month, PEO Plus costs $1,488 a year per person. At 30 people that's $44,640 a year before anyone sees a doctor.
- **Renewal uncertainty.** Ask how the carrier, plan menu, census and PEO pricing terms affect your renewal. Do not assume a published national premium trend predicts the next bill.
- **Plan menu.** You select from available plan options. Ask what changes and reporting are available rather than assuming you can customize every benefit.
- **Premiums on top.** KFF's 2025 survey put the average employer plan at $9,325 a year for single coverage and $26,993 for family coverage. The PEO fee is added to that, not taken out of it.

## What a 12-person team pays in fees

**PEO Plus vs. Justworks Payroll with health insurance access**

A 12-person company, all benefits-eligible. Fees only, at Justworks' October 2026 list prices. Premiums are billed separately in both cases, and plan options and rates may differ between the PEO and non-PEO offerings.

- PEO Plus: 12 × $124 × 12 months: $17,856
- Payroll: (12 × $8 + $50) × 12 months: $1,752
- Health insurance add-on: 12 × $8 × 12 months: $1,152
- Payroll plus add-on, total: $2,904
- Difference in fees per year: $14,952

About **$15,000 a year** separates the PEO from Justworks' own non-PEO setup for this team. What you give up is co-employment: the compliance help, EPLI and workers' comp bundled into the PEO. If you need those, the fee may be fair. If health insurance is the only reason you use PEO Plus, compare the available coverage and full replacement cost before deciding.

Add a realistic premium to see the total. Illustrative: at KFF's 2025 average single premium of about $777 a month, 12 single-coverage employees cost about $111,900 a year in premiums. With PEO Plus fees, the total is about $129,700. A 10% premium renewal adds roughly $11,200 more the next year.

## Situations that change the math

- **Family-heavy teams.** The PEO fee is the same per employee, but premiums for family coverage averaged $26,993 a year in KFF's 2025 survey, almost three times single coverage. On a family-heavy team, premiums and renewals matter far more than the fee.
- **Employees who waive coverage.** PEO Plus is priced per employee, not per enrolled employee. If several people are covered by a spouse's plan, you still pay the full tier fee for them. CHOICE, by contrast, is priced per enrolled employee.
- **Remote employees in other states.** A PEO's plan menu depends on where each employee lives. Before you hire in a new state, check which plans and networks are available there.
- **Owners on payroll.** Owners and spouses who draw W-2 pay are on payroll like everyone else. Ask Justworks whether they count toward the per-employee fee, and include them when you model the bill.
- **Approaching applicable large employer status.** Generally, an average of at least 50 full-time employees, including equivalents, in the preceding calendar year triggers ACA employer shared-responsibility rules. Related employers are aggregated and exceptions can apply. Affordability for plan years beginning in 2026 uses 9.96% of household income for the lowest-cost self-only minimum-value offer, with employer safe harbors available. A PEO does not remove the employer’s responsibility.

Choose the PEO if you need co-employment's compliance help. Choose Justworks Payroll with its health add-on if you only need benefits access and want the lowest fee on Justworks. Choose a plan of your own if you want to set the deductible, out-of-pocket maximum and network yourself, and price it on your own team.

## How to evaluate a Justworks quote

1. **Separate fees from premiums** List the PEO tier fee, each add-on and the premiums for every plan and coverage tier. Multiply by your real enrollment, including spouses and children.
2. **Read the Summary of Benefits and Coverage** For the plan most employees will choose, write down the deductible, out-of-pocket maximum, coinsurance and network type. A cheaper premium with a $3,000 deductible isn't cheaper for an employee who needs care.
3. **Ask about plan availability by state** PEO plan menus vary by where employees live. Check the plans offered to each of your locations.
4. **Ask how renewals have moved** Ask what the pool's last two renewals were and when your rates can change.
5. **Price the non-PEO options** Compare with Justworks Payroll plus its health insurance add-on, and with at least one plan of your own using the same census.
6. **Compare per employee per year** Divide total annual cost (fees plus premiums) by enrolled employees. That's the number to compare across every option.

## So is it worth it?

**My take by company stage**

| Your situation | My take |
| --- | --- |
| 2–5 people, nobody to run HR | Justworks PEO is worth it |
| 5+ people and growing | Price your own plan; keep Justworks payroll |
| Large renewal coming | Get a quote before you accept it |
| Need richer benefits to hire | Compare deductibles and out-of-pocket maximums, not just premiums |
| On PEO Plus mainly for health insurance | Price Justworks Payroll plus its health add-on, and your own plan |

## How to leave the Justworks PEO

1. **Confirm the new plan first** Get your new health plan quoted and approved with a start date on the first of a month. Don't give notice until it's confirmed.
2. **Check your service agreement** Find the notice period and how the termination date is set, then give written notice that lines up with the new plan's start date.
3. **Move to Justworks Payroll or another payroll** If you stay on Justworks Payroll, ask Justworks to schedule the change from PEO to Payroll for the same date.
4. **Register your own tax accounts** You'll report wages under your own EIN. Open state withholding and unemployment accounts in each state where you have employees.
5. **Replace workers' comp, EPLI and the 401(k)** Bind your own workers' comp and EPLI to start on the switch date. Set up a 401(k) and arrange the transfer from the PEO's plan.
6. **Plan COBRA and deductibles** Ask who covers former employees on COBRA after you leave, and whether the new plan credits deductibles already met this year.
7. **Enroll employees and check the first payroll** Run enrollment two to three weeks before the start date. Check that PEO deductions stopped and new ones started.

The general version, for any PEO, is in [How do I leave a PEO?](https://www.getprescience.com/guides/how-to-leave-a-peo)

**Prepare the employee list before leaving Justworks**

Start the quote while checking the PEO notice period and replacement coverage. Create your account and complete the census so you can compare the proposal before cancelling anything.

[Compare my Justworks renewal](https://www.getprescience.com/quote)

[Follow the Justworks census export guide](https://www.getprescience.com/integrations/justworks)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Keep Justworks payroll, get your own plan

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Keep Justworks Payroll, drop the PEO Plus fee, and put your own plan with an effective $0 deductible behind it.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

You can keep your current payroll provider with Prescience. For the step-by-step switch, see [How do I leave a PEO?](https://www.getprescience.com/guides/how-to-leave-a-peo)

## Separate the PEO decision from the insurance decision

The fee comparison above is not a recommendation to remove HR support without replacing it. I would write a second budget for payroll, state registrations, workers’ compensation, employment practices coverage, retirement administration and internal staff time. Some of those costs remain even when the medical plan becomes less expensive. Ask which PEO services you actually used during the last year and which ones you need for planned hiring.

There is no universal employee count at which the PEO stops being useful. A small multistate employer may need extensive support; a larger business may already have it internally. Likewise, an employee who waives medical coverage can still use payroll and HR services covered by the PEO fee. Make a company-level comparison, then separately show employees their premium contribution and medical exposure. Keep the PEO if its documented services and coverage justify the difference.

## Frequently asked questions

**How much does Justworks PEO cost?**

Justworks lists PEO Basic at $79 and PEO Plus at $124 per employee per month, with no base fee, as of October 2026. Medical, dental and vision premiums are billed on top. Check Justworks' pricing page for current prices.

**Can I keep Justworks for payroll and leave the PEO?**

Yes. Justworks offers payroll without the PEO, and Prescience lets you keep your current payroll provider. Confirm the deduction setup before enrollment.

**Is Justworks health insurance good?**

Evaluate the available plan’s network, exclusions, prescriptions and employee costs. Justworks’ published fees make the administrative component visible, but quality and value depend on the actual plan and services your team needs.

**Is Prescience cheaper than Justworks?**

Compare written quotes. Prescience quotes are usually 10–20% below comparable fully insured coverage, with no admin fees. It does not establish a universal saving against Justworks, and replacement HR services may add cost.

**What's the difference between PEO Basic and PEO Plus?**

PEO Plus adds medical, dental and vision administration, HSA and FSA accounts, and mental health and fertility benefits. If you want Justworks-sponsored health plans as a PEO customer, Plus is the tier that lists them.

**Can I get health insurance on Justworks without the PEO?**

Justworks lists a Payroll + Health Insurance add-on at $8 per benefits-eligible employee per month that gives access to medical, dental and vision plans and COBRA admin on the Payroll plan. Plan options may differ from the PEO's.

**Is Justworks a certified PEO?**

The IRS report dated August 7, 2026 lists Justworks Employment Group LLC and related entities. Check the entity on your contract. Wage-base continuity depends on satisfying the federal CPEO and work site employee rules.

**Does Justworks charge a setup fee?**

Justworks says it doesn't charge an implementation fee. You pay the monthly per-employee price plus any add-ons and premiums.

**Can we leave Justworks PEO mid-year?**

Yes. Give the notice your agreement requires and line up a new plan that starts the day after PEO coverage ends. Ask whether the new plan credits deductibles already met.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [Justworks, published pricing](https://www.justworks.com/pricing)
- [Justworks Help Center, pricing and active W-2 billing](https://help.justworks.com/hc/en-us/articles/360004481791-Pricing)
- [IRS, active certified PEO list (report dated August 7, 2026)](https://www.irs.gov/pub/irs-sbse/active-cpeos.pdf)
- [26 CFR 31.3511-1, CPEO successor rules](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/subpart-F/section-31.3511-1)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS, employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)
- [DOL, employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)

# Is Thatch ICHRA worth it?

Source: https://www.getprescience.com/guides/is-thatch-ichra-worth-it
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Is Thatch ICHRA worth it?." Prescience, October 28, 2026. https://www.getprescience.com/guides/is-thatch-ichra-worth-it

If ICHRA fits your employees, I recommend Prescience Choice: $20 per enrolled employee per month, with plan comparison, enrollment support and Crystal included. Thatch Standard charges $45 per enrolled employee monthly plus a compliance fee for employers with 1–49 eligible employees. Choice offers a lower administration price; compare local policies, allowances and employee costs before choosing coverage.

- **Thatch price (small employers):** $45 per enrolled employee/month + $50/month
- **Employer allowance:** Chosen by employer; separate from fees
- **Coverage:** Individual plans; verify local options
- **Prescience Choice administration:** $20 per enrolled employee/month

## What Thatch is

Thatch administers individual coverage HRAs, marketed as health budgets. Employers choose allowances within the federal class and variation rules. Employees select qualifying individual coverage, with enrollment and payment support. Thatch advertises a card for eligible expenses from remaining benefits. Confirm which expenses your employer permits and the substantiation process. The platform does not itself replace the individual insurance policy.

Thatch advertises licensed advising and additional health-service offers. Those services are not the same as insurance benefits: verify provider availability, eligibility and out-of-pocket charges. Justworks also lists an ICHRA service through Thatch. Compare the partner route’s entire subscription cost and service scope with direct enrollment, rather than comparing only one add-on fee.

## Prescience Choice: a lower-cost ICHRA with employee support

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

**Administration for 10 enrolled employees**

Illustrative administration-only comparison for an employer eligible for Thatch Standard. All 10 employees enroll. Thatch published pricing checked October 15, 2026; allowances and insurance premiums are excluded.

- Prescience Choice: 10 × $20: $200/month
- Thatch Standard: 10 × $45 + $50 compliance fee: $500/month
- Difference: $300/month ($3,600/year)

Choice leaves $3,600 more in the annual budget in this example. Employers can keep that saving or put it toward employee allowances. It does not change the price or benefits of the individual insurance policy employees select. Thatch offers custom pricing for 50+ eligible employees, so use its actual quote for that comparison.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Same ICHRA rules and the same individual plans, for $25 less per enrolled employee each month than Thatch Standard, with no setup or platform fee.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Price a Choice allowance for your team**

Compare the administration cost separately from the allowance and the policies employees can buy. Start the Choice setup and complete the employee details needed to review the proposal.

[Start my Choice quote](https://www.getprescience.com/employer/choice)

[Check employee affordability](https://www.getprescience.com/tools/ichra-affordability-calculator)

## What Thatch costs

**Thatch's published pricing (thatch.com/pricing, October 2026)**

|  | Standard | Custom |
| --- | --- | --- |
| Who it's for | 1–49 eligible employees | 50+ eligible employees |
| Platform fee | $45 per enrolled employee per month | Quoted individually |
| Compliance fee | $50 per month | Included in quote |
| Minimum | None listed | 10 enrolled employees ($2,400 a year) |
| Extras | Advising, enrollment support, Thatch Card, compliance documents | Adds ACA reporting, a dedicated account manager and onsite enrollment help |

You pay the platform fee only for employees who enroll. Thatch's own example: 4 enrolled employees cost $45 × 4 + $50 = $230 a month. Through Justworks, the CHOICE add-on is listed at $25 per enrolled employee per month. The fees are on top of the allowance itself, which is your real cost.

## The ICHRA rules every Thatch customer follows

- **Employees must have individual coverage** (or Medicare Parts A and B, or Part C) to be reimbursed. The ICHRA pays toward premiums and, if you allow it, other medical costs.
- **Notice generally 90 days ahead.** Employees get a written notice at least 90 days before the plan year. New hires get it no later than the day their ICHRA can start.
- **One offer per class.** You can't offer the same class of employees both an ICHRA and a traditional group plan. Classes include full-time, part-time, salaried, hourly and employees in different rating areas.
- **Premium tax credits.** If the ICHRA is affordable, employees can't get marketplace premium tax credits. If it isn't, they can opt out of the ICHRA and claim the credit if otherwise eligible. In 2026, affordability uses 9.96% of household income against the lowest-cost silver plan.
- **Special enrollment.** Being newly offered an ICHRA opens a 60-day window to buy an individual plan, so employees don't wait for open enrollment.

## What Thatch does well

- A polished shopping experience for employees, with plans filtered by their own doctors and prescriptions.
- A fixed, predictable budget for the employer.
- You pay the platform fee only for employees who enroll.
- Works for teams spread across many states, since each employee buys a plan where they live.
- Unused allowance may cover other eligible expenses if the employer permits them; confirm carryover and termination rules rather than assuming it becomes employee-owned money.
- Published pricing, which most benefits platforms don't offer.

## Who Thatch is a good fit for

ICHRA can be a good fit for the following teams. I would start with a Prescience Choice quote and compare Thatch if its specific services justify the higher administration price:

- **Fully remote teams in many states** where a single group network won't cover everyone well.
- **Young, mostly single teams** in states with competitive individual markets, where the allowance covers a decent plan.
- **Companies with a hard per-head budget** that would otherwise offer nothing.
- **Teams with very different needs,** where letting each person choose beats one plan for all.

It is a poor fit if the available plans miss necessary providers, the allowance leaves an unaffordable gap, or the subsidy trade-off is unfavorable. Generous allowances and suitable individual plans can work for older employees and families too. Test the actual offers rather than deciding by age alone.

## Where it goes wrong for employees

A fixed employer allowance does not fix every employee’s total health cost. Before calling a proposal cheaper, check these five items:

- **Premium gaps:** compare the gross premium with the actual allowance for each enrollment tier. Do not use a vendor-wide average as the promised contribution.
- **Networks:** HMOs and EPOs generally restrict routine out-of-network care. Verify emergency protections, authorized exceptions and travel coverage separately.
- **Cost sharing:** use actual deductibles and maximums. A national average cannot represent a specific silver plan or the cost-sharing reductions available to an eligible household that declines an unaffordable ICHRA.
- **Age variation:** premiums may vary by age within federal and state rules; permitted age-based allowances can offset some or all of that variation.
- **Platform expense:** with 20 enrolled employees at Standard prices, $45 × 20 × 12 = $10,800 plus $600 in monthly compliance charges over the year, or $11,400 before allowances.

I would prioritize continuity for ongoing treatment. Ask the individual insurer about a specialist missing from the network, pending authorizations, specialty prescriptions and care outside the service area. Do not assume a narrow network excludes emergency care, or that a PPO label guarantees every clinician. Send individual medical questions through a private support channel.

I wrote more about this in [Is ICHRA a scam for your employees?](https://www.getprescience.com/guides/is-ichra-a-scam)

_Chart: KFF estimated individual Marketplace deductible, weighted by metal/CSR plan selections: $2,759 in 2025 and $3,786 in 2026, a 37% increase._

The deductible chart reflects KFF’s analysis of selected Marketplace coverage, including changes in which metal levels people selected. Its $2,759 and $3,786 figures are averages across different enrollment mixes, not a quote or a same-plan increase. A local silver plan with cost-sharing reductions can have very different terms from the overall average.

## What a flat allowance buys at 25 vs. 60

Individual premiums are age-rated. Under the federal default age curve, a 60-year-old pays 2.714 times what a 21-year-old pays, and a 40-year-old pays 1.278 times. That's why a flat allowance feels generous to a junior engineer and thin to a senior one.

**10 employees, a $600 allowance, two employees compared**

Illustrative only. Ten employees enroll on Thatch Standard and each receives a $600 monthly allowance. Assume a plan premium of $625 at age 40, then apply federal default age factors for ages 25 and 60. The $625 is an invented starting price, not a benchmark average or vendor quote. Round monthly premiums before annualizing.

- Assumed plan, 25-year-old ($625 × 1.004 ÷ 1.278): about $491/month
- 25-year-old: allowance left for the Thatch Card: about $109/month
- Assumed plan, 60-year-old ($625 × 2.714 ÷ 1.278): about $1,327/month
- 60-year-old: remaining premium gap: about $727/month ($8,724/year)
- Thatch fees: 10 × $45 + $50: $500/month ($6,000/year)
- Employer cost: allowances plus fees: $78,000/year

The annual maximum allowance budget plus the listed fees is $78,000 if all ten use the full allowance. Actual reimbursed spending can be lower. Under these assumptions the 60-year-old’s rounded premium gap is $8,724 annually before medical cost sharing. Remaining benefits for the younger employee are available only under the employer’s expense, substantiation and carryover rules; they are not unrestricted cash.

Compare that with KFF's 2025 group averages: workers paid $1,440 a year toward single coverage, and the average single deductible at small firms was $2,631. Run your own census both ways before you decide.

## How to evaluate a Thatch proposal

1. **Price each employee, not the average** Ask Thatch for the benchmark silver premium for every employee's age, ZIP code and family size, and what each would pay out of pocket under your budget.
2. **Check the networks** For your three or four most common employee locations, list which plans are PPOs and whether the main hospital systems and your employees' doctors are in network.
3. **Check affordability if you have 50+ FTEs** For applicable large employers, the allowance must make the lowest-cost silver plan affordable at 9.96% of income (using a safe harbor) or you risk penalties.
4. **Add up the total cost** Allowances plus Thatch fees, per year. Compare with a group plan quote on the same census, including what employees would pay.
5. **Ask about the employee experience** What happens when an employee has a claim problem? With ICHRA, the insurer is the employee's own individual carrier, not your plan.

## So is Thatch worth it?

**My take**

| Your situation | My take |
| --- | --- |
| Employees in many states, strict per-head budget | Start with Prescience Choice at $20 PEPM; check each local plan |
| Hiring from big tech | Compare the candidate’s actual coverage needs and employee cost |
| Older or family-heavy team | Run the numbers carefully; ICHRA allowances stretch less |
| Want the lowest total cost for a good plan | Compare a Prescience quote side by side |
| Already decided on ICHRA | Compare Prescience Choice at $20 PEPM with Thatch Standard at $45 PEPM plus its compliance fee |

## How to switch from Thatch to a group plan

1. **Get the group plan quoted and pick a start date** Choose the first of a month. Confirm the plan before you tell employees.
2. **End the ICHRA for the same date** Tell Thatch the last day of the ICHRA plan year or the date it ends, and confirm when the last allowance is paid.
3. **Tell employees early** Use a planning target of at least 30 days, but have the administrator check all required notices and contract deadlines. After confirming replacement enrollment, employees who want to avoid overlapping coverage should cancel their own individual policies, effective the day before the group plan starts, so nobody pays for two plans.
4. **Watch the Thatch Card balance** Ask Thatch what happens to unspent Card funds when the ICHRA ends and tell employees the deadline to use them.
5. **Enroll and set deductions** Run enrollment for the group plan and set up payroll deductions for any employee share. Employees who keep their individual plan should know they lose the allowance.

For timing details, see [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year) and [should we switch from a group plan to ICHRA?](https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra)

## The group plan alternative

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** If the age math above leaves older employees or families with big premium gaps, compare a group plan quote on the same census.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Check what the budget promises

I would distinguish three amounts in the proposal: the maximum employer allowance, the amount actually reimbursed and the platform fee. They need not be equal. Ask when funds become available, whether unused amounts carry over and what happens when an employee leaves or changes coverage. If the employer allows expenses beyond premiums, obtain the eligible-expense rules and claim deadline. A card balance is not a bank account owned by the employee.

For an affordable ICHRA offer, declining the benefit does not by itself restore premium tax credits. For an unaffordable offer, the employee must opt out and otherwise qualify for credits. Use the lowest-cost silver self-only premium for the applicable affordability calculation, not the second-lowest-cost benchmark used to calculate Marketplace credits. Employer safe harbors do not replace the employee’s household-income analysis.

Before launch, ask the administrator to confirm permitted classes, any minimum class size, and notices. Generally the notice is due 90 days before the plan year; newly eligible employees and newly established employers have special timing. The special enrollment period associated with an ICHRA is tied to when coverage can begin and the applicable notice rules, so employees should confirm their personal deadline. Keep the old policy until the replacement enrollment and effective date are confirmed.

## Frequently asked questions

**How much does Thatch cost?**

Thatch publishes small-employer pricing of $45 per enrolled employee per month plus a $50 monthly compliance fee, for 1–49 eligible employees. At 50 or more eligible employees it quotes custom pricing with a 10-enrollee minimum. Check Thatch's pricing page for current terms.

**Is Thatch a good company?**

Thatch publishes its services and pricing. Whether it is a good fit depends on the actual service agreement, individual-plan options, allowances and employee support. Funding or valuation does not establish insurance quality.

**Is ICHRA through Thatch cheaper than group insurance?**

It can cost the employer less, but that alone does not establish lower total cost. Compare the allowance and fees with employer group contributions, then compare each employee’s premium gap, medical exposure, networks and subsidy position.

**Can we switch from Thatch to a group plan?**

Yes. A Prescience plan can start mid-year; we set the start date with you so employees can cancel individual plans without a gap or overlap.

**What is the Thatch Card?**

After an employee buys an insurance plan, the rest of their health budget is loaded onto a Thatch Card that they can spend on eligible costs such as copays, prescriptions and therapy.

**Can Thatch budgets vary by employee?**

Yes. Thatch says budgets can be based on age, location and dependents, within the ICHRA rules that require the same terms for everyone in a class.

**Can we offer Thatch to some employees and a group plan to others?**

Only by class. ICHRA rules let you offer different benefits to different classes, such as full-time and part-time, but not a choice between an ICHRA and a group plan within the same class.

**Do employees on Thatch lose premium tax credits?**

If the ICHRA is affordable for them, yes. If it isn't, they can decline it and claim premium tax credits if otherwise eligible.

**Is Thatch cheaper through Justworks?**

Justworks lists its CHOICE add-on, run with Thatch, at $25 per enrolled employee per month, compared with Thatch's direct price of $45 plus a $50 monthly fee. Compare what each includes before deciding.

## Sources

- [Thatch, published pricing](https://thatch.com/pricing)
- [Thatch, health budgets and employee support](https://thatch.com/)
- [Justworks, published pricing](https://www.justworks.com/pricing)
- [HealthCare.gov, individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [Treasury, Labor and HHS, 2019 HRA final rules](https://www.irs.gov/irb/2019-28_IRB)
- [CMS, ICHRA model notice](https://www.cms.gov/files/document/cms-10704-hra-model-notice.pdf)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [CMS, federal default and state-specific age curves](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/downloads/statespecagecrv053117.pdf)
- [CMS, market rating reforms and state variations](https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/state-rating)
- [HealthCare.gov, plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [KFF original analysis, 2026 Marketplace enrollment and deductibles](https://www.kff.org/affordable-care-act/what-we-know-so-far-about-2026-aca-marketplace-enrollment-premiums-and-deductibles/)
- [CMS, Marketplace public-use files and geographic scope](https://www.healthcare.gov/health-plan-information/)

# Is ICHRA a scam for your employees?

Source: https://www.getprescience.com/guides/is-ichra-a-scam
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Is ICHRA a scam for your employees?." Prescience, October 28, 2026. https://www.getprescience.com/guides/is-ichra-a-scam

ICHRA is a lawful employer health benefit when it follows federal rules. Whether it is a good deal depends on the allowance, local individual-plan prices, provider access and lost premium tax credits. I would test those details for employees and families before accepting either a savings pitch or a claim that the arrangement is a scam.

- **2026 affordability percentage:** 9.96%
- **Federal ICHRA allowance cap:** No annual dollar cap
- **Age rating:** Up to 3:1; state exceptions apply
- **Tax-credit rule:** Affordable offer generally blocks credits

## How ICHRA works

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If you go ahead with ICHRA, we run the three hard cases from this guide (your oldest employee, your largest family and your lowest-paid employee) before you set allowances, so nobody ends up worse off by surprise.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

An individual coverage HRA reimburses qualifying individual insurance and, if the employer permits, other eligible medical expenses. The employer can offer a group plan to a different permitted employee class, but cannot offer employees a choice between the two within the same class. These federal rules became available for plan years beginning in 2020. Employees need qualifying coverage and must substantiate it; the allowance is not unrestricted cash.

The rules come from a 2019 joint rule by the Treasury, Labor and HHS departments. They are stricter than most sales decks suggest:

**The main ICHRA rules an employer has to follow**

| Rule | What it means in practice |
| --- | --- |
| Employee must have individual coverage | Each covered person must have qualifying individual insurance or Medicare Parts A and B, or Part C. Short-term insurance and sharing ministries do not qualify. The employer has to collect proof of coverage at enrollment and an attestation with each reimbursement. |
| Same terms within a class | You can split staff into classes (full-time, part-time, salaried, hourly, by rating area and a few others), but everyone in a class gets the same offer. |
| Allowance can vary only by age and family size | Older employees can get up to 3 times what the youngest get. You can't give one engineer more than another in the same class for any other reason. |
| No group plan and ICHRA for the same class | You can't let employees choose between the group plan and the allowance. |
| Minimum class sizes | If you offer a group plan to one class and ICHRA to another, certain classes must have at least 10 people (employers under 100), 10% of staff (100–200) or 20 people (over 200). |
| Written notice 90 days ahead | Generally give notice 90 days before the plan year. Employees first eligible later must receive it no later than their coverage start; special timing applies to newly established employers. |
| Annual opt-out | Employees can opt out each year, which matters for premium tax credits (below). |

None of that is a scam. It's a legitimate tax structure. The problem is what happens to the employee after the allowance lands.

## The math employees face

There is no allowance that guarantees adequate coverage everywhere. Start with current gross premiums for each employee’s age, location and coverage tier. Then subtract the proposed benefit and examine the plan’s deductible, copays and out-of-pocket maximum. A national premium average cannot tell you whether a particular employee can keep a hospital, cover a prescription or afford family coverage.

- **Age:** federal individual-market rating generally allows up to 3:1 adult variation, with stricter state rules. New York and Vermont do not allow age rating.
- **Family coverage:** compare premiums and employer allowances for each covered family member rather than applying a single-person average to a household.
- **Medical exposure:** obtain the actual deductible and out-of-pocket limit for each plan under consideration. Low premiums do not establish low total cost.
- **Networks:** HMOs and EPOs generally restrict routine out-of-network benefits. Emergency protections, authorized exceptions and the policy’s service area need separate review.
- **Subsidies:** an affordable ICHRA offer can block premium tax credits even when the employee prefers another plan. Check the household’s position before enrollment.

_Chart: CMS 2026 federal-platform plan-county offerings: HMO 44,390 (46%), EPO 32,100 (33%), PPO 14,174 (15%), POS 6,418 (7%), out of 97,082 rows. Rounded shares total 101%; these are not unique nationwide plan or enrollment shares._

**One $600 allowance, three ages (illustrative only)**

Assume one individual-market plan costs $600 monthly at age 21 in a state using the federal default age curve. Apply factors 1.000 at 21, 1.278 at 40 and 3.000 at 64. Each person gets a $600 allowance. These are assumed prices, not quotes or national averages, and no tax credit is assumed.

- Age 21: $600 × 1.000: $600 premium; $0 monthly gap
- Age 40: $600 × 1.278: $766.80 premium; $166.80 monthly gap
- Age 64: $600 × 3.000: $1,800 premium; $1,200 monthly gap
- Age 64: $1,200 × 12: $14,400 annual premium gap

A flat allowance creates different employee costs under these assumptions. Age-adjusted allowances can reduce the difference within the ICHRA rules. Group-plan employee contributions also depend on employer policy; they are not legally guaranteed to be identical for all ages or classes.

The chart’s rounded 46% HMO, 33% EPO, 15% PPO and 7% POS shares match plan-county listings in CMS’s 2026 federal-platform Marketplace landscape file, not distinct nationwide plans or enrollment. The same plan appears in multiple counties. Deduplicating that file by standard component plan ID gives about 52% HMO, 27% EPO, 10% PPO and 10% POS. Rounding can prevent totals from equaling 100%. HMO and EPO coverage generally restricts routine out-of-network care, but emergency services and other legal or contractual exceptions require separate review.

## The premium tax credit trap

This is the part most employees never hear about. When an employer offers an ICHRA, the employee's eligibility for marketplace subsidies depends on whether the offer counts as **affordable**:

- **Affordable ICHRA:** the employee can't get a premium tax credit for any month the ICHRA is offered, whether or not they use it.
- **Unaffordable ICHRA:** the employee can opt out and claim the premium tax credit instead, if their income qualifies. If they accept the ICHRA, they lose the credit.
- **The test:** the ICHRA is affordable if the cost of the lowest-cost silver plan for self-only coverage, minus the monthly allowance, is no more than 9.96% of household income for 2026 plan years (9.02% in 2025).

So a lower-income employee can end up worse off than if the company offered nothing at all. Without any offer, they might qualify for a large subsidy. With a modest but "affordable" ICHRA, the subsidy disappears and the allowance may cover less than the credit would have. The affordability test also looks only at self-only coverage, so a family can lose subsidies while the allowance covers a fraction of a family plan. You can check the employer side with our [ACA affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator).

## Who ICHRA really works for

An ICHRA lets the employer choose its allowance, while employees choose qualifying individual coverage. Platform charges are separate. Thatch’s direct Standard pricing lists $45 per enrolled employee monthly plus a $50 monthly compliance charge for employers with 1–49 eligible employees. That published price is a vendor-specific fee, not evidence of an industry margin or a typical ICHRA cost.

ICHRA can work across ages and family types when allowances are sufficient and local coverage fits. It may also simplify purchasing for a dispersed workforce. Conversely, an inadequate allowance or missing provider can make it a poor fit for an employee of any age. I would compare actual household outcomes rather than treating young workers as automatic winners and older workers as automatic losers.

**When ICHRA is a fair choice, and when it isn't**

| Your team | ICHRA is a reasonable fit if… | Look elsewhere if… |
| --- | --- | --- |
| Mostly under 35, single | Your local marketplace has several insurers and broad plans | Your area has one or two insurers with narrow HMOs |
| Spread across many states | No group carrier has a usable network everywhere you hire | A national PPO covers where your people live |
| Several parents and older staff | You fund age-scaled and family allowances generously | The budget only stretches to a flat single allowance |
| Lower-wage staff | The allowance is clearly larger than the subsidy they'd lose | An "affordable" offer would wipe out their tax credits |
| Recruiting senior hires | Candidates already buy their own coverage | Candidates compare you with big-company PPO plans |

## Red flags in an ICHRA sales pitch

ICHRA isn't a scam, but some of the ways it's sold are misleading. Watch for these:

- **"Employees get more choice and better coverage for less."** More choice, yes. Better coverage for less only holds if the allowance is generous and the local market is healthy. Ask to see actual plan prices for your oldest employee and your largest family.
- **Savings shown against your current group renewal only.** The employer saves; the comparison rarely shows what employees now pay out of pocket.
- **No mention of the premium tax credit rules.** If the vendor can't explain affordability, they haven't modeled your lower-income staff.
- **Allowances that don't move with premiums.** If premiums rise 26% and the allowance rises 3%, your team just took a pay cut.
- **Fees quoted per enrolled employee without the minimums.** Read the pricing page for platform fees, minimums and what large-employer compliance costs.

1. **Price your three hardest cases** Your oldest employee, your largest family and your lowest-paid employee. Get real marketplace quotes for each in their ZIP code.
2. **Compare total cost to each person** Annual premium gap plus expected cost sharing, or the out-of-pocket maximum for a high-use scenario, against what they pay on your group plan today.
3. **Check networks** Make sure the hospital and doctors your team actually uses are in at least one plan at each price point.
4. **Model the tax credit** For anyone who might qualify for subsidies, compare the allowance with the credit they'd lose.
5. **Decide who helps employees** Someone has to answer "is this doctor in network?" and "why was this denied?" Ask whether the platform does that or only reimburses.

**Compare the employee impact before choosing an ICHRA**

Use actual employee locations and family tiers to compare the allowance with a group-plan proposal. Start a quote and create an account, then complete the census before deciding which option fits.

[Compare coverage for my team](https://www.getprescience.com/quote)

[Review ICHRA versus group coverage](https://www.getprescience.com/compare/ichra-alternative)

## Support matters after enrollment

I want a benefits proposal to say who helps after the plan is selected. Ask who checks provider participation, helps with enrollment errors and explains how to appeal a denied claim. The individual insurer still makes coverage decisions under its contract; an HRA administrator cannot promise approval. A named support channel and an escalation procedure make the practical responsibility clear without assuming employees must manage everything alone.

If you want to go deeper on the switch itself, read [Should we switch from a group plan to ICHRA?](https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra) and [Why are insurers pushing ICHRA?](https://www.getprescience.com/guides/why-are-insurers-pushing-ichra)

## If your employer just moved you to ICHRA

1. **Read the notice.** It states the benefit terms, substantiation and opt-out procedures, and explains the tax-credit interaction. Use the stated allowance and household information to check your own affordability; the notice does not determine your personal tax-credit eligibility.
2. **Check your income against the subsidy rules.** If the offer is unaffordable for you, opting out and claiming the premium tax credit may be worth more than the allowance.
3. **Shop on networks first, price second.** Search for your doctors and nearest hospital in each plan's directory before comparing premiums.
4. **Price the whole year.** Add 12 months of premium gap to the applicable out-of-pocket maximum for a high-use comparison. Do not add the deductible again because covered in-network deductible payments count toward that maximum. A cheap bronze plan can cost more than a gold plan if you expect care.
5. **Watch the enrollment window.** Gaining an ICHRA (or losing a group plan) opens a special enrollment period, usually 60 days, so you don't have to wait for open enrollment.
6. **Keep receipts and proof of coverage.** Reimbursement depends on showing you're enrolled in individual coverage.

## A better way to cap your costs

If what you want from ICHRA is a predictable cost, you can get that from a group plan too:

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** If what you wanted from ICHRA was a predictable cost, Diamond gives you one monthly cost set in your quote without moving your team to the individual market.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Test affordability separately from the preferred plan

For an illustrative employee with $48,000 annual household income, the 2026 threshold is $48,000 × 9.96% ÷ 12 = $398.40 monthly. If the applicable lowest-cost silver self-only premium is an assumed $800 and the monthly ICHRA amount used in the test is $450, the required contribution is $350. That is affordable under these assumptions even if the employee prefers a more expensive plan. This calculation is not a quote or an individual tax determination.

Employer safe harbors used to avoid shared-responsibility penalties and the employee’s household-income test serve different purposes. A payroll-based safe harbor does not establish the household’s premium-tax-credit result. Related individuals offered ICHRA coverage also need review under the ICHRA rules, which differ from the family affordability test for a traditional employer plan. If the employee declines an unaffordable ICHRA, tax-credit eligibility still depends on the other Marketplace requirements.

Before implementation, record the applicable class, allowance, eligible relatives, notice date, coverage substantiation and opt-out procedure. Confirm the special enrollment deadline before ending existing coverage. For employees already receiving advance credits, use the Marketplace process to report the new offer promptly. The provider’s sales estimate is not a substitute for the Marketplace determination or annual tax reconciliation.

## What the published averages actually measure

PeopleKeep’s $583 monthly allowance figure describes single employees at businesses with 5–49 employees in its 2025 customer report. It is not a national allowance standard or a promise of available coverage. KFF’s October 2025 analysis estimated a 26% average increase in gross Marketplace premiums for 2026. Gross premiums are not the same as households’ payments after tax credits, and individual changes differ. Compare the final local premium, employer allowance and any tax-credit eligibility for each employee.

KFF’s later analysis put the average deductible across selected Marketplace coverage at $3,786 for 2026, versus $2,759 in 2025. Enrollment moving between metal levels affected that average. It does not show what a fixed plan’s deductible did or predict an employee’s spending. Network types also differ by market: CMS public-use files cover federal-platform Marketplace states, not every US individual plan. A national-looking network chart cannot substitute for checking the exact local plan, providers and out-of-network terms.

## Frequently asked questions

**Is ICHRA legal?**

Yes. Federal rules have allowed individual coverage HRAs since 2020. The question isn't legality; it's whether the allowance is enough for your employees to buy a good plan.

**What is the average ICHRA allowance?**

There is no federal minimum allowance that guarantees a good employee outcome. Employers choose the benefit. Evaluate current prices by age, location and family tier, together with applicable affordability rules.

**Why are ICHRA plans more expensive for employees in 2026?**

Costs depend on the employee’s current plan, location and allowance. A premium increase or a smaller employer benefit raises the employee’s gap; changes in subsidy eligibility can matter too. Use actual plan-year prices rather than a national estimate.

**Who benefits most from ICHRA?**

Employers control the allowance. Employees can benefit when available plans and the allowance meet their needs. Age, family size, local networks and subsidy eligibility all matter; no demographic group is an automatic winner.

**Can employees get marketplace subsidies with an ICHRA?**

Only if the ICHRA is unaffordable and they opt out of it. For 2026 plan years, an ICHRA is affordable if the lowest-cost silver self-only plan minus the allowance is no more than 9.96% of household income. If it's affordable, no subsidy.

**Can an employer give older employees a bigger ICHRA allowance?**

Yes. Allowances can rise with age, up to three times the amount for the youngest employees, and with family size. They must otherwise be the same for everyone in a class.

**Can I offer both a group plan and ICHRA?**

Yes, but not to the same class of employees. For example, a group plan for full-time staff and ICHRA for part-time staff, subject to minimum class-size rules.

**How much do ICHRA platforms charge?**

Prescience Choice charges $20 per enrolled employee monthly, with no setup or platform fee. Thatch Standard lists $45 per enrolled employee monthly plus $50 monthly for employers with 1–49 eligible employees. Compare the written scope, minimums and fees of any platform you consider.

**What's the alternative to ICHRA?**

A group plan with a fixed employer cost. Prescience quotes one monthly contribution, usually 10–20% below comparable fully insured coverage, with no admin fees and an effective $0 deductible for your team.

## Sources

- [HealthCare.gov, individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [Treasury, Labor and HHS, 2019 HRA final rules](https://www.irs.gov/irb/2019-28_IRB)
- [CMS, ICHRA model notice](https://www.cms.gov/files/document/cms-10704-hra-model-notice.pdf)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [CMS, market rating reforms and state variations](https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/state-rating)
- [CMS, federal default and state-specific age curves](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/downloads/statespecagecrv053117.pdf)
- [HealthCare.gov, plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)
- [Thatch, published pricing](https://thatch.com/pricing)
- [DOL, ACA implementation FAQs Part 71, 2026 cost-sharing limits](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-71)
- [KFF original analysis, 2026 Marketplace enrollment and deductibles](https://www.kff.org/affordable-care-act/what-we-know-so-far-about-2026-aca-marketplace-enrollment-premiums-and-deductibles/)
- [CMS, Marketplace public-use files and geographic scope](https://www.healthcare.gov/health-plan-information/)
- [PeopleKeep, original 2025 ICHRA customer report](https://www.peoplekeep.com/offers/ichra-report)
- [KFF, estimated 2026 gross Marketplace premium increases](https://www.kff.org/quick-insights/aca-insurers-are-raising-premiums-by-an-estimated-26-but-most-enrollees-could-see-sharper-increases-in-what-they-pay/)
- [CMS, 2026 individual-market medical landscape data (plan-county listings)](https://data.healthcare.gov/datafile/py2026/individual_market_medical.zip)

# Is Gusto health insurance good quality?

Source: https://www.getprescience.com/guides/is-gusto-health-insurance-good
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-07
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Is Gusto health insurance good quality?." Prescience, October 28, 2026. https://www.getprescience.com/guides/is-gusto-health-insurance-good

Gusto doesn't make health insurance. It's a licensed broker that sells standard small group plans from carriers like Blue Shield, Aetna, Kaiser and United inside its payroll dashboard. So the quality of "Gusto health insurance" is the quality of whichever carrier plan you pick, at the carrier's price. Gusto makes buying easy; it doesn't make the plan cheaper or better.

- **What Gusto is:** Payroll company and licensed broker
- **Who insures you:** The carrier you choose
- **Extra fee when Gusto is broker:** None; paid via carrier commission
- **Fee with an outside broker:** $6 per eligible employee/month

## How Gusto health insurance works

Gusto acts as the insurance broker for coverage it sells and provides enrollment and payroll administration. It says Gusto-brokered health insurance administration has no additional fee beyond premiums. For an outside broker, its Help Center lists $6 per eligible employee per month on Simple and Plus. Premium customers already on that tier as of October 1, 2026 are described as grandfathered into free integration; customers joining on or after that date are charged $6. The wording overlaps on October 1 itself, so confirm that boundary in writing.

Gusto says it supports health benefits in all 50 states and Washington, D.C., with 30+ carriers, though the carriers and plans you can pick vary by state. Plans are issued by those carriers; Gusto doesn't underwrite or guarantee coverage.

Ask Gusto to disclose the compensation and services attached to your proposal. A broker can help compare plans, but the carrier’s coverage documents govern benefits and claims. Do not infer that a separate intermediary participates in your policy without seeing the relevant disclosures.

**What Gusto charges around health insurance (October 2026, from Gusto's pages)**

| Item | Simple | Plus | Premium |
| --- | --- | --- | --- |
| Payroll base price | $49/month | $80/month | $180/month |
| Per person | $6/month | $12/month | $22/month |
| Health plan bought with Gusto as broker | Premium only | Premium only | Premium only |
| Connect a plan from your own broker | $6 per eligible employee/month | $6 per eligible employee/month | $6 unless grandfathered; confirm October 1, 2026 boundary |

HSA and FSA administration, ACA reporting for larger employers and COBRA administration are separate add-ons with their own fees. Check the current list on Gusto's pricing page before you budget.

## So is the insurance good?

For the same ACA-compliant small-group product, census and effective date, carrier rating rules apply regardless of the broker. Another broker may offer different products or services. Match the exact plan identifier before calling two quotes equivalent.

- **Network:** check the actual provider directory. PPOs usually allow out-of-network benefits, while HMOs and EPOs generally restrict routine care to their networks. A network label does not establish its size or price.
- **Deductible and out-of-pocket maximum:** what your team actually pays when they get care.
- **Metal level:** bronze, silver, gold and platinum change premiums and cost-sharing.
- **Prescription tiers:** a plan can look rich on paper and still put common drugs behind a deductible.
- **HSA eligibility:** high-deductible plans let employees save tax-free, but they pay full price for most care until the deductible is met.

What Gusto can't do is change the economics. You're still buying a fully insured small group plan, so you pay the carrier's rates, and the carrier keeps whatever it doesn't spend on claims. Under the ACA, small group prices can vary only by age, tobacco use, location and family size. Your team's health doesn't move the price, and a healthy team doesn't get a discount for low claims. Carriers must spend at least 80% of small group premiums on care and quality improvement; the rest covers administration, commissions and profit.

## What a 12-person team pays through Gusto

Founders sometimes compare Gusto's software fee with a PEO's fee and conclude Gusto health insurance is cheap. The software fee is small. The premium is the cost.

**12 employees on Gusto Plus, 10 enrolled in single coverage (illustrative)**

Assumes the KFF 2025 average single premium at firms with 10–199 workers ($9,211 a year, about $768 a month), the employer paying 80% of it, and Gusto acting as broker. Real premiums depend on your state, ages and plan.

- Gusto Plus payroll: $80 + 12 × $12: $224/month
- Health admin fee with Gusto as broker: $0
- Premiums: 10 enrolled × $768: $7,680/month
- Employer share (80%): $6,144/month
- Employee share (20%): $154/month each
- Same plan via an outside broker, connected to Gusto: +$72/month (12 × $6)

About $73,700 a year in employer premiums against about $2,700 a year in payroll software. Whatever you decide about Gusto, the plan's price and design drive almost all of the cost, and that price is the carrier's, not Gusto's.

## Where Gusto is strong, and where it isn't

**Gusto health insurance, fairly**

| Strengths | Limits |
| --- | --- |
| Benefits, payroll deductions and new-hire enrollment live in one place | Prices are the carriers' filed small group rates; Gusto can't negotiate them |
| No extra admin fee when Gusto is your broker | Commission is built into the premium either way |
| Licensed benefits advisors and a broad carrier list in most states | Carrier and plan choice varies by state, and some local plans may not be offered |
| Works for very small teams if carriers' participation rules are met | Renewals follow the carrier's annual rate changes; Gusto can only re-shop |
| ICHRA through partners such as Thatch | Confirm the current partner, fee and administration scope if you want an ICHRA or QSEHRA. |

Ask which claim and billing questions Gusto’s advisors will help escalate and which must go directly to the insurer. The carrier decides coverage and prior authorization under the policy. Obtain the service scope and response channels before buying rather than assuming brokerage assistance stops at enrollment.

## What happens at renewal

Small group plans renew once a year. The carrier sets the new rates from its filed rate changes and your team's new ages, and Gusto passes them on with a renewal notice. KFF's 2025 survey found average employer premiums rose about 5% for single coverage and 6% for family coverage in one year, and family premiums rose 26% over five years. A cheap first year doesn't protect you from that.

- **Guaranteed issue and renewal.** A small group carrier can't refuse your group or drop it because someone got sick.
- **Age steps.** Age can affect premiums where state law permits it, but not every birthday changes the factor. New York and Vermont prohibit age rating in these markets. Renewal comparisons must separate rate changes from census and enrollment changes.
- **Re-shopping.** Request other available carrier plans at renewal. Review cancellation, participation and enrollment terms before switching; do not assume every contract can end without a charge.
- **Mid-year changes.** Changing carriers mid-year is possible, but deductibles usually restart on the new plan unless the new carrier gives credit. Read [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year).

## Questions to ask before you buy through Gusto

1. Which carriers and plans are available in our state and county, and which are missing compared with an independent broker?
2. What are the carrier's participation and employer contribution minimums for a group our size?
3. Are our main hospitals and our employees' doctors in network? Check each plan's provider directory yourself.
4. What is the out-of-pocket maximum, not just the deductible, for single and family coverage?
5. How are specialty drugs and common prescriptions covered before the deductible?
6. Who handles COBRA or state continuation for people who leave, and what does it cost?
7. What did this carrier's renewals look like for similar groups last year?

## Your options if you're on Gusto payroll

**Ways to offer health insurance while running payroll on Gusto**

| Option | What you get | Good fit when |
| --- | --- | --- |
| Gusto as broker | Carrier small group plan, enrollment in Gusto, no admin fee | You want a standard plan quickly and price isn't the main issue |
| Outside broker, connected to Gusto | Same carrier plans, a broker who can shop more widely, $6 per eligible employee on Plus | You want a local broker's advice or a carrier Gusto doesn't offer in your state |
| ICHRA through a Gusto partner | A monthly allowance employees spend on individual plans | Your team is young, single and spread across states. Read [Is ICHRA a scam?](https://www.getprescience.com/guides/is-ichra-a-scam) first |
| A PEO | The PEO's large group plan, but you move payroll to the PEO too | You want HR outsourced as well as benefits |
| Prescience | A company health plan while keeping your current payroll provider | You want a richer plan at a lower fixed cost and to keep Gusto payroll |

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Looking at the ICHRA row? Choice is $20 per enrolled employee per month, and it works alongside Gusto payroll.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## My take

**When Gusto health insurance makes sense**

| Your situation | My take |
| --- | --- |
| Already on Gusto payroll, want a standard plan fast | Gusto is a convenient way to buy it |
| Want lower cost than carrier rates | Gusto can't help; the price is the carrier's |
| Want a richer plan for recruiting | Look at a Prescience plan |
| Want to keep Gusto payroll but change insurance | Compare a new health plan while keeping your payroll provider |

Gusto is good at what it is: a payroll company that makes buying a standard plan painless. If a standard carrier plan at the carrier's price is what you want, buying it through Gusto is reasonable. If you want something better than a standard plan, the answer won't come from the payroll dashboard.

## How to change insurance and keep Gusto payroll

1. **Pull your current plan details** From Gusto, download plan summaries, the employee census and your renewal date. Note any carrier notice requirement for cancelling.
2. **Get quotes 60–90 days before your target start** Send the census to the new provider. Ask for the total monthly cost, the employee contribution by tier and the network.
3. **Pick a start date on the 1st of a month** Set the new plan to start the day after the old one ends so nobody has a gap.
4. **Enroll employees and set deductions** Run enrollment, then add the new plan's deductions in Gusto (or let the new provider's integration do it) before the first payroll on the new plan.
5. **Cancel the old plan in writing** Cancel through Gusto or the carrier with the exact end date, and confirm the final premium bill.

**Keep Gusto payroll and compare the insurance separately**

Use your employee census and current contribution sheet for the comparison. Start a quote, create your account and review the census before confirming replacement coverage.

[Compare my Gusto health plan](https://www.getprescience.com/quote)

[Follow the Gusto census export guide](https://www.getprescience.com/integrations/gusto)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Keep Gusto payroll, upgrade the plan

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Keep running payroll on Gusto and swap the carrier plan for Diamond: deductions keep flowing through the same dashboard.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Make the brokerage decision at renewal

I would keep Gusto as broker when its available plans meet the team’s needs and its support is worth keeping. I would consider an outside broker if the missing carrier, specialized advice or continuity service justifies the integration charge. Ask both to price the same effective date and enrollment tiers. A lower software fee is not evidence that one health plan covers more care.

Before changing the broker of record, confirm whether the insurer, network and plan remain the same. A broker change and a coverage change are different transactions. If only the broker changes, ask about commission timing, service responsibility and system access. If the policy changes, also verify enrollment, prior authorizations, deductible credits and termination dates. Keep a written record of who will answer employee questions during the handoff.

## Frequently asked questions

**Does Gusto provide its own health insurance?**

No. Gusto is a licensed broker that sells small group plans from carriers such as Blue Shield, Aetna, Kaiser and United. The carrier insures your team.

**Does Gusto charge for health insurance?**

Gusto-brokered administration has no separate health administration fee beyond premiums. External broker integration is $6 per eligible employee per month on Simple and Plus and for new Premium customers from October 2026, subject to the Help Center’s grandfathering exception. Confirm your contract, especially if you joined Premium on October 1.

**Is Gusto health insurance cheaper?**

Not usually. Small group plans are sold at the carrier's filed rates whichever broker you use. Gusto makes buying easier, not cheaper.

**Which states does Gusto offer health insurance in?**

Gusto says it supports health benefits in all 50 states and Washington, D.C. The carriers and plans available differ by state.

**Does Gusto offer ICHRA or QSEHRA?**

Gusto lists health reimbursement options through partners. Confirm the current ICHRA or QSEHRA administrator, eligibility rules and separate fees before enrollment.

**Is Gusto's health insurance good for a two-person company?**

It can be, if carriers in your state accept groups that small and you meet their participation and contribution rules. The plan quality is the carrier's either way.

**Can I keep Gusto payroll and use Prescience for health insurance?**

Yes. Prescience lets you keep your current payroll provider. Confirm the deduction setup before enrollment.

**Who do employees call with claims questions on a Gusto plan?**

The carrier makes claims and authorization decisions. Ask Gusto what help its advisors provide with escalation, enrollment errors and billing, and keep both support contacts available.

## Sources

- [Gusto, health benefits](https://gusto.com/product/benefits/health)
- [Gusto, published pricing](https://gusto.com/product/pricing)
- [Gusto Help Center, broker integration and October 2026 pricing exception](https://support.gusto.com/article/220623140746493/broker-integration-connect-existing-insurance-plans-to-gusto)
- [CMS, market rating reforms and state variations](https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/state-rating)
- [CMS, medical loss ratio rules](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [DOL, plan information and disclosure](https://www.dol.gov/general/topic/health-plans/planinformation)

# Startup deals for health insurance

Source: https://www.getprescience.com/guides/startup-health-insurance-deals
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-11
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Startup deals for health insurance." Prescience, October 28, 2026. https://www.getprescience.com/guides/startup-health-insurance-deals

The useful health-insurance deals are the ones that reduce total cost without hiding employee expenses or future obligations. I would check documented partner offers, tax-credit eligibility and pre-tax benefits, then compare complete quotes. A first-year discount is only one line in that calculation.

- **Investor perks:** Check your fund's perks page
- **Small business tax credit:** Up to 50% of premiums
- **Prescience admin fees:** $0
- **Minimum group size:** 2 employees

## Where to look for savings

**Where startups actually save on health benefits**

| Deal | Who qualifies | What it's worth |
| --- | --- | --- |
| Evaluate renewal terms | Anyone comparing proposals | Model several renewal scenarios; future rates are not guaranteed |
| Compare administration fees | Companies buying bundled services | Use published or quoted prices and include replacement services |
| Section 125 premium plan | Any employer with employee premium contributions | Up to 7.65% employer FICA on eligible pre-tax dollars below the Social Security wage base |
| Employer HSA contributions | Teams on an HSA-eligible plan | Tax-free to employees, no payroll tax for you |
| Small Business Health Care Tax Credit | Fewer than 25 FTEs, low average wages, SHOP plan | Up to 50% of employer premiums for two years |
| R&D payroll tax credit | Young startups with under $5 million in receipts doing research | Up to $500,000 a year against payroll taxes (frees cash, not a health benefit) |
| Investor perks | Portfolio companies of funds that negotiate offers | Varies; check the terms against a normal quote |

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** For a very small team, the cheapest real deal is often a fixed allowance: Choice is $20 per enrolled employee per month, and you decide what the company spends.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## 1. Check your investor's perks page

Many venture firms negotiate benefits offers for their portfolio companies. Check your investor's perks page or ask your platform team before you buy, and tell any provider you talk to who backs you.

Treat a perk like any other quote. A discount on a PEO's admin fee doesn't change what the PEO charges for the health plan itself, and a free first month doesn't help if the renewal jumps. Ask for the full monthly cost per employee, what's included and how year-two pricing works, then compare it with at least one quote that isn't a perk.

## 2. Don't fall for teaser rates

I would treat a low first-year rate as a question to investigate, not proof of a teaser. Ask how long it is guaranteed, whether a discount expires, and which factors change the renewal. Compare several future-rate scenarios instead of assuming any vendor routinely doubles its premiums. Keep the scenarios separate from actual quotes so a planning exercise does not become an unsupported claim about a competitor.

**Year-one savings vs. three-year cost, 10 employees (illustrative)**

Illustrative only, with invented rates for ten enrolled employees. Offer A starts at $575 monthly per person, then rises to $850 and $1,100. Offer B starts at $700 with assumed 7% annual increases. These are not vendor quotes, typical rates or a forecast. Medical premiums only; fees and enrollment changes excluded.

- Offer A, year 1: 10 × $575 × 12: $69,000
- Offer A, year 2: 10 × $850 × 12: $102,000
- Offer A, year 3: 10 × $1,100 × 12: $132,000
- Offer A, three-year total: $303,000
- Offer B, years 1–3 ($700, $749, $801.43): $270,051.60 total

Offer A is $15,000 cheaper in year one but $32,948.40 more expensive over three years under these assumptions. Neither future path is guaranteed. Repeat the calculation with your written quote, a moderate increase and a stress case, then include fees and employer contribution policy.

## 3. The Small Business Health Care Tax Credit

If you have fewer than 25 full-time equivalent employees with average wages below an IRS limit that's adjusted each year, pay at least half of employee-only premiums and buy a plan through the SHOP marketplace, you may get a tax credit of up to 50% of what you pay in premiums (35% for tax-exempt employers), for two consecutive years. Check wages and ownership exclusions before estimating a credit; being a startup does not itself create eligibility.

**Small Business Health Care Tax Credit limits for 2026**

| Test | Full credit | Reduced credit | No credit |
| --- | --- | --- | --- |
| Full-time equivalents (FTEs) | 10 or fewer | 11–24 | 25 or more |
| Average annual wages per FTE | $34,100 or less | $34,100–$68,200 | $68,200 or more |
| Employer share of employee-only premium | At least 50% | At least 50% | Under 50% |

The credit period is two consecutive taxable years beginning with the first qualifying claim. Owners’ premiums may be excluded. Have the accountant evaluate actual qualifying employee premiums, carryback or carryforward rules and the deduction adjustment before selecting the claim year.

## Tax credit mistakes I see founders make

- **Count hours correctly.** Use the IRS credit-specific FTE method, generally capped at 2,080 hours per worker, with applicable owner and seasonal-worker exclusions. Do not substitute the ACA employer-mandate calculation for the credit calculation.
- **Apply ownership exclusions accurately.** Exclude the owners and specified relatives covered by the IRS rules; do not assume every minority shareholder is excluded.
- **Buying outside SHOP.** A plan bought outside a SHOP marketplace doesn't qualify, unless a limited IRS exception applies. Ask your broker to quote SHOP plans specifically.
- **Paying 50% of family premiums but less of employee-only.** The 50% test is measured on employee-only coverage.
- **Wasting the two years.** The credit lasts two consecutive tax years. Claiming a tiny credit in a year with one employee can use up the window.

## 4. Use the tax rules you already have

- **Employer contributions are deductible** and tax-free to employees.
- **Section 125 plans** let employees pay their share of premiums pre-tax. You need a written plan document; payroll providers and benefit vendors often supply one for little or nothing.
- **HSAs** let employer money for medical costs go in tax-free and stay with the employee. For 2026 the limits are $4,400 self-only and $8,750 family. See [What is an HSA?](https://www.getprescience.com/guides/what-is-an-hsa)
- **New for 2026:** qualifying individual-market bronze and catastrophic plans receive special HSA treatment, including qualifying off-Exchange coverage under IRS Notice 2026-5. This does not cover every employer bronze plan. Certain defined direct primary care arrangements no longer prevent contributions, subject to monthly fee limits. Permitted telehealth before the deductible is permanently allowed for plan years beginning in 2025 or later.

**What a Section 125 plan saves a 10-person team (illustrative)**

Assumes 10 employees each contribute $250 a month to premiums, everyone is under the Social Security wage base, and employees are in the 22% federal bracket. State income tax excluded.

- Employee premium contributions: 10 × $250 × 12: $30,000/year
- Employer payroll tax saved (7.65%): $2,295/year
- Employee payroll tax saved (7.65%): $2,295/year
- Employee federal income tax saved (22%): $6,600/year

About $11,200 a year stays with the company and the team instead of going to taxes, for a plan document and a payroll setting. Note: more-than-2% owners of an S corporation can't pay premiums pre-tax through a Section 125 plan.

## 5. Free up cash with the R&D payroll tax credit

This is a separate tax incentive, not a health-insurance discount. A qualified small business with less than $5 million in current-year gross receipts and no gross receipts before the five-tax-year period ending with that year may elect up to $500,000 of research credit against payroll tax. Qualifying research and calculation rules apply; the election is generally limited to five tax years.

- Elect it on Form 6765 with your original, timely filed income tax return.
- The credit first offsets employer Social Security tax up to $250,000 per quarter, then employer Medicare tax; unused amounts carry forward under the rules.
- It starts in the first calendar quarter after you file the return, through Form 8974 with your quarterly Form 941.

## 6. Stop paying admin fees

Use your written fee schedule. As a purely illustrative calculation, a $100 monthly service fee for each of 15 employees is $18,000 a year. That fee may buy payroll or HR work you would otherwise need to replace. Prescience charges no admin fees for its health-plan offering, but this does not make every service in a PEO bundle unnecessary.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** No admin fees and no teaser rate: your monthly cost for the plan year is set in your quote before the plan starts.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## How to collect every deal you qualify for

1. **Build a census (day 1)** List each employee's age, ZIP code and coverage tier (single, couple, family). Every quote starts here, and it lets you compare offers on the same people.
2. **Run the tax credit test (day 1)** Count FTEs (2,080 hours each, owners excluded) and average wages. If you're under 25 FTEs and under $68,200 average wages for 2026, ask a broker for SHOP quotes and have your accountant run Form 8941.
3. **Collect three quotes (weeks 1–3)** One from your investor's perks page if there is one, one carrier plan through a broker or your payroll provider, and one alternative such as Prescience. Ask each for monthly cost by tier and the renewal method.
4. **Compare two-year cost (week 3)** Premium plus fees, minus any tax credit, for year one and a realistic year two. Add employer HSA money if the plan is HSA-eligible.
5. **Turn on the tax plumbing (week 4)** Adopt a Section 125 plan document, set premium deductions pre-tax in payroll and set up employer HSA contributions if you're giving them.
6. **File for the credits (tax time)** Form 8941 for the health care credit and Form 6765 for the R&D payroll election, both with your return.

**Compare the whole benefit budget after the discounts**

Keep one-time discounts and recurring costs on separate lines. Start a quote and complete your census after account creation so the written proposal can be compared with the offers you have collected.

[Compare my full benefits cost](https://www.getprescience.com/quote)

[Estimate the recurring employer cost](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

## "Deals" that aren't

- **Health-sharing ministries and discount cards.** They aren't insurance, may not pay claims and don't meet ACA rules. Do not describe them as equivalent to comprehensive insurance.
- **Skipping coverage until you're bigger.** It saves money until you try to hire someone with a family. See [startup benefits package](https://www.getprescience.com/guides/startup-benefits-package).
- **High deductibles without available cash.** Compare the deductible, premiums, employer account contributions and covered services. Ask whether employees can handle bills early in the year rather than assuming every high-deductible option has the same value.
- **Stipends.** A taxable cash stipend costs you payroll tax and buys employees less. Read [health insurance stipends](https://www.getprescience.com/guides/health-insurance-stipend) before choosing one.

## Budget the credit after the eligibility work

A credit is not the same as cash available when the premium invoice arrives. For the small business health care tax credit, have the accountant calculate the allowable premiums, both FTE and wage reductions, and the effect on the premium deduction. Tax-exempt employers have a different percentage and refund limitations. If the company cannot use a general business credit immediately, timing and carryover rules can change its practical value.

For an investor offer, save the written eligibility and expiration terms with the ordinary quote. Confirm whether the discount applies to payroll, platform fees or medical premiums. Model the total after the promotional period ends. If the proposal does not disclose future prices, label those years as assumptions, not savings. The best choice may be the regular-rate plan if its coverage, support and contract terms fit better.

## Frequently asked questions

**Are there health insurance discounts for startups?**

Not coupon-style discounts, but there are real savings: investor perks, the Small Business Health Care Tax Credit for qualifying small employers, pre-tax premium and HSA rules, and avoiding admin fees.

**Who qualifies for the Small Business Health Care Tax Credit?**

Employers with fewer than 25 full-time equivalent employees, average wages under the IRS limit for the year ($68,200 for 2026, with the full credit at $34,100 or less), at least 50% of employee-only premiums paid by the employer and a plan bought through SHOP. The credit is up to 50% of premiums for two consecutive years.

**What is the cheapest health insurance for a startup?**

The cheapest premium isn't always the cheapest plan once fees and renewals are included. Compare total annual cost over two years. Prescience quotes are usually 10–20% below comparable fully insured coverage with no admin fees.

**Do VC firms offer health insurance deals?**

Some negotiate offers for their portfolio companies. Check your investor's perks page and compare the full cost, including renewals, against a regular quote.

**How much does a Section 125 plan save?**

For eligible employees below the Social Security wage base, qualified pre-tax premium deductions generally save 7.65% in employer FICA. Above the base, the Social Security component no longer applies. Owner exclusions and plan nondiscrimination rules also matter.

**What are the 2026 HSA limits?**

$4,400 for self-only coverage and $8,750 for family coverage, including employer contributions. People 55 and older can add $1,000.

**Can a startup use the R&D tax credit to pay for benefits?**

Indirectly. A qualified small business can apply up to $500,000 a year of its research credit against payroll taxes, which frees cash for benefits or anything else.

**Are PEO first-year rates a good deal?**

Sometimes. Compare the written discount, expiration date, renewal terms and all fees. There is no supported universal first-year or renewal rate for PEO customers in this guide; the numerical scenario uses invented assumptions.

## Sources

- [IRS, small business health care tax credit](https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace)
- [IRS Revenue Procedure 2025-32, 2026 tax adjustments](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS, research credit against payroll tax](https://www.irs.gov/credits-deductions/research-credit-against-payroll-tax-for-small-businesses)
- [IRS Publication 15-B (2026), fringe benefits and owner exceptions](https://www.irs.gov/publications/p15b)
- [IRS Publication 15 (2026), payroll taxes](https://www.irs.gov/publications/p15)
- [IRS Revenue Procedure 2025-19, 2026 HSA and HDHP limits](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS Notice 2026-5, new HSA eligibility rules](https://www.irs.gov/irb/2026-02_IRB)
- [Justworks, published pricing](https://www.justworks.com/pricing)

# How do I get free health insurance for my business?

Source: https://www.getprescience.com/guides/how-to-get-free-health-insurance-for-my-business
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-19
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How do I get free health insurance for my business?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-to-get-free-health-insurance-for-my-business

A business cannot make healthcare costless, but it can pay employees’ premiums and reduce medical expenses through its contribution policy. Eligible small employers may also claim a health-insurance tax credit. I would separate what the employee pays from what the company pays, then compare coverage and total cost.

- **Employee premium possible:** $0
- **Deductible your team sees:** Effective $0 with Prescience
- **Small business tax credit:** Up to 50% of premiums
- **Prescience admin fees:** $0

## Why "free" usually isn't

An average single employer plan cost $9,325 a year in 2025 and an average family plan $26,993, according to KFF. Those dollars come from somewhere: the employer, the employee's paycheck, a tax credit funded by taxpayers, or the employee at the point of care through a deductible. When something is advertised as free health insurance for a business, one of these is true:

- **The cost moved, not vanished.** A $0 premium plan with a $7,000 deductible still leaves potential medical bills; zero premium is not zero cost.
- **It may be a limited promotion.** Check its expiration and renewal terms.
- **It isn't insurance.** Discount cards and health-sharing programs can refuse to pay and don't follow ACA rules.
- **It's public coverage.** Medicaid and marketplace subsidies are real and valuable, but they belong to the employee, not the business, and an affordable minimum-value employer offer can affect Marketplace credits; Medicaid uses different eligibility rules.

So the real question has two parts: how do I make coverage feel free to my team, and how do I make it cost my business as little as possible? The tools are different.

## Make it free for employees

What feels free to an employee is two things: nothing comes out of their paycheck, and they don't hit a deductible when they need care. Both are design choices the employer makes.

- **Pay employee premiums.** The company can choose to cover the employee-only premium in full and set a separate dependent contribution. Budget every tier and possible enrollment changes.
- **Fund the deductible.** Employer HSA contributions can cover the deductible so employees don't feel it. The 2026 HSA limits are $4,400 self-only and $8,750 family.
- **Show copays up front** and explain exclusions, authorization rules and any services billed separately.
- **Use what's already free.** Non-grandfathered plans generally must cover applicable recommended preventive services with no deductible, copay or coinsurance in network. See [preventive care covered free](https://www.getprescience.com/guides/preventive-care-covered-free).

**What "free to employees" costs an 8-person team (illustrative)**

Assumes 8 employees on single coverage at the KFF 2025 small-firm average premium ($9,211 a year, about $768 a month) as an assumed illustrative price for an HSA-eligible plan, not a surveyed HDHP price, with the employer paying the full premium and putting $1,500 a year into each HSA.

- Premiums: 8 × $768 × 12: $73,728/year
- Employer HSA contributions: 8 × $1,500: $12,000/year
- Total employer cost: $85,728/year
- Per employee per month: About $893
- Employee paycheck deduction: $0

Employees have no premium payroll deduction and receive $1,500 for eligible medical expenses. Medical cost sharing may remain; the HSA deposit does not erase the plan deductible. The business still pays about $86,000 a year, which is why the next section matters.

## The Small Business Health Care Tax Credit, with 2026 numbers

This is the closest thing to government-paid premiums for a business. It covers up to 50% of the premiums you pay (35% for tax-exempt employers) for two consecutive tax years. To qualify you need all four:

1. **Fewer than 25 full-time equivalent employees.** An FTE is 2,080 hours a year, so two half-time workers are one FTE. Specified owners and family members are excluded under the IRS rules, including sole proprietors, partners, more-than-2% S corporation shareholders and more-than-5% other owners.
2. **Average annual wages under $68,200 for 2026.** The wage reduction begins above $34,100. The full credit also requires no more than 10 FTEs and satisfaction of the other limits.
3. **You pay at least 50% of employee-only premiums,** at a uniform percentage for everyone.
4. **The plan is bought through a SHOP marketplace,** usually with a broker's help, or you meet a limited IRS exception.

The credit also phases down between 10 and 25 FTEs, and the IRS caps the premiums that count at the average small group premium for the applicable rating area under the IRS calculation. You claim it on Form 8941, and your premium deduction drops by the amount of the credit.

**6-person team, $40,000 average wages (illustrative)**

Illustrative for a taxable employer: 6 qualifying FTEs, $40,000 average wages, no excluded owner premiums, and 75% of an assumed $9,211 annual single premium paid through SHOP. Assume the premium is below the applicable IRS average-premium cap, all other conditions are met and the credit is usable. Tax year 2026.

- Employer premiums: 6 × $9,211 × 75%: $41,450
- Maximum credit (50%): $20,725
- FTE reduction (10 or fewer FTEs): None
- Wage reduction: ($40,000 − $34,100) ÷ $34,100: About 17.302%, or $3,586
- Credit: About $17,139

The estimated credit covers about 41% of these employer premiums before the required reduction in the premium deduction. Actual Form 8941 rounding and tax circumstances control. A qualifying wage average of $150,000 exceeds the 2026 threshold and produces no credit.

## QSEHRA and ICHRA: tax-free money instead of a group plan

A properly established QSEHRA or ICHRA can provide tax-favored reimbursements under its rules. Eligibility, coverage substantiation and owner status matter. An unrestricted stipend or an informal premium payment is not automatically a compliant tax-free arrangement.

**The two main health reimbursement arrangements in 2026**

|  | QSEHRA | ICHRA |
| --- | --- | --- |
| Employer size | Eligible employer that is not an ACA applicable large employer | Any size |
| 2026 maximum | $6,450 single, $13,100 family per year | No cap |
| Can you also offer a group plan? | No | Yes, to a different class of employees |
| Effect on marketplace subsidies | Affordable QSEHRA blocks credits; otherwise permitted benefit generally reduces the credit | An affordable ICHRA ends the credit; an unaffordable one can be declined |
| Notice to employees | Generally 90 days ahead; newly eligible timing differs | Generally 90 days ahead; newly eligible and new-employer timing differs |

The practical test is whether the allowance buys suitable individual coverage locally. Premiums may vary by age and family enrollment under applicable state rules. A generous benefit in one county may leave a gap elsewhere. Compare actual plans and the subsidy interaction before choosing a QSEHRA or ICHRA.

## Medicaid and marketplace subsidies for your employees

For some employees, the most generous coverage available is public, and it really is close to free. A business with fewer than 50 full-time equivalents has no federal requirement to offer coverage, so this is a legal option. It belongs to the employee, though, and what you offer changes what they can get.

**What lower-income employees may qualify for in 2026**

| Program | Who qualifies | How an employer offer affects it |
| --- | --- | --- |
| Medicaid (adults) | Expansion-state adults generally qualify up to an effective 138% of poverty, subject to age, residency, immigration and state rules | Employees can enroll even if you offer a plan |
| CHIP (children) | Children in families above Medicaid limits, with income limits set by each state | Check current state eligibility and other-coverage rules; do not assume a waiting period |
| Marketplace premium tax credit | Generally 100%–400% of poverty plus other eligibility tests; 2026 Marketplace coverage uses 2025 guidelines | Affordable minimum-value offers can block credits; employee and family tests differ |

The enhanced federal premium tax credits applied through 2025. For 2026, evaluate eligibility under the current IRS rules and report household changes promptly. Medicaid and CHIP applications require a separate state determination; employees should not assume a Marketplace result settles eligibility for those programs.

> **When offering nothing can help employees:** A group offer can affect Marketplace credits if it is affordable and provides minimum value. Before choosing no offer, compare actual household eligibility and your legal duties. A QSEHRA also affects credits. Unrestricted taxable pay may help with expenses, but it is not insurance and does not guarantee eligibility for public coverage.

## Lower the cost for the business

- **Small Business Health Care Tax Credit:** up to 50% of premiums for two years if you qualify (above).
- **Tax deductions:** employer contributions are deductible, and employees can pay their share pre-tax under a Section 125 plan, which can also save applicable payroll taxes for eligible employees; 7.65% FICA applies below the Social Security wage base, not universally.
- **Compare service fees:** use the actual PEO or platform quote and include the value and replacement cost of HR and payroll services. Prescience charges no admin fees for its health-plan offering.
- **Compare against fully insured pricing:** in a fully insured plan, the carrier keeps what it doesn't spend on claims (the federal small-group medical loss ratio standard generally requires 80% for claims and quality improvement, using the statutory calculation and rebates). Prescience quotes are usually 10–20% below comparable fully insured coverage.
- **Compare two-year cost, not first-year price.** See [startup health insurance deals](https://www.getprescience.com/guides/startup-health-insurance-deals) for a worked example.

## Which route gets closest to free for your business

- **Choose a SHOP plan and the tax credit if** you have fewer than 25 FTEs, average wages well under $68,200 and can pay at least half of employee-only premiums. Eligibility and actual usable credit must be calculated before budgeting savings.
- **Choose a QSEHRA if** you have fewer than 50 FTEs, a tight budget and employees who are young or qualify for subsidies, and you can live with the 2026 caps of $6,450 single and $13,100 family.
- **Choose ICHRA if** your team is spread across states with healthy individual markets and you want a fixed allowance with no cap.
- **Choose a group plan with employer-paid premiums if** you're hiring salaried professionals, have parents on the team or want one network and one set of benefits for everyone.
- **Choose nothing (for now) only if** your team is tiny, mostly qualifies for Medicaid or large subsidies, and you can explain the trade-off to them honestly.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA route fits, Choice keeps it simple: you set the allowance, there's no cap like QSEHRA's, and administration is $20 per enrolled employee per month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## What not to do

- **Don't rely on discount cards or health-sharing programs** as a replacement for insurance. They aren't insurance, and your team won't have the same protection.
- **Don't ignore renewals.** A cheap first year that turns into a 40% renewal isn't free.
- **Don't drop coverage to save money** if you're hiring. Candidates will notice.
- **Do not reimburse premiums informally.** Employer payment arrangements can violate ACA market reforms unless a compliant exception or arrangement applies, such as a properly established ICHRA or QSEHRA. Section 4980D can impose $100 per affected person per day, subject to statutory exceptions and correction rules. Use the right documents and administration rather than assuming any payment is tax-free.

## How Prescience gets close to free for employees

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Pay the employee premium and the plan already starts with an effective $0 deductible, so "free to employees" doesn't hide a deductible.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Make the employee promise precise

I would avoid calling the entire plan free. Tell employees exactly which premium tier the company pays, how dependents are treated and what they may owe for care. If the company contributes to an HSA, state the amount and deposit schedule. A monthly deposit is not the same as a full balance available for a January bill, and employer plus employee deposits share the annual contribution limit.

Check the high-use year by adding annual employee premiums to the applicable in-network out-of-pocket maximum. Do not add the deductible a second time. Separately identify noncovered services and out-of-network exposure. Review the same calculation for a single employee and a family. That is more useful than a headline promising free coverage while leaving the employee to discover which costs remain.

**Price the employee contribution you want to promise**

Free for employees still needs an employer budget and confirmed coverage terms. Start with company details, create your account and add the census to compare a written proposal with that contribution policy.

[Price my team's contribution policy](https://www.getprescience.com/quote)

## Frequently asked questions

**Can a small business get free health insurance?**

An employer can cover the full premium, but copays, coinsurance and uncovered expenses may remain. Eligible tax credits and deductions can reduce the business cost; they do not make care universally free.

**Is there a government program that pays for small business health insurance?**

The Small Business Health Care Tax Credit covers up to 50% of premiums for two years for qualifying employers with fewer than 25 full-time equivalents who buy through SHOP. For 2026, average wages must be under $68,200, with the full wage-based credit at $34,100 or less, before any FTE phase-down or other limit.

**Are employer health insurance costs tax-deductible?**

Yes. Employer contributions to employee health coverage are generally deductible business expenses and tax-free to employees.

**How can employees pay nothing for health insurance?**

An employer can pay the premium in full, but employees may still owe copays, coinsurance or uncovered expenses. Employer HSA deposits can help eligible employees with costs. Prescience offers an effective $0 deductible; premium contributions are a separate employer decision.

**Do small businesses have to offer health insurance?**

Federal ACA employer shared-responsibility rules generally apply based on an average of at least 50 full-time employees, including equivalents, in the prior calendar year, aggregating related employers. Exceptions and penalty conditions matter. State obligations can differ.

**Can my employees get Medicaid if I offer health insurance?**

An employer offer does not by itself disqualify someone from Medicaid. Eligibility also depends on the state, income, household, age and immigration or residency rules. Expansion states generally cover otherwise eligible adults under 65 up to an effective 138% of the poverty level.

**What are the 2026 QSEHRA limits?**

$6,450 a year for self-only coverage and $13,100 for family coverage.

**Will offering health insurance cost my employees their subsidies?**

An affordable minimum-value employer offer can block employee premium tax credits. For a traditional group plan, family members have a separate affordability test based on the relevant family premium. For 2026 plan years, the percentage is 9.96%; household and other eligibility rules also apply.

**Is health-sharing a free alternative to insurance?**

No. Health-sharing ministries aren't insurance, aren't required to pay claims and don't follow ACA rules on pre-existing conditions or essential benefits.

## Sources

- [IRS, small business health care tax credit](https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace)
- [IRS Revenue Procedure 2025-32, 2026 tax adjustments](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS Publication 15-B (2026), fringe benefits and owner exceptions](https://www.irs.gov/publications/p15b)
- [IRS Revenue Procedure 2025-19, 2026 HSA and HDHP limits](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS Publication 969, HSA eligibility, contributions and distributions](https://www.irs.gov/publications/p969)
- [HealthCare.gov, individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [HealthCare.gov, Medicaid expansion and eligibility](https://www.healthcare.gov/medicaid-chip/medicaid-expansion-and-you/)
- [HealthCare.gov, federal poverty levels by coverage year](https://www.healthcare.gov/glossary/federal-poverty-level-fpl/)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [HealthCare.gov, preventive health services](https://www.healthcare.gov/coverage/preventive-care-benefits/)
- [CMS, medical loss ratio rules](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)
- [IRS Notice 2015-17, employer payment arrangements](https://www.irs.gov/pub/irs-drop/n-15-17.pdf)
- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS, employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)

# What is self-funded health insurance?

Source: https://www.getprescience.com/guides/what-is-self-funded-health-insurance
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-22
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "What is self-funded health insurance?." Prescience, October 28, 2026. https://www.getprescience.com/guides/what-is-self-funded-health-insurance

Self-funded health coverage means the employer bears the plan’s claims obligations instead of purchasing a conventional insured policy. Administrators usually process claims, and stop-loss may reimburse eligible costs above contracted thresholds. It can offer flexibility, but savings are uncertain and the employer needs to understand liquidity, exclusions, renewal terms and compliance.

- **Covered workers in self-funded plans:** 67% (KFF, 2025)
- **At firms with 10–199 workers:** 27% self-funded, 37% level-funded
- **Governing law:** ERISA, plus state stop-loss rules
- **Prescience minimum:** 2 employees

## How self-funding works

In a fully insured plan, you pay a premium and the carrier pays claims. In a self-funded plan, your company pays claims as they happen, usually through a third-party administrator that runs the network, processes claims and answers member questions. The employer bears claims obligations under the plan, while contracts and plan-asset rules determine how unused funds are handled.

1. An employee sees a doctor in the plan's network (often rented from a large carrier).
2. The doctor bills the third-party administrator (TPA), which reprices the claim to the network rate and applies the plan's copays and deductible.
3. The TPA draws the plan's share from the employer's **claims fund**, an account funded under the agreed payment schedule; the employer must manage liquidity.
4. If one person's claims pass the **specific attachment point**, or the group's total passes the **aggregate attachment point**, the stop-loss insurer reimburses eligible excess amounts, subject to exclusions, timing and other contract conditions.
5. Each month the employer also pays fixed costs: TPA fees, stop-loss premiums, pharmacy benefit manager fees and network access fees.

KFF reports 67% of covered workers in self-funded plans in 2025. At firms with 10–199 workers, it separately reports 27% self-funded and 37% level-funded, with a combined share of 51%. Those overlapping measures cannot be added. Level funding is a packaged form of self-funding, although survey respondents may classify it inconsistently. These statistics do not prove that self-funding causes lower deductibles or lower total cost.

_Chart: 2025 covered-worker shares in self-funded plans: 67% at all firms with 10+ workers, 80% at firms with 200+ workers and 27% at firms with 10–199 workers._

## The terms you'll see in a self-funded proposal

**Self-funding vocabulary, in plain English**

| Term | What it means |
| --- | --- |
| Claims fund | The employer's money set aside to pay claims. Treatment of unused funds depends on ownership, plan-asset rules and contracts. |
| Specific stop-loss | Insurance that pays one person's claims above a per-person limit (the specific attachment point or deductible), such as $40,000. |
| Aggregate stop-loss | Insurance reimbursing eligible aggregate claims above the contractual threshold; it does not cap excluded claims or every employer obligation. |
| Attachment point | The dollar level where stop-loss starts paying. |
| Contract basis (12/12, 12/15, 12/24) | Which claims count: incurred in the 12-month year and paid within 12, 15 or 24 months. A 12/12 stop-loss contract generally excludes claims paid after that contract year unless another provision covers them; the health plan may still owe the claim. |
| Run-out | Claims for care in the plan year that arrive after it ends. The plan may still owe them. The claims and stop-loss deadlines determine the relevant period. |
| Lasering | At renewal, the stop-loss carrier sets a higher specific attachment point for one known high-cost person, or excludes them. |
| TPA | Third-party administrator. Processes claims and runs member service for a fee per employee per month. |

## A 25-person company's year, four ways

**Self-funded vs. fully insured, 25 employees (illustrative)**

Assumes expected claims of $230,000 a year, a fully insured premium of $290,000 (claims at about 80% of premium), TPA fees of $40 per employee per month ($12,000 a year) and stop-loss premiums of $45,000. Specific attachment point $40,000; aggregate attachment point $276,000 (120% of expected claims), with 25 covered people and no dependents assumed. This is a hypothetical contract, not a finding that these terms are available or lawful in every state. Numbers are for illustration, not a quote. Assume every claim is covered by the health plan and eligible for stop-loss, no individual exclusions or higher thresholds apply, and all deadlines are met.

- Good year: $180,000 claims + $57,000 fixed: $237,000 (saves $53,000)
- Expected year: $230,000 claims + $57,000 fixed: $287,000 (about the same)
- Bad year: one $350,000 claimant + $200,000 other claims: Employer pays $40,000 + $200,000 + $57,000 = $297,000
- Stop-loss reimburses in the bad year: $310,000 ($350,000 − $40,000)
- Modeled aggregate scenario: eligible retained claims reach the threshold: $276,000 + $57,000 = $333,000 (costs $43,000 more)

In this simplified calculation, net employer cost ranges from $237,000 to $333,000 across the modeled scenarios. That is not an absolute liability ceiling: excluded claims, late submissions, run-out, contract disputes and reimbursement delays can create extra cost or cash needs. Renewal terms are separate, and ACA-compliant small-group insurance cannot price one employee’s health status into the group’s rate.

## Why employers self-fund

- **Lower claims can reduce employer spending.** Amounts that are plan assets, including employee contributions, must remain subject to plan-asset and fiduciary rules.
- **You see your data.** Aggregate reporting shows what's driving cost.
- **You design the plan.** Private-sector single-employer self-funded ERISA plans generally avoid state insurance benefit mandates, but federal requirements remain.
- **No premium taxes or carrier margin** on the self-funded portion.

The design freedom comes from **ERISA preemption**. ERISA overrides state laws that "relate to" employee benefit plans, and its "deemer clause" stops states from treating a self-funded plan as an insurance company. So state mandates on what an insured plan must cover, state premium taxes and small group rating rules don't reach the plan itself. States retain authority over stop-loss insurance. Governmental and church plans and multiple-employer arrangements require separate analysis.

Federal obligations remain, but applicability differs. Non-grandfathered plans generally must cover applicable recommended preventive services without cost sharing and limit in-network essential-health-benefit cost sharing. Annual and lifetime dollar-limit prohibitions concern essential health benefits. COBRA, mental health parity, HIPAA, claims procedures and surprise-billing rules require their own applicability review; do not assume every small plan is subject to every provision in the same way.

## The risks for a small company

The risk is volatility. A large employer's claims average out across thousands of people. A 20-person company can have one premature birth or cancer diagnosis that costs more than its whole expected year. Small employers manage this with stop-loss insurance:

- **Specific stop-loss** reimburses claims above a per-person limit.
- **Aggregate stop-loss** reimburses eligible claims above a group threshold, subject to exclusions, payment deadlines and other contract terms. It does not cap every employer obligation.

Stop-loss terms and availability depend on underwriting and state law. New York prohibits issuance to groups subject to its small-group community-rating rules. Other jurisdictions use their own definitions and limits; confirm them for the specific policy rather than relying on a national threshold.

**State-law and contract questions before buying stop-loss**

| Issue | What to establish |
| --- | --- |
| New York small-group rule | Section 3231 prohibits stop-loss issuance to groups subject to small-group community rating; generally up to 100 employees under the state rules. This is not a blanket ban on self-funding. |
| Other states | Confirm the applicable small-employer definition, attachment-point rules, policy situs and any transition exceptions with the insurer and regulator. Do not treat a model act as enacted law. |
| Individual protection | List thresholds, exclusions and any person-specific terms in the actual contract. |
| Aggregate protection | Confirm which claims count, how enrollment changes the threshold and when reimbursement occurs. |
| Renewal | Ask about rate guarantees, renewal eligibility and restrictions on new individual terms. |
| Exit | Match run-out obligations with stop-loss incurred/paid periods and any terminal coverage. |

A published state-law chart is a starting point for research, not a binding proposal. The insurer must confirm whether the contract can be issued to your group in the relevant jurisdiction. Where stop-loss is unavailable, taking on uncapped claims can be impractical even though self-funding itself is not prohibited. I would not approve a small-company proposal without a written legal-eligibility and cash-exposure review.

- **Terminal liability.** If you stop self-funding, run-out claims are yours unless your contract covers them.
- **Cash flow.** Claims arrive unevenly. A bad quarter can drain the claims fund before aggregate stop-loss pays, which often happens only after year-end.
- **Disclosure.** Stop-loss applications ask about known conditions. A wrong answer can void coverage.

## What a self-funded plan has to handle

- A written plan document and summary plan description under ERISA.
- Nondiscrimination rules for self-insured medical reimbursement under Internal Revenue Code section 105(h).
- HIPAA privacy and security for plan data.
- Federal COBRA when applicable. State continuation usually regulates insured coverage and should not be assumed to apply to a self-funded ERISA plan.
- PCORI fees when applicable: $3.84 times the average covered lives for policy or plan years ending October 1, 2025 through September 30, 2026. File Form 720 and pay by July 31 of the following calendar year, adjusted for weekends and holidays. A December 31, 2025 plan year is due July 31, 2026; a June 30, 2026 plan year is due August 2, 2027.
- Determine how claims are funded and identify participant contributions or other plan assets. Self-funded benefits can be paid from general employer assets; a separate trust is not universal.
- Check Form 5500 obligations. The small welfare-plan exemption generally requires fewer than 100 participants at the beginning of the year and an unfunded, insured or combined arrangement meeting the exemption conditions; trusts and multiple-employer arrangements need separate review.
- Summaries of benefits and coverage, mental health parity analyses and ACA coverage reporting (Forms 1094 and 1095).

## Questions to ask before you sign a self-funded proposal

1. **What could we owe this year?** Start with fixed costs plus retained claims, then identify exclusions, claims outside the contract period and cash needed before reimbursement. Ask for a stress calculation and each assumption behind it.
2. **What's the contract basis?** A 12/12 stop-loss contract generally requires claims to be incurred and paid within its 12-month period. A December claim paid in January may remain the health plan's obligation without that stop-loss reimbursement. Compare extended payment periods and run-out protection in the actual contract.
3. **Is there a renewal rate cap or a no-new-laser guarantee?** Without one, a single diagnosis can reshape next year's price.
4. **Does aggregate stop-loss reimburse monthly or only at year-end?** Monthly accommodation protects cash flow.
5. **Who pays run-out claims if we leave?** Get terminal liability terms in writing.
6. **What's carved out?** Check whether pharmacy, transplants or specialty drugs sit outside stop-loss.
7. **What will we see in reports?** You should get monthly claims by category, large-claimant reports (de-identified) and pharmacy spend.

**Compare a written proposal before taking on plan obligations**

Keep the responsibility, cash-flow and contract questions above in the comparison. Start a Prescience quote with your company details, then add the employee census after creating your account.

[Compare a plan for my team](https://www.getprescience.com/quote)

[Compare the funding models](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured)

## Who should self-fund

- **Larger employers:** a larger population can spread claims variation, but savings are not guaranteed. Compare credible projections, stop-loss and administration costs, reserves and governance capacity.
- **50–200 employees with stable claims and cash reserves:** worth quoting, ideally with stop-loss on a 12/15 or 12/24 contract.
- **Under 50 employees:** one large claim can dominate the year. Most small groups that self-fund do it through a level-funded product; compare that with fully insured in [Level-funded vs. self-funded vs. fully insured](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured).
- **New York small groups:** the stop-loss prohibition can make a conventional protected arrangement unavailable. Do not confuse that with a prohibition on all employer self-funding.

## Compare the employee experience as well as the finances

Prescience designs and runs company health plans starting at 2 employees. Compare its quoted benefits, provider access and monthly cost with your other proposals.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** If the cash-flow swings above are more than a small company wants to manage, compare Diamond: one monthly cost set in your quote, fixed before the plan starts.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Name who owns each obligation

Before signing, I would put the administrator, stop-loss insurer, broker, payroll team and employer finance lead in a responsibility table. Specify who decides benefit claims, submits stop-loss reimbursements, handles appeals, maintains eligibility and reconciles employee contributions. Ask what reports the employer receives and how protected health information is restricted. Buying an administrative service does not automatically transfer every fiduciary duty.

Then simulate a late large claim. Record its service date, payment date, stop-loss filing deadline and who supplies the required documents. If the administrator misses a deadline, determine whether its contract provides a remedy and whether that remedy covers the full loss. The employee’s right to a covered benefit and the employer’s right to stop-loss reimbursement are different obligations. A rejected reimbursement does not automatically erase the plan’s promise to the employee.

## Frequently asked questions

**Can a small business self-fund its health insurance?**

Yes, usually with stop-loss insurance or through a level-funded plan. State rules vary; New York, for example, bans stop-loss for small groups.

**What is the difference between self-funded and fully insured?**

In a fully insured plan, the carrier takes the risk and keeps unspent premium. In a self-funded plan, the employer pays claims directly and keeps the savings, often with stop-loss to reimburse eligible excess claims under its contract.

**What is stop-loss insurance?**

Stop-loss reimburses a self-funded employer for claims above set limits, either per person (specific) or for the whole group (aggregate).

**Is self-funded health insurance regulated by the state?**

Private-sector single-employer self-funded ERISA plans generally are not subject to state insurance benefit mandates. States regulate stop-loss insurance. Governmental, church and multiple-employer arrangements require separate analysis.

**What is an attachment point?**

The claims level where stop-loss starts paying. A specific attachment point applies per person, such as $40,000; an aggregate attachment point applies to the whole group's annual claims, set by the contract as a dollar amount or percentage of expected claims.

**What is lasering in stop-loss?**

At renewal, the stop-loss insurer sets a higher per-person attachment point for a known high-cost member, or excludes them, so the employer carries more of that person's claims.

**What happens to unspent money in a self-funded plan?**

Lower claims can leave the employer with unspent general assets. Employee contributions and other plan assets cannot simply be retained as employer profit. Fully insured premiums belong to the insurer, subject to applicable medical loss ratio rebates.

**Do self-funded plans have to follow the ACA?**

Many federal rules apply. Preventive-care and out-of-pocket requirements generally concern non-grandfathered plans, and dollar-limit prohibitions concern essential health benefits. Other requirements depend on plan and employer status; state insurance mandates generally do not govern a single-employer self-funded ERISA plan.

## Sources

- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [DOL, ERISA coverage and exceptions](https://www.dol.gov/general/topic/health-plans/erisa?lang=en)
- [DOL, fiduciary responsibilities under a group health plan](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/understanding-your-fiduciary-responsibilities-under-a-group-health-plan)
- [New York Insurance Law section 3231](https://www.nysenate.gov/legislation/laws/ISC/3231)
- [New York DFS, small-group expansion and stop-loss restrictions](https://www.dfs.ny.gov/apps_and_licensing/health_insurers/small_group_expansion_to_1_100_employees_faqs)
- [IRS, PCORI filing due dates and applicable rates](https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-institute-filing-due-dates-and-applicable-rates)
- [IRS, PCORI fee questions and answers](https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers)
- [DOL, employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [DOL, ACA implementation FAQs Part 71, 2026 cost-sharing limits](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-71)
- [HealthCare.gov, preventive health services](https://www.healthcare.gov/coverage/preventive-care-benefits/)
- [DOL, Form 5500 filing instructions](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2024-instructions.pdf)
- [DOL, small-employer parity exception](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-5)
- [DOL Advisory Opinion 2015-02A, employer stop-loss and plan obligations](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2015-02a)

# Level-funded vs. self-funded vs. fully insured: which is best?

Source: https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-28
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Level-funded vs. self-funded vs. fully insured: which is best?." Prescience, October 28, 2026. https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured

Fully insured coverage transfers covered claims risk to an insurer in exchange for premiums. A self-funded employer retains plan claims obligations, often with stop-loss protection. Level funding is a packaged form of self-funding with scheduled payments. I would compare contractual exposure, cash flow, benefits and renewal terms before choosing.

- **Firms of 10–199: level-funded:** 37% of covered workers
- **Firms of 10–199: self-funded:** 27% of covered workers
- **Small group MLR floor:** 80% of premium
- **Prescience admin fees:** $0

## The short version

KFF’s 2025 survey reports 37% of covered workers at firms with 10–199 workers in level-funded plans and 27% reported in self-funded plans. These categories overlap and must not be added: the combined measure is 51%. Survey respondents can be uncertain about how level-funded products are classified. Across all surveyed firms, 67% of covered workers were reported in self-funded plans. The survey excludes firms with fewer than ten workers in 2025.

**Three funding approaches**

|  | Fully insured | Level-funded | Self-funded |
| --- | --- | --- | --- |
| Who owes plan claims | Insurer under policy | Employer; stop-loss reimburses eligible costs | Employer; optional stop-loss reimburses eligible costs |
| Monthly cost | Fixed premium | Fixed payment | Varies with claims |
| Unspent money | Carrier keeps it | Partial refund on some plans | Employer keeps it |
| Renewal factors | Market rules, rates and census | Claims, stop-loss and contract terms | Claims, stop-loss and contract terms |
| Underwriting | None in small group | Yes, for stop-loss | Yes, for stop-loss |
| Deductible your team sees | Plan's deductible | Plan's deductible | Plan's deductible |

## Who pays when a $400,000 claim lands

Consider an entirely illustrative $400,000 covered claim in a 20-person company. This is an assumed claim amount, not a price for a medical condition or procedure. Whether it changes the employer’s cash needs depends on the policy and stop-loss contract, not just the funding label.

**One $400,000 claim on a 20-person team, by funding model**

|  | Fully insured | Level-funded | Self-funded |
| --- | --- | --- | --- |
| This year’s employer cost | Premium plus contractual adjustments | Scheduled amount only if the contract covers the event; exclusions can leave liability | Retained eligible claims plus fixed costs and any uncovered amounts |
| Who pays above retained risk | Insurer under policy | Stop-loss reimburses eligible amounts under its contract | Stop-loss reimburses eligible amounts if purchased |
| Next year's renewal | Carrier's filed rate change, same as every group like yours | Repriced on your claims; possible laser on that person | Repriced on your claims; possible laser on that person |
| Can the group be dropped? | Cannot terminate solely for claims; legal renewal exceptions exist | The plan can renew, but stop-loss terms can change sharply | Same as level-funded |

**Use your team to compare the coverage and the contract**

Hold employee tiers and the effective date constant across proposals. Start a quote, create your account and complete the census, then compare the written benefits and obligations alongside the funding examples.

[Start my plan comparison](https://www.getprescience.com/quote)

[Review the fully insured comparison](https://www.getprescience.com/compare/fully-insured-alternative)

## Fully insured

You pay a premium per enrolled employee; the carrier pays claims and keeps the difference. Small group pricing follows ACA rating rules, so your team's health doesn't change your rate, but a healthy team also doesn't benefit from low claims. Carriers must spend at least 80% of small group premiums on care and quality; the rest covers administration, commissions and profit.

- **Rating:** in the small group market, premiums can vary only by age, tobacco use, location and family size. Health status cannot determine the ACA-compliant small-group premium, and a cancer diagnosis on your team can't raise your group's rate on its own.
- **Guaranteed issue and renewal:** the carrier must accept your group and can't drop it for claims.
- **Refunds:** if an insurer fails the applicable adjusted medical loss ratio standard for its state and market segment, rebates may be due. The federal small-group threshold is generally 80%, calculated under rules including quality expenses, taxes, credibility adjustments and multiple years. That's pooled across all its groups, not based on yours.
- **State rules apply:** state benefit mandates, premium taxes and state continuation coverage all come with the policy.
- **Best for:** groups with older employees, known health conditions or a low appetite for surprises.

## Level-funded

Self-funded under the hood, billed like insurance: one fixed monthly payment covers expected claims, admin fees and stop-loss premiums. If claims run low, some plans refund part of the surplus. If they run high, stop-loss may reimburse eligible claims under its terms; future pricing is not guaranteed.

The payment schedule alone does not establish maximum liability. Ask which claims count toward specific and aggregate protection, whether the administrator advances reimbursement, and what happens if the health plan covers an expense the stop-loss policy excludes. Check enrollment-based adjustments, claims submission deadlines and reimbursement timing. A fixed monthly invoice can coexist with contractual liabilities outside it.

**20 employees, $1,000 per employee per month (illustrative)**

Assumes a level-funded plan billing $20,000 a month: $13,000 to the claims fund, $5,000 for stop-loss and $2,000 for administration. The contract refunds 50% of any surplus after a 3-month run-out, only if the group renews. Terms vary widely; read yours. Assume all claims qualify under matching plan and stop-loss terms, enrollment is unchanged, no exclusions or higher individual limits apply, and stop-loss pays the modeled excess.

- Annual payments: $20,000 × 12: $240,000
- Claims fund for the year: $13,000 × 12: $156,000
- Good year: claims $120,000, surplus $36,000: Refund $18,000 next spring, if you renew
- Bad year: claims $210,000: Stop-loss pays the $54,000 excess; you still pay $240,000
- Bad year, next renewal: Claims fund and stop-loss repriced to your higher claims

Under these assumptions the good-year net cost is $222,000 and the bad-year payment remains $240,000. Actual exposure can be higher for excluded, late or otherwise unreimbursed claims. The hypothetical refund requires renewal and timely run-out settlement; it is not cash guaranteed at the beginning of the year.

- **Underwriting:** carriers ask for a census and often a health questionnaire for each employee. A group with a known high-cost condition may be quoted high or declined.
- **Surplus refunds:** check the share (some refund half, some all, some none), the timing and whether you must renew to get it.
- **Leaving:** if you leave, run-out claims and any surplus are handled by the contract terms. Some plans keep the surplus if you don't renew.
- **State limits:** states set minimum stop-loss attachment points for small employers; New York bans stop-loss for small groups, so level-funding isn't available there.

## Self-funded

You pay actual claims plus administration and stop-loss premiums. Monthly costs move with claims. Unspent employer assets generally remain available subject to contract and plan-asset rules, while benefit design remains subject to applicable federal requirements. For small groups, volatility is the problem. More in [What is self-funded health insurance?](https://www.getprescience.com/guides/what-is-self-funded-health-insurance)

- **Monthly bill:** fixed TPA, network and stop-loss costs, plus actual claims as they're paid. Monthly payments can vary substantially with the timing of claims.
- **Exposure:** calculate fixed fees, retained claims and amounts outside stop-loss coverage. The aggregate attachment point is not an absolute cap on every employer obligation.
- **Data:** you get your own claims data, which lets you see what drives cost and change the plan.
- **Best for:** larger employers with cash reserves and a few hundred or more covered people.

For most private-sector employers, ERISA applies to the health plan and generally preempts state insurance mandates for a single-employer self-funded plan. Governmental and church plans, and multiple-employer arrangements, need separate analysis. Federal requirements remain, and states regulate stop-loss insurance. New York’s restrictions can prevent a small group from obtaining the stop-loss needed for a conventional level-funded product. Confirm applicable state law before relying on a proposal.

## Switching between models

**What to expect when you change funding model**

| Move | What happens | Watch out for |
| --- | --- | --- |
| Fully insured to level-funded | Underwriting on a census and often health questionnaires; the first year can price below your renewal if the group is healthy | Year-two renewal after a bad claim; surplus terms that require renewal |
| Level-funded back to fully insured | Eligible small groups have guaranteed-availability protections; enrollment, participation and contribution conditions still need review | Run-out claims and any surplus are settled under the old contract; a mid-year move restarts deductibles unless credited |
| Level-funded to traditional self-funded | Usually at 100+ employees, when claims are steadier and reserves exist | Cash flow in a bad quarter; choosing the contract basis |
| Any model mid-year | Possible, but employees' deductibles and out-of-pocket totals may reset | Ask the new plan for deductible credit and collect accumulator reports first |

## Mistakes I see small companies make

- **Comparing a level-funded quote with a fully insured renewal on month one only.** Compare the maximum possible cost and the likely year-two price, too.
- **Counting the surplus refund as savings.** It's uncertain, arrives months later and may require renewing.
- **Assuming the health questionnaire is a formality.** Inaccurate answers can void stop-loss coverage when you need it.
- **Forgetting the plan is now yours.** Under a self-funded or level-funded plan, the employer is the ERISA plan sponsor and fiduciary, with the plan document, notices and claims appeals that come with it.
- **Changing enrollment.** Model hires, departures and dependent enrollment under the contract. Handle health underwriting through authorized confidential channels; do not base employment decisions on diagnoses or expected claims.

## Where Prescience fits

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Whatever the funding label, the questions above come down to cost certainty and what employees pay. Diamond answers both: one monthly cost set in your quote and an effective $0 deductible.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Which is best for you

- Simplest setup, cost isn't the constraint: fully insured.
- Healthy group of a few dozen people, comfortable with renewals that follow claims: level-funded.
- Hundreds of employees and an appetite for risk: traditional self-funding.
- If Prescience interests you, compare its quoted monthly cost and written benefits alongside the alternatives. Do not infer a funding structure or a blanket absence of underwriting from the public description.

1. **Get a fully insured quote as your baseline** Confirm eligibility, participation, contribution and enrollment requirements. Use the resulting price and written benefits as a reference for other proposals.
2. **Get level-funded quotes with the full terms** Ask for the monthly payment split (claims fund, stop-loss, admin), the surplus refund rules, the run-out terms and the renewal cap, if any.
3. **Model a bad year, not just an average one** Ask what renewal looks like if one person has a $300,000 claim. If nobody will answer, assume a large increase.
4. **Compare two years of cost** Year one plus a realistic year two for each option, including any expected refund at its real timing.

## Cash timing can change the decision

I would ask the finance lead to model when money leaves the company, not only the eventual net cost. If an administrator draws funds to pay claims before stop-loss reimbursement arrives, the employer needs liquidity for that delay. An annual aggregate settlement may not help with an unusually expensive month. Ask whether accommodation payments exist and what documentation triggers them.

Run-out deserves its own line in the exit budget. Claims for care incurred before termination can arrive afterward. Match the health plan’s payment obligation to the stop-loss contract’s incurred and paid periods, filing deadline and terminal coverage. A new fully insured policy ordinarily does not assume the old self-funded plan’s unpaid claims. Obtain a written closeout schedule and keep enough resources for obligations that remain.

Finally, distinguish corporate funds from participant contributions and other plan assets. The employer cannot assume every favorable balance is unrestricted profit. Have the administrator explain custody, permitted expenses, surplus handling and fiduciary responsibilities. If the proposal cannot explain these items clearly, fully insured coverage may be the more suitable choice even when a self-funded expected-cost estimate is lower.

## Frequently asked questions

**What is the difference between level-funded and self-funded?**

Both pay claims from employer money. Level-funded plans bill a fixed monthly amount that bundles expected claims, admin and stop-loss, and may refund some surplus. Traditional self-funded plans bill actual claims, so costs vary month to month.

**Is level-funded the same as fully insured?**

No. A level-funded plan feels like insurance because the payment is fixed, but it's self-funded underneath, and your claims drive your renewal.

**Which is cheapest for a small business?**

It depends on your team. Level-funded and self-funded plans can cost less for healthy groups but carry renewal risk. Prescience quotes are usually 10–20% below comparable fully insured coverage and are fixed before the plan starts.

**Do level-funded plans refund unused money?**

Some do. Contracts differ on the share refunded, when it's paid (usually after a run-out period of a few months) and whether you must renew to receive it.

**Can a level-funded plan raise my rates because of one sick employee?**

Yes. Renewals follow your group's claims, and the stop-loss insurer can raise the price or set a higher attachment point for a known high-cost person. Fully insured small group rates can't be raised for one person's claims.

**Are level-funded plans available in every state?**

No. States regulate stop-loss for small employers. New York prohibits issuing stop-loss to groups within its small-group definition, generally up to 100 employees. Other states impose their own conditions. Check the applicable law and contract before budgeting for this coverage.

**Do level-funded plans have to follow state insurance mandates?**

Private-sector single-employer self-funded ERISA plans generally avoid state insurance benefit mandates. Federal rules remain: ACA preventive-care and out-of-pocket requirements generally apply to non-grandfathered plans, with the cost-sharing limit tied to essential health benefits. States still regulate stop-loss insurance.

**What size company should self-fund?**

Traditional self-funding usually makes sense from a few hundred employees up. Below about 50, one large claim can dominate a year, so most small groups that self-fund use level-funded products.

## Sources

- [KFF, 2025 Employer Health Benefits Survey (original survey and methodology)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, market rating reforms and state variations](https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/state-rating)
- [CMS, medical loss ratio rules](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)
- [DOL, ERISA coverage and exceptions](https://www.dol.gov/general/topic/health-plans/erisa?lang=en)
- [DOL, fiduciary responsibilities under a group health plan](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/understanding-your-fiduciary-responsibilities-under-a-group-health-plan)
- [New York Insurance Law section 3231](https://www.nysenate.gov/legislation/laws/ISC/3231)
- [New York DFS, small-group expansion and stop-loss restrictions](https://www.dfs.ny.gov/apps_and_licensing/health_insurers/small_group_expansion_to_1_100_employees_faqs)
- [DOL, ACA implementation FAQs Part 71, 2026 cost-sharing limits](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-71)
- [HealthCare.gov, preventive health services](https://www.healthcare.gov/coverage/preventive-care-benefits/)
- [DOL Advisory Opinion 2015-02A, employer stop-loss and plan obligations](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2015-02a)

# How do I leave a PEO?

Source: https://www.getprescience.com/guides/how-to-leave-a-peo
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-15
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How do I leave a PEO?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-to-leave-a-peo

Leaving a PEO means coordinating health benefits, payroll, workers’ compensation and tax reporting. I would work backward from the contract’s notice requirement and confirmed replacement coverage. The practical goal is one documented handoff, with continuous insurance, accurate payroll and clear responsibility for former employees.

- **Notice period:** Set by your agreement
- **Planning window:** Allow 90–120 days; confirm provider deadlines
- **Federal COBRA applies at:** 20+ employees
- **Prescience start date:** Mid-year starts supported

## What the PEO does today that you'll own after

A PEO is a co-employer. It runs payroll under its own tax accounts in many states, sponsors the health plan your team is on, holds the workers' comp policy and often sponsors the 401(k). When you leave, each of those has to land somewhere on the same day.

**Suggested planning allowances, not guaranteed vendor timelines**

| Function | Who does it after | Lead time |
| --- | --- | --- |
| Health, dental, vision | Your own group plan (or another provider) | 4–8 weeks to quote, enroll and issue cards |
| Payroll and tax filing | Payroll provider such as Gusto, Rippling or Justworks Payroll | 2–4 weeks to set up and test |
| State unemployment and withholding accounts | Your company, in each state you have employees | Days to several weeks, varies by state |
| Workers' compensation | Your own policy, bound to start on cutover day | 1–3 weeks to quote and bind |
| 401(k) | Your own plan, or a spin-off of your piece of the PEO's plan | 4–8 weeks; often the slowest piece |
| FSA, HSA, commuter | A new administrator, or your health plan's partner | 2–4 weeks |
| COBRA administration | You or a COBRA administrator | Set up before the first person leaves after cutover |
| HR tools, handbook, compliance posters | You, your payroll provider or an HR service | Export before access ends |

## Before you give notice

1. **Read the contract.** Find the notice period, any termination fee and whether notice has to land before a quarter or renewal date.
2. **Get your replacement health plan quoted.** Send a census, current plan documents and effective date. Confirm enrollment and payment deadlines before giving irrevocable cancellation instructions.
3. **Choose payroll.** Justworks and Rippling both sell payroll without the PEO, so you can often keep the same software.
4. **Price workers' compensation** in your own name. The PEO's master policy ends with the contract.
5. **Check state tax accounts.** Some states let the PEO report under its own unemployment account; you may need to open or reactivate yours.
6. **Ask whether your PEO is IRS-certified (a CPEO).** It changes how Social Security and federal unemployment wage bases carry over mid-year (below).

> **Pick the cutover date first:** Everything else is scheduled backward from one date. The cleanest is the 1st of a month at the start of a quarter (January 1, April 1, July 1 or October 1): health coverage usually runs through month-end, and a quarter start keeps payroll tax filings from splitting mid-quarter.

## Data to export before you leave

- Year-to-date payroll registers, tax filings and W-2 data.
- Benefit elections, dependents and current plan summaries for every employee.
- Deductible and out-of-pocket amounts employees have met this year, where available.
- HSA, FSA and commuter account details and balances.
- Workers' comp claims history and loss runs.
- PTO balances, handbooks and signed policies stored in the PEO's system.
- A list of everyone currently on COBRA through the PEO, with their election dates and end dates.
- 401(k) contribution history, loan balances and vesting records.
- I-9s and offer letters, if they live in the PEO's system.

Download these yourself while you still have access. Access to the PEO's portal often ends on the termination date, and getting reports afterward can take weeks.

**Have the PEO export? Put it to work on a quote**

You do not need to wait until the PEO contract ends to start a comparison. Create your account through the quote flow and review the employee census before confirming replacement coverage and your exit dates.

[Start my PEO replacement quote](https://www.getprescience.com/quote)

[Find my payroll census export guide](https://www.getprescience.com/integrations)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## A typical timeline

**Illustrative schedule for an agreement requiring 60 days of notice**

| When | What happens |
| --- | --- |
| 90–120 days before | Read contract and obtain replacement quotes |
| At least 60 days before | Deliver required written notice after confirming the replacement arrangement |
| 45–60 days before | Open accounts and configure payroll |
| 30–45 days before | Enroll employees and coordinate treatment transitions |
| 14–30 days before | Test payroll and reconcile rosters |
| Cutover date | New coverage begins after old coverage ends; payroll follows confirmed pay periods |

1. **90–120 days before cutover: decide and quote** Read the contract for notice, fees and auto-renewal. Collect a census (age, ZIP, coverage tier) and get health, payroll and workers' comp quotes. Ask the PEO for loss runs and plan documents now, while the relationship is friendly.
2. **60–90 days before: give written notice** Send notice the way the contract requires (often email to a named address, sometimes certified mail) and get written confirmation of the termination date and final invoice timing.
3. **45–60 days before: set up accounts** Register or reactivate state withholding and unemployment accounts, local tax accounts where needed, and confirm your federal EIN details. Bind workers' comp to start on cutover day.
4. **30–45 days before: enroll the new health plan** Hold an enrollment meeting, collect elections and dependents, and send the census to the new plan. Ask the new plan about deductible credit and what proof it needs.
5. **14–30 days before: payroll parallel run** Load year-to-date wages, deductions and tax totals into the new payroll system and run a test payroll. Set up 401(k), FSA and HSA deductions.
6. **Cutover week** Last PEO payroll covers the final period before cutover; first new payroll covers the next period. Health cards should be in hand. Tell employees who to call from day one.
7. **First 30 days after** Submit deductible credit proof within the new plan's deadline (often 30 days from the effective date). Reconcile the PEO's final invoice and any refunds. Confirm COBRA ownership for anyone who left.
8. **Next January** Make sure employees get W-2s for both parts of the year, and that quarterly and annual returns for the switch quarter were filed once, by the right party.

## Keeping health coverage continuous

Set the new plan's start date to the day after PEO coverage ends; coverage usually runs through the end of the month, so a first-of-the-month start is cleanest. Tell employees early: who to contact, when cards arrive and what happens to visits already scheduled.

- **Ongoing treatment.** Give employees a private route to the new administrator for treatment-continuity questions. Verify providers, prescriptions and whether new authorizations are required. Do not collect diagnoses in a company-wide spreadsheet.
- **Prescriptions.** Ask employees to discuss any needed refill timing with their pharmacist or clinician before the switch and check the new plan's formulary.
- **Claims after cutover.** Care before cutover is billed to the PEO plan even if the claim arrives later; care after is billed to the new plan.

> **Mid-year deductibles:** Prescience offers an effective $0 deductible. Still confirm copays, out-of-pocket accumulation, coverage dates and ongoing-treatment arrangements. That description alone does not establish which prior-plan expenses receive credit.

If you change plans mid-year, request written deductible and out-of-pocket credit terms. Ask what expenses qualify, which documents are needed, the submission deadline, and whether claims already processed will be recalculated. Credit can vary by carrier, product and transition; do not assume a generic carrier guideline applies to your contract.

## COBRA when you leave a PEO

Two groups need a plan: people already on COBRA through the PEO, and anyone who leaves around cutover.

- **People already on COBRA.** Identify the responsible plan administrator, applicable plan documents and legal continuation duties. A PEO contract cannot by itself eliminate statutory rights. Obtain written confirmation of where each qualified beneficiary will continue coverage and how payments and election records transfer, if a transfer is appropriate.
- **Federal COBRA generally applies** to private-sector group plans of employers with at least 20 employees on more than half of typical business days in the preceding year. Part-time staff count fractionally. Multiple-employer arrangements need a plan-level review. State continuation rules can apply to insured coverage; do not assume they cover self-funded ERISA plans.
- **COBRA deadlines:** for employer-reportable events such as termination or reduced hours, the employer generally has 30 days to notify a separate administrator, which generally has 14 days to send the election notice. When employer and administrator are the same, the combined deadline is generally 44 days. Election must allow at least 60 days from the later of notice or loss of coverage; the initial payment is due within 45 days after election.
- **Cost and length:** up to 102% of the plan's cost, generally for 18 months after termination other than gross misconduct or a reduction in hours causing loss of coverage; disability and second-event extensions may apply.
- **People leaving near cutover:** have the administrators determine coverage and notice responsibility from the qualifying event, coverage-loss date, plan terms and applicable law. Do not decide solely from the last day worked.

Estimate what COBRA costs a departing employee with our [COBRA cost calculator](https://www.getprescience.com/tools/cobra-cost-calculator), and read [COBRA for small employers](https://www.getprescience.com/guides/cobra-for-small-employers) for the full rules.

## Payroll, taxes and workers' comp

- Run the last PEO payroll and the first new payroll on adjacent periods, with no overlap.
- Confirm who files quarterly returns for the quarter you switch in.
- Make sure year-end W-2s are covered; some PEOs issue them for the part of the year they paid.
- Bind your own workers' comp policy to start on cutover day.

**Wage bases.** Social Security tax applies to the first $184,500 of wages in 2026, and federal unemployment tax to the first $7,000. If your PEO is an IRS-certified PEO (CPEO), federal rules treat the CPEO and your company as predecessor and successor when the contract ends, for qualifying work site employees, so covered wages can count toward the same Social Security and FUTA bases. Confirm that the contract and worker meet the conditions. With a PEO that isn't certified, ask your payroll provider and accountant whether the wage bases restart for the rest of the year, which adds employer tax for high earners.

**Wage base cost of a July 1 switch from a non-certified PEO (illustrative)**

Assumes the wage bases restart, an engineer paid $240,000 a year ($120,000 by June 30) and 2026 rates: 6.2% employer Social Security up to $184,500, and 0.6% net FUTA on the first $7,000, assuming the full state unemployment credit and no credit reduction.

- Social Security wages paid by the PEO, Jan–Jun: $120,000
- Paid by you, Jul–Dec: $120,000
- Employer Social Security if no restart: 6.2% × $64,500 left in the base = $3,999
- Employer Social Security if the base restarts: 6.2% × $120,000 = $7,440
- Extra federal unemployment tax: 0.6% × $7,000 = $42

Exactly $3,483 more for this one employee in the switch year if the bases restart. For a team with several high earners, that can make a January 1 cutover worth waiting for.

**State unemployment.** States treat PEOs differently. In some, the PEO reports your wages under your own account and your experience rate carries on; in others, the PEO reports under its account and you start fresh with a new-employer rate. Check each state where you have employees.

## The PEO exit checklist

- Contract: notice period, termination fee, auto-renewal date, final invoice timing.
- Cutover date set (1st of a month, ideally a quarter start).
- Written notice sent and termination date confirmed in writing.
- Health plan quoted, enrollment done, cards issued before cutover.
- Deductible credit requested, with accumulator report or EOBs.
- Payroll provider set up, year-to-date totals loaded, test payroll run.
- Federal EIN confirmed; state withholding and unemployment accounts open in every state.
- Workers' comp bound in your name from cutover day.
- 401(k) plan set up or spin-off scheduled; contributions mapped in payroll.
- FSA, HSA and commuter accounts moved; FSA claim deadlines communicated.
- COBRA ownership confirmed for current COBRA participants and recent leavers.
- All data exported: payroll, benefits, PTO, I-9s, policies, loss runs.
- Employees told what changes, when and who to call.
- Next January: W-2s and annual filings reconciled for both parts of the year.

## Moving health benefits to Prescience

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

Prescience handles setup and enrollment, claims, compliance and COBRA. Confirm the transition schedule, employee support contacts and payroll deduction responsibilities for your company.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Pick your cutover date and we'll work backward from it: quote, enrollment, cards and COBRA handled, with no gap in coverage.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**How long does it take to leave a PEO?**

Use the service agreement and replacement-provider deadlines to set the schedule. This guide’s 90–120 day planning allowance is a project recommendation, not a promised completion time.

**Will employees lose health insurance when we leave a PEO?**

Not if you time it. Start the new plan the day after PEO coverage ends, usually the first of a month, and enroll employees before cutover.

**Can I leave a PEO in the middle of the year?**

Yes, subject to your contract's notice terms. Prescience plans can start mid-year.

**Can I keep the same payroll software after leaving a PEO?**

Often yes. Justworks and Rippling both sell payroll without the PEO, and Prescience lets you keep your current payroll provider.

**What happens to employees on COBRA when we leave a PEO?**

Confirm the applicable plan documents, legal obligations and responsible administrator. The service contract alone does not determine or eliminate COBRA rights. Document each beneficiary’s continuing coverage, payment instructions and remaining election period before cutover.

**Do deductibles reset when we leave a PEO mid-year?**

A new plan can have different deductible and out-of-pocket rules. Ask for written credit terms for the actual transition. Prescience offers an effective $0 deductible, but employees still need the copay, accumulation and coverage details.

**Will we get two W-2s in the year we leave a PEO?**

Usually yes: one from the PEO for wages it paid and one from your company or new payroll provider for the rest of the year.

**Is there a fee to leave a PEO?**

Some contracts have a termination fee or require notice before a renewal date. Read the termination section before you give notice.

**What's the best date to leave a PEO?**

The 1st of a month at a quarter start, and ideally January 1, which avoids split quarterly filings, mid-year deductible resets and wage base questions.

## Sources

- [DOL, employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [26 CFR 31.3511-1, CPEO successor rules](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/subpart-F/section-31.3511-1)
- [IRS, active certified PEO list (report dated August 7, 2026)](https://www.irs.gov/pub/irs-sbse/active-cpeos.pdf)
- [IRS Publication 15 (2026), payroll taxes](https://www.irs.gov/publications/p15)
- [SSA, 2026 contribution and benefit base](https://www.ssa.gov/oact/cola/cbb.html)
- [Justworks, published pricing](https://www.justworks.com/pricing)
- [Rippling, PEO services](https://www.rippling.com/products/hr/peo)
- [DOL, plan information and disclosure](https://www.dol.gov/general/topic/health-plans/planinformation)

# How much does employee health insurance cost per month?

Source: https://www.getprescience.com/guides/average-employee-health-insurance-cost
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-06
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How much does employee health insurance cost per month?." Prescience, October 28, 2026. https://www.getprescience.com/guides/average-employee-health-insurance-cost

The average employer health plan cost about $777 per month for single coverage and $2,249 per month for family coverage, based on KFF's 2025 survey. Employers paid most of it: about $657 a month for a single employee and $1,679 for a family. Your own number depends mostly on your state, your team's ages, how many people cover dependents and the plan level you pick.

- **Single coverage:** $777/month ($9,325/year)
- **Family coverage:** $2,249/month ($26,993/year)
- **Employer share, single:** About $657/month
- **Employer share, family:** About $1,679/month

## The national averages, per month

**Average employer health premiums, 2025 (KFF), converted to monthly; each monthly value rounded independently**

|  | Total premium | Worker pays | Employer pays |
| --- | --- | --- | --- |
| Single coverage | $777 | $120 | $657 |
| Family coverage | $2,249 | $571 | $1,679 |

Annual figures from KFF: $9,325 single and $26,993 family, with workers contributing $1,440 and $6,850 on average. Single premiums rose 5% and family premiums 6% in a year. Over five years, family premiums grew 26%, a little below wage growth (28.6%) and a little above inflation (23.5%).

_Chart: Bar chart of average monthly employer health premiums in 2025: $777 single with $657 paid by the employer, and $2,249 family with $1,679 paid by the employer._

One change to know about: starting with 2025, KFF's survey covers firms with 10 or more workers. Teams of 3–9 are no longer in the averages, so a very small company should treat these figures as a reference point, not a quote.

## Small firms pay about the same premium but shift more to families

Premiums at small firms (10–199 workers) are close to those at large firms. The real difference is who pays. Small employers ask workers with families to pay a much larger share.

**Premiums and worker contributions by firm size, 2025 (KFF)**

|  | Small firms (10–199) | Large firms (200+) |
| --- | --- | --- |
| Single premium, per year | $9,211 ($768/month) | $9,361 ($780/month) |
| Family premium, per year | $26,054 ($2,171/month) | $27,280 ($2,273/month) |
| Worker share, single | 16% | 16% |
| Worker share, family | 36% | 23% |
| Worker pays for family, per year | $8,889 ($741/month) | $6,227 ($519/month) |
| Workers who pay more than half the family premium | 29% | 5% |
| Average single deductible | $2,631 | $1,670 |

KFF reports that 53% of covered workers at firms with 10–199 workers have a single deductible of at least $2,000, versus 28% at larger firms. The average deductible row excludes workers without a general deductible. Compare both paycheck deductions and point-of-care costs rather than using premium alone.

## What coverage costs in your state

A state average cannot predict a specific employer quote. Rating area, enrollment ages, covered dependents, network and policy benefits all matter. I would use national survey figures for an initial planning range, then replace them with quotes based on the same census and effective date. Do not add an arbitrary city surcharge or assume that every rural plan costs less.

**What to collect for a location-specific comparison**

| Input | What to verify | Why it matters |
| --- | --- | --- |
| Employer location | Correct business address and applicable rating area | The insurer applies its geographic rating rules |
| Remote employees | Eligibility and routine network access in every employee location | A headquarters quote does not establish usable coverage elsewhere |
| Ages and dependents | Accurate birth dates and requested covered family members | Age-rated and family-tier methods produce different bills |
| Product | Exact plan, network, formulary and effective date | A state average mixes products and enrolled populations |
| Contribution | Employee-only amount and treatment of incremental dependent cost | Employer spending differs from total premium |

For a multi-state team, ask the insurer how it assigns the group rating area and whether every employee can enroll in the proposed product. State rules also affect permissible age and tobacco variation. See our guides for [California](https://www.getprescience.com/small-business-health-insurance/california), [New York](https://www.getprescience.com/small-business-health-insurance/new-york) and [Texas](https://www.getprescience.com/small-business-health-insurance/texas), then verify the specific policy available to your company.

## Cost by plan type

**Average premiums and single deductibles by plan type, 2025 (KFF)**

| Plan type | Share of covered workers | Single premium | Family premium | Average single deductible |
| --- | --- | --- | --- | --- |
| PPO | 46% | $9,818 ($818/month) | $28,272 ($2,356/month) | $1,337 |
| HDHP with savings option | 33% | $8,620 ($718/month) | $25,379 ($2,115/month) | $2,609 |
| HMO | 12% | Not in KFF summary | Not in KFF summary | $1,649 |
| POS | 9% | Not in KFF summary | Not in KFF summary | $2,122 |

The PPO and HDHP/SO single-premium averages differ by about $100 monthly, but they represent different enrolled populations and benefit designs. This is not a guaranteed saving for switching the same group. KFF's $690 average employer HSA contribution is for single coverage in HSA-qualified HDHPs and includes workers whose employer contributes nothing. Deductible averages exclude workers without one.

## Why your quote is probably different

- **Location.** Obtain the actual plan rate for the applicable area. Local provider contracts and the available products matter, but a city name alone does not justify a particular premium.
- **Ages.** Small group rates may rise with age, up to three times for a 64-year-old compared with a 21-year-old. Under the federal default age curve, a 40-year-old costs about 1.28 times a 21-year-old.
- **Tobacco.** Federal rules allow up to a 1.5:1 ratio where state law permits it; small-group tobacco rating is also subject to wellness-program requirements.
- **Plan benefits.** Metal levels describe actuarial value, not identical deductibles or networks. Compare actual premiums and service-level cost sharing.
- **Dependents.** Family coverage costs roughly three times single coverage. Two or three employees with families can move your average a lot.
- **Buying route.** Include separately quoted broker, administration or PEO service fees. Do not treat hypothetical first-year discounts or renewal increases as market facts.
- **Market and funding arrangement.** ACA-compliant small-group premiums cannot vary by the group's health status or claims. Large-group and underwritten products use different methods. Confirm which rules apply before interpreting a renewal.

**How age alone changes one plan's price (illustrative)**

Assumes one small group plan where a 21-year-old's rate is $450 a month, priced on the federal default age curve.

- Age 21 (factor 1.000): $450/month
- Age 40 (factor 1.278): $575/month
- Age 64 (factor 3.000): $1,350/month

Same plan, same network, three times the price. A team of 28-year-old engineers and a team with several people in their fifties can see very different quotes for identical coverage.

## Three illustrative team budgets

The following fictional budgets demonstrate arithmetic only. Dollar rates are selected assumptions, not measured city or state averages, actual quotes or customer information. Each assumes full employee-only payment plus half of the incremental dependent cost. The locations identify scenarios, not expected local prices. Actual ages, benefit design, fees and enrollment can change every result.

**5-person team in Austin, everyone on single coverage**

Illustrative single premium: $712 monthly; five enrolled employees and full employer payment. No separate fees.

- 5 × $712: $3,560/month
- Employees pay: $0
- Company cost per year: $42,720

The company pays $8,544 per enrolled employee annually. Tax treatment depends on employee and owner status; use the gross expense for cash planning before considering any deduction.

**12-person team in Denver, 3 employees cover families**

Fictional monthly rates: $735 single and $2,088 family. Twelve enrollees, including three families. Incremental dependent cost is $1,353 and the company pays half, $676.50. No separate fees.

- Employee-only coverage, 12 × $735: $8,820/month
- Half of dependent cost, 3 × $676.50: $2,029.50/month
- Company total: $10,849.50/month ($130,194/year)
- Each family employee pays: $676.50/month

About $10,850 per employee per year on average. The dependent share is about 19% of the company's bill.

**30-person team in New York, 8 employees cover families**

Fictional monthly rates: $909 single and $2,479 family. Thirty enrollees, including eight families. Incremental dependent cost is $1,570 and the company pays half, $785. No separate fees.

- Employee-only coverage, 30 × $909: $27,270/month
- Half of dependent cost, 8 × $785: $6,280/month
- Company total: $33,550/month ($402,600/year)
- Each family employee pays: $785/month

About $13,420 per employee per year. Moving dependents from 50% to 100% would add $75,360 a year; moving to 75% would add $37,680.

To model your own split, see [how much employers pay for health insurance](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance), which compares 50%, 75%, 100% and flat-dollar contributions line by line.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Would rather set the number than accept a rate? With Choice, the company's cost per employee is the allowance you pick, plus $20 a month for each enrolled employee.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Estimate your own cost in 15 minutes

1. **List who would enroll** Collect the census securely, including eligible employees and likely enrollment tiers. Record valid waivers for participation purposes rather than silently removing everyone with another possible coverage source.
2. **Pick a starting rate** Use the published national average only as a labeled provisional input. Ask for rates based on your census and intended start date. Do not assume a fixed adjustment for age or city without the applicable rating method.
3. **Choose a contribution policy** Specify the amount for employee-only coverage and the formula for dependents. Show both employer monthly expense and employee payroll deduction for every tier. Check carrier requirements and applicable affordability rules.
4. **Add fees and a renewal** Add all quoted fees and model several hypothetical future increases. Separate a renewal-rate assumption from hiring and coverage-tier changes so the budget owner can see why spending changes.
5. **Get two or three real quotes** Ask for quotes on the same census from at least two routes (for example a carrier small group plan through a broker, a PEO and a newer option like ours). Compare total annual cost and the deductible and out-of-pocket maximum side by side, not premium alone.

> **Don't forget the money that stays in your pocket:** Qualified employee health coverage generally receives favorable federal income and payroll tax treatment. Owners and other special cases differ, and an income-tax deduction is not a dollar-for-dollar refund. See [how much employers pay](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance) for an explicitly assumed tax comparison.

**Replace the average with a quote for your employees**

Your employee locations and family mix are more useful than a national average. Start with company details, create your account and complete the census to compare a written proposal with your current budget.

[Get a quote for my actual team](https://www.getprescience.com/quote)

[Check the employer cost calculation](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Where the money goes

Federal medical loss ratio rules generally require insurers to meet an 80% standard in individual/small-group markets and 85% in large group, calculated with statutory adjustments and multi-year averaging. Rebates operate at an insurer/state/market level, not as a refund of your company's unused claims budget. The standards do not promise a particular premium or profit margin.

Costs are also still rising quickly. Employers in Mercer's (now Marsh's) 2026 survey expect total health benefit cost per employee to rise 8.2% in 2027 after planned changes, and about 11% if they changed nothing. If your renewal is above that, read [why your renewal went up](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up).

## Common budgeting mistakes

- **Budgeting on single rates only.** Your first employee with a spouse and two children can cost three times your average. Budget for the share of your team likely to add dependents in the next year.
- **Assuming a renewal.** Test multiple hypothetical increases and show the cash reserve required in each case. A market forecast is not the insurer's commitment.
- **Ignoring fees.** PEO and platform fees are often billed per employee per month on top of premiums.
- **Comparing premiums but not cost sharing.** A hypothetical $80 monthly employee-premium reduction saves $960 yearly. Compare that with the service costs and maximum exposure under each option; illness alone does not determine which total is lower.
- **Assuming every employee enrolls.** Some waive because they are on a spouse's plan or Medicare. Price the people who will actually enroll, and check carrier participation rules.

## How to pay less without a worse plan

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Against the $777 single and $2,249 family averages above, our quotes usually land 10–20% lower on comparable coverage. Get your number in about a minute.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Check the model against the first invoice

I would keep a simple reconciliation with one row per enrollee: coverage tier, total premium, employer amount, employee amount and effective date. The employer and employee columns must sum to the premium for every row. Keep fees in a separate column so a fixed service charge is not confused with medical premium. Compare the insurer's enrollment confirmation with payroll before the first deduction.

If an employee adds dependents or leaves during the year, model the actual effective date and ask about prorating or credits under the policy. Do not multiply the final month's bill by twelve and label it actual annual spending. For planning, keep a stable-enrollment scenario alongside a hiring scenario. That distinction makes it easier to explain why total benefit spending increased even when the rate per enrolled person changed little.

## Frequently asked questions

**How much does health insurance cost per employee per month?**

About $777 a month for single coverage and $2,249 for family coverage on average in 2025, according to KFF. Employers paid about $657 and $1,679 of that.

**How much does a small business pay for employee health insurance?**

At firms with 10–199 workers, the average single premium was $9,211 a year and the family premium $26,054 in 2025. Employers paid about 84% of single coverage and 64% of family coverage on average. Location, ages, plan level and fees move your number a lot.

**Why is health insurance more expensive in San Francisco?**

Premiums depend on the particular area, insurer, network and benefits. Obtain current comparable quotes; this guide does not establish a San Francisco surcharge or use private quote information.

**Which states have the most expensive employer health insurance?**

A state ranking depends on the survey year and population. This guide uses verified national employer benchmarks and does not present an unverified state ranking as a quote for your business.

**Is family coverage really three times the price of single coverage?**

Roughly. KFF's 2025 averages were $9,325 single and $26,993 family, a ratio of about 2.9.

**Do older employees cost more to insure?**

Often in age-rated small-group coverage, within federal and state limits. Some states prohibit or restrict age variation. The federal default adult curve reaches a 3:1 ratio, but it is not used identically everywhere.

**How much will health insurance costs go up next year?**

Employers in Mercer's 2026 survey expect an average 8.2% rise in health benefit cost per employee for 2027, after planned changes. Your renewal can be higher or lower depending on your claims, carrier and group size.

**Is a high-deductible plan cheaper?**

It can have a lower premium, but compare actual quotes and employer HSA contributions. KFF's plan-type averages describe different groups, not a guaranteed saving from switching plans.

## Sources

- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, Medical Loss Ratio](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)
- [HealthCare.gov, How insurance companies set health premiums](https://www.healthcare.gov/how-plans-set-your-premiums/)
- [CMS, State specific age curve variations (federal default age curve)](https://www.cms.gov/files/document/statespecagecrv042517pdf)
- [Mercer (Marsh), Employers expect health benefit costs to jump 8.2% in 2027 (September 2026)](https://www.mercer.com/en-us/about/newsroom/employers-expect-health-benefit-costs-to-jump-in-2027/)
- [CMS, Market rating reforms](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)
- [IRS, Fringe benefits](https://www.irs.gov/publications/p15b)

# How much do employers pay for employee health insurance?

Source: https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-12
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How much do employers pay for employee health insurance?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance

KFF's 2025 survey reports average worker premium shares of 16% for single coverage and 26% for family coverage, leaving employer shares of 84% and 74%. Subtracting average worker dollars from total premiums gives $7,885 and $20,143 annually. I use those benchmarks to compare contribution formulas, then test employee affordability and the employer's actual budget.

- **Employer share, single:** 84% ($7,885/year)
- **Employer share, family:** 74% ($20,143/year)
- **Common carrier minimum:** Often 50% of employee-only premium
- **ACA affordability (2026):** 9.96% of household income

## What employers pay on average

KFF's 2025 survey found covered workers contribute 16% of the premium for single coverage and 26% for family coverage. That leaves employers paying 84% and 74%, or about $7,885 and $20,143 a year ($657 and $1,679 a month).

**Employer and worker shares of the premium by firm size, 2025 (KFF)**

|  | All firms | Small firms (10–199) | Large firms (200+) |
| --- | --- | --- | --- |
| Employer share, single | 84% | 84% | 84% |
| Employer share, family | 74% | 64% | 77% |
| Family premium | $26,993 | $26,054 | $27,280 |
| Worker pays for family | $6,850 | $8,889 | $6,227 |
| Employer pays for family | $20,143 | About $17,165 | About $21,053 |

KFF's 2025 sample covers firms with at least ten workers. Its average percentage contributions and average dollar contributions are separately weighted measures, so multiplying one published average by another need not reproduce the dollar figure. At small firms, 29% of covered workers face more than half the family premium, versus 5% at large firms. That describes covered workers, not all employees or all companies.

## Are there minimums?

- **Carrier rules.** Ask for the actual employer contribution, minimum participation and valid-waiver rules. These vary by state and product. A rule for one carrier is not a universal federal minimum.
- **November 15–December 15.** Under federal guaranteed-availability rules, small groups that miss contribution or participation requirements have an annual enrollment opportunity. Confirm application timing and effective date with the insurer; other eligibility rules still apply.
- **ACA affordability.** ALE status generally uses the prior-year average of full-time employees plus equivalents, including aggregation rules. For plan years beginning in 2026, the affordability percentage is 9.96%. Employer safe harbors can use W-2 wages, rate of pay or the federal poverty line rather than household income. Minimum value and offer requirements also matter.
- **Smaller employers.** Federal ACA shared-responsibility penalties generally do not apply below ALE size, but state obligations and other benefits rules can still apply.
- **Tax credit.** The small business credit generally requires a uniform contribution of at least 50% of employee-only coverage, plus employee-count, wage and SHOP conditions, with limited exceptions.

## Six contribution policies, priced for a 10-person team

The same team can cost the company anywhere from about $47,000 to $146,000 a year depending on the policy. This example uses KFF's 2025 national averages: $777 a month for single coverage and $2,249 for family coverage (so dependents add $1,472 a month). Seven employees enroll alone; three cover families.

**Illustrative: 10 employees (7 single, 3 family) at national average premiums**

| Policy | Single employee pays | Family employee pays | Company pays per month | Company pays per year |
| --- | --- | --- | --- | --- |
| 50% of employee-only | $388.50 | $1,860.50 | $3,885 | $46,620 |
| 75% of employee-only | $194.25 | $1,666.25 | $5,827.50 | $69,930 |
| Flat $600 a month each | $177 | $1,649 | $6,000 | $72,000 |
| 100% of employee-only | $0 | $1,472 | $7,770 | $93,240 |
| 100% employee + 50% dependents | $0 | $736 | $9,978 | $119,736 |
| 100% of everyone | $0 | $0 | $12,186 | $146,232 |

**How the 100% employee + 50% dependents line adds up**

10 enrollees: 7 single at $777 and 3 family at $2,249 a month. The company pays every employee's own coverage and half of the $1,472 dependent cost.

- Employee-only coverage, 10 × $777: $7,770
- Half of dependent cost, 3 × $736: $2,208
- Company cost per month: $9,978
- Company cost per year: $119,736
- Each family employee pays: $736/month

The company pays about 82% of total premiums. Going to 100% for families adds $26,496 a year; dropping dependents to 0% saves the same amount.

Which policy fits?

- **50% of employee-only:** low employer spending in this illustration, but $1,860.50 monthly for each family enrollee. Test actual affordability rather than assuming a carrier minimum meets employee needs.
- **75% of employee-only:** the company pays more, but families still owe $1,666.25 monthly in this example.
- **Flat $600:** fixes the per-enrollee contribution, not total spending if enrollment grows. Where age rating applies, equal allowances can leave different employee balances.
- **100% of employee-only:** removes the employee-only payroll deduction, but dependent coverage still costs $1,472 monthly here.
- **100% employee plus half of incremental dependents:** lowers the family payroll deduction to $736. Specify that the percentage applies to the incremental cost, not the entire family premium.
- **100% of everyone:** transfers all modeled premium spending to the company. Employees still face the policy's cost sharing when they receive care.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Like the flat-dollar idea? Choice is the purest version of it: you set one allowance per employee class, and the company's cost never moves mid-year.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Price the contribution policy against an actual plan**

Use the same employee and dependent tiers when comparing the strategies above. Start a quote and create an account, then complete the census before choosing the employer contribution.

[Price my contribution policy](https://www.getprescience.com/quote)

## Tax treatment: why a premium dollar beats a salary dollar

- **For the company:** qualifying employee health premiums generally can be deducted as a business expense. Tax-credit coordination and owner treatment can change the result.
- **For employees:** employer-provided qualifying accident and health coverage is generally excluded from federal income and payroll taxes. Owners and some family or domestic-partner situations require separate review.
- **Employee share:** with a Section 125 premium-only plan, employees pay their share before income and payroll tax. See [Section 125 explained](https://www.getprescience.com/guides/section-125-pre-tax-health-insurance).
- **More-than-2% S corporation shareholders:** special W-2 income inclusion and possible self-employed health insurance deduction rules apply. Social Security and Medicare exclusions require the applicable plan conditions; do not process them as ordinary cafeteria-plan employees.
- **Sole proprietors and partners** are not employees for this purpose; they generally use the self-employed health insurance deduction instead.
- **Reporting:** W-2 cost reporting has its own rules and transition relief, including relief for employers filing fewer than 250 W-2s in the preceding year. Code DD is informational, not a new tax. Confirm which coverage and employer exceptions apply.

**Paying $777 a month in premium vs. $777 more in salary (illustrative)**

Illustrative eligible common-law employee in the 22% federal bracket, below the Social Security wage base, with a 7.65% employee and employer payroll-tax assumption. Ignore state tax, unemployment taxes and other payroll effects. Qualified health coverage is fully excludable.

- Company pays the premium: company cost: $777
- Company pays the premium: employee's tax: $0
- Company adds $777 salary: company cost with 7.65% payroll tax: $836.44
- Employee's tax on the $777 (29.65%): $230.38
- Employee keeps: $546.62

To leave the employee with $777 after tax, the company would have to pay about $1,104 in extra salary plus its own payroll tax. That is about $1,189 of company money for the same benefit, so paying the premium directly is roughly a third cheaper.

**What Section 125 saves on the employee's share (illustrative)**

A family employee pays $736 a month toward coverage. Same tax assumptions as above.

- Employee's income and payroll tax saved (29.65%): $218.22/month
- Company payroll tax saved (7.65%): $56.30/month
- Employee saves per year: About $2,618.69 before monthly rounding

These are hypothetical tax savings, not a vendor fee or guaranteed return. Compare administration costs and maintain a compliant written Section 125 plan, including eligibility and nondiscrimination requirements.

## Turn the contribution policy into an employee explanation

I would show candidates and employees a dollar table for each enrollment tier, including dependents. A percentage alone can be misleading: paying 75% of the whole family premium is different from paying the entire employee-only amount plus 75% of the incremental dependent premium. State the formula and the resulting payroll deduction together.

The contribution policy pays for enrollment, not every service. In a fictional plan with a $3,000 unmet deductible, a covered MRI with a $3,000 allowed amount could still cost the employee $3,000 even when the company pays every premium dollar. Use examples from the actual policy to show this distinction during enrollment.

## Edge cases founders run into

- **Part-time staff.** Eligibility depends on the plan and applicable law. For ACA shared responsibility, full-time generally means 30 hours of service weekly or 130 monthly, with permitted measurement methods. Do not assume a simple job label decides eligibility.
- **Different contributions.** Have the administrator review proposed employee classes under the relevant tax nondiscrimination, health-status nondiscrimination and state rules. A bona fide class is not automatic permission to favor owners or highly compensated employees.
- **Remote employees in other states.** One group plan can cover employees in several states if its network reaches them. Check the network where each person lives before you set one contribution for all. See [health insurance for remote employees](https://www.getprescience.com/guides/health-insurance-for-remote-employees).
- **Medicare-age workers.** Review Medicare Secondary Payer rules before changing eligibility or contributions. The age-based working-employer rule generally uses a 20-employee test, but disability, ESRD and multiemployer situations have different rules.
- **Waiting periods.** Once an employee is otherwise eligible, a group health plan generally cannot impose a waiting period longer than 90 days. Check the actual effective-date calculation and permitted eligibility conditions.
- **Midyear changes.** Review plan amendments, insurer terms, notices and Section 125 election rules before changing contributions. Do not assume employees can automatically change elections in response to any adjustment.

## How to set your contribution

1. **Start from your hiring market** Ask which benefits and payroll deductions matter to your hiring market without collecting personal diagnoses. Decide what the company can sustain under several enrollment scenarios.
2. **Price employee-only coverage first** Decide whether the company pays 75% or 100% of each employee's own coverage. This drives most of your cost.
3. **Then decide on dependents** Choose 0%, 50%, 75% or 100% of the extra cost of a spouse or children. Model it with your real census; three families on a ten-person team change the bill a lot.
4. **Model two years, with fees** Add all quoted fees and model several explicitly hypothetical renewals. Fixed-dollar and percentage policies distribute future premium increases differently; neither fixes total spending when enrollment changes.
5. **Compare what employees experience** Put the paycheck deduction, deductible and out-of-pocket maximum for each option in one table. That is the number employees will compare with their last job.
6. **Write it down and apply it consistently** Put the policy in your plan documents and offer letters, and apply it the same way to everyone in each class.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Whichever contribution policy you pick from the table above, a lower total premium makes every row cheaper. Our quotes usually come in 10–20% below comparable fully insured coverage.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What percentage of health insurance do employers pay?**

On average, 84% for single coverage and 74% for family coverage in KFF's 2025 survey. At firms with 10–199 workers, employers paid 84% for single coverage and 64% for family coverage.

**Do employers have to pay 50% of health insurance?**

There's no federal 50% rule, but many small group carriers require the employer to pay at least half of the employee-only premium. Groups that miss the rule can still enroll between November 15 and December 15. Large employers must meet the ACA's affordability standard.

**Should a startup pay 100% of employee health insurance?**

It is one option. Compare the cost with employee affordability, dependent contributions and other benefits. There is no universal startup contribution standard.

**Is it better to give employees a flat dollar amount or a percentage?**

A flat amount fixes the employer contribution per enrollee. A percentage shares premium increases in the same proportion, so both employee and employer dollars usually rise. Neither prevents spending increases when enrollment grows.

**Are employer health insurance contributions tax-deductible?**

Generally, qualifying employee premiums are deductible and excluded from employee federal income and payroll taxes. Owners, domestic partners and tax-credit coordination require separate treatment.

**Do employers have to cover dependents?**

ALE offer rules generally include dependent children under age 26 but not spouses; the employer need not subsidize those children to meet that particular rule. State requirements and plan terms may impose additional obligations.

**How much does it cost a company to cover a family?**

The average family premium was $26,993 in 2025, and employers paid $20,143 of it on average. At small firms the employer paid about $17,165 and the worker $8,889.

**Can I pay more for some employees than others?**

Potentially, but the applicable plan, tax nondiscrimination, health-status and state rules must be checked. Have the administrator review the classes and formula before implementation.

## Sources

- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS, Employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)
- [HealthCare.gov, The Small Business Health Care Tax Credit](https://www.healthcare.gov/small-businesses/provide-shop-coverage/small-business-tax-credits/)
- [IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits](https://www.irs.gov/publications/p15b)
- [IRS, S corporation compensation and medical insurance issues](https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues)
- [eCFR, Guaranteed availability](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-147/section-147.104)
- [IRS, 2026 affordability percentage](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS, Small business health credit](https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace)
- [DOL, Waiting period rule](https://www.dol.gov/newsroom/releases/ebsa/ebsa20140297)
- [CMS, Medicare Secondary Payer](https://www.cms.gov/medicare/coordination-benefits-recovery/overview/secondary-payer)

# What is the best health insurance for a small business?

Source: https://www.getprescience.com/guides/best-health-insurance-for-small-business
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-17
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "What is the best health insurance for a small business?." Prescience, October 28, 2026. https://www.getprescience.com/guides/best-health-insurance-for-small-business

The best plan is the one your team can actually use at a cost you can sustain for three years, not just this year. I judge small business health insurance on five things: total cost, renewal risk, the deductible and out-of-pocket maximum employees face, network breadth, and whether anyone helps people get care. A carrier small group plan, a level-funded plan, a PEO, an ICHRA or QSEHRA, or a newer option like ours can each be right; here's how to tell which.

- **What matters most:** Cost, renewals, deductible, network, support
- **Average small-firm deductible:** $2,631 (KFF, 2025)
- **Prescience Choice administration:** $20 per enrolled employee/month
- **Minimum group size:** 2 employees

## Five things to judge a plan on

1. **Total annual cost,** including PEO, platform or admin fees, not just premiums.
2. **Renewal terms.** Ask how future pricing is determined and whether any introductory discount expires. A fixed current-year price is not a multi-year guarantee.
3. **What employees pay at the point of care:** deductible, coinsurance and out-of-pocket maximum. The average small-firm deductible was $2,631 in 2025, and 53% of covered workers at small firms had a single deductible of $2,000 or more. KFF defines small firms as 10–199 workers and the deductible average excludes workers without a general deductible.
4. **Network.** PPOs let people see out-of-network doctors; HMOs and EPOs generally don't. Check that the doctors and hospitals your team already uses are in it.
5. **Support.** Who helps an employee find a specialist, get a prior authorization through or fight a bill?

## The six ways a small business can offer coverage

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row in the table fits your team, start with Choice: $20 per enrolled employee per month, in all 50 states.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Small business health coverage options in 2026**

| Option | How it works | Typical minimum size | Who carries the cost risk |
| --- | --- | --- | --- |
| Fully insured small group plan | Buy a plan from a carrier, usually through a broker. ACA rules set what it covers and how it's priced. | Check state and carrier eligibility; SHOP generally needs a non-owner employee | The carrier; you pay a fixed premium |
| Level-funded plan | Fixed monthly payments fund expected claims plus stop-loss insurance; you may get money back in a good year. 37% of covered workers at firms with 10–199 workers were in one in 2025 (KFF). | Product and state dependent | Employer obligations depend on claims funding, stop-loss and contract terms |
| PEO | Bundles contracted HR/payroll services and access to offered health benefits; plan structure varies | Vendor dependent | Check medical pricing, fees and termination obligations |
| ICHRA | Employer offers reimbursements under compliant individual-coverage rules; enrollment and substantiation are required | 1 employee | Employees, above the allowance |
| QSEHRA | For eligible non-ALE employers offering no group health plan; 2026 full-year caps are $6,450 self-only and $13,100 family | 1 employee | Employees, above the allowance |
| A designed plan like Prescience | We design and run the plan, with an effective $0 deductible, copays and a care team. | 2 employees | Fixed monthly cost set in your quote |

For a self-funded proposal, examine the employer's maximum liability, stop-loss exclusions, reimbursement timing and obligations after termination. A monthly payment schedule alone does not resolve those questions. State rules and product eligibility affect available options; get the relevant terms in writing before comparing them with an insurance premium.

## How the options score

**My scorecard for small business health insurance options**

|  | Cost | Renewal risk | Employee experience | Best for |
| --- | --- | --- | --- | --- |
| PEO | Quoted premium plus service fees | Contract specific | Check exact benefits and support | Employers valuing a combined HR service |
| ICHRA | Allowance plus administration | Reassess affordability and local premiums | Individual-market choices vary by location | Employers prepared to administer compliant allowances |
| Fully insured | Quoted premium and any separate fees | Future rates are not guaranteed | Choose among available networks and designs | Employers preferring insurer-paid claims |
| Level-funded | Scheduled payments plus any contractual obligations | Underwriting and contract specific | Check benefits separately from financing | Employers able to assess claims and termination risk |
| Prescience | Usually 10–20% below comparable fully insured coverage | Fixed before the plan starts in each quote | Effective $0 deductible and care navigation | Teams comparing cost, access and employee support |

**Put a team-specific proposal on your scorecard**

Use the criteria above to compare the written benefits, employee costs and employer budget. Start your Prescience quote with company details, then create an account and complete the census.

[Get a team-specific quote](https://www.getprescience.com/quote)

[Prepare the census for comparison](https://www.getprescience.com/integrations)

## Which option fits your company

- **Consider a PEO if** the combined HR, payroll and benefits service solves work you would otherwise buy separately. Compare all fees and exit terms. See [how to leave a PEO](https://www.getprescience.com/guides/how-to-leave-a-peo).
- **Choose a carrier small group plan if** you want the simplest, most familiar product and your broker can get a good network in your area. Ask what the second-year renewal is likely to be.
- **Consider level-funded coverage if** the proposal is available, its benefits fit, and you understand the employer's claim, renewal and termination obligations. Do not choose it solely because the scheduled payment is lower.
- **Consider an ICHRA or QSEHRA if** defined reimbursements fit the budget and employees have suitable individual coverage options. An affordable ICHRA offer generally blocks premium tax credits; an unaffordable offer requires opting out to pursue credits. QSEHRA coordination is different and may reduce the credit. Do not promise both the full allowance and a full subsidy.
- **Check eligibility before seeking group quotes if** the company has only founders. SHOP generally requires a qualifying employee other than an owner or spouse. State and product rules can differ outside SHOP. Compare individual coverage while confirming whether the business qualifies for group coverage.
- **Choose a plan like ours if** you want to compete with large-company benefits on a small-company budget, with a fixed cost and a plan people can use from the first visit.

**What I'd look at first, by company size**

| Employees | Usually worth quoting | Watch out for |
| --- | --- | --- |
| 2–5 | Carrier small group plan, PEO, QSEHRA, a designed plan like ours | Participation rules; PEO fees that look small now and grow with headcount |
| 6–20 | Carrier small group plan, a designed plan like ours, PEO renewal for comparison | PEO renewals after year one; first family enrollees changing your average |
| 21–49 | Carrier small group plan, level-funded, a designed plan like ours | Level-funded renewals after a large claim; planning for the 50-employee ACA rules |
| 50–99 | Level-funded, carrier plans, a designed plan like ours, ICHRA for some classes | ACA affordability and reporting (Forms 1094-C and 1095-C); in some states, small group rules still apply up to 100 |
| 100+ | Self-funded with stop-loss, level-funded, large group carrier plans | Claims volatility, pharmacy costs and vendor fees you now see directly |

> **Watch the participation rules:** Ask for the specific contribution and participation requirements and treatment of valid waivers. Under 45 CFR 147.104, an issuer may restrict groups that cannot satisfy those rules to the November 15–December 15 enrollment window. Confirm application deadlines and effective dates; this exception does not eliminate other group eligibility requirements.

## Compare two years, not one

The following comparison uses two fictional offers and hypothetical renewals. It is a sensitivity test, not a vendor quote, market forecast or report from a customer. Keep enrollment and benefit assumptions visible. Real renewal pricing must come from the relevant insurer or contract.

**Two-year cost for 12 enrollees (illustrative)**

Carrier plan: $850 per enrollee a month, 9% renewal. PEO: $700 first-year premium plus $120 per employee a month in fees, 25% renewal on premium.

- Carrier plan, year 1 (12 × $850 × 12): $122,400
- Carrier plan, year 2 (12 × $926.50 × 12): $133,416
- Carrier plan, two-year total: $255,816
- PEO, year 1 (12 × $820 × 12): $118,080
- PEO, year 2 (12 × $995 × 12): $143,280
- PEO, two-year total: $261,360

The PEO is $4,320 cheaper in year one and $5,544 more expensive across these two hypothetical years. No future outcome follows from that assumption. Repeat the calculation with several renewal rates and compare the value of the included HR services.

**What one employee pays for a $2,000 MRI (illustrative)**

Fictional covered in-network MRI with a $2,000 allowed amount. Plan A has a $2,631 deductible; Plan B has a $500 deductible then 20% coinsurance. Both start with empty accumulators, require authorization, and have maximums above the calculated cost.

- Plan A: all $2,000 falls under the deductible: $2,000
- Plan B: $500 deductible + 20% of $1,500: $800
- Difference for this one scan: $1,200

Two plans with similar premiums can feel completely different to someone who gets hurt. Compare the deductible and out-of-pocket maximum, not just price.

## Questions to ask before you sign

1. **What will year two cost?** Request the actual pricing commitment and any renewal cap in the contract. If future pricing is unknown, model a range. A missing renewal cap does not itself prove an introductory discount.
2. **What are all the fees?** Request premiums, separate fees, commissions and setup or exit charges. For covered ERISA brokerage or consulting arrangements expecting at least $1,000 compensation, federal disclosure requirements generally apply to contracts entered into, extended or renewed on or after December 27, 2021.
3. **What does an employee pay for common care?** Ask for the deductible, out-of-pocket maximum and the cost of a primary care visit, an MRI, an ER visit and a birth. The Summary of Benefits and Coverage shows the last one as a worked example.
4. **Are our doctors in network?** Send the list of doctors, hospitals and children's hospitals your team uses and get a yes or no for each, in every state where you have people.
5. **Who helps employees?** Ask who an employee calls to find a specialist, fix a denied claim or understand a bill, and how fast they answer.
6. **Can we start mid-year and keep our payroll?** Some options require a January 1 start or moving payroll. Know before you plan your switch. See [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year).

## Mistakes I see founders make

- **Choosing on premium alone,** then hearing from the first employee who needs surgery.
- **Picking a narrow network for a distributed team.** An HMO that is great in Austin can leave your Denver hire with nothing in network.
- **Forgetting dependents.** The plan your 25-year-old team likes may be wrong for the first senior hire with three children.
- **Not planning the exit.** Leaving a PEO or level-funded plan mid-year can mean a deductible reset and run-out claims. Pick something you won't have to leave in a year.
- **Using current headcount as the ACA test.** ALE status generally uses the prior calendar year average of full-time employees plus equivalents, with aggregation and other special rules. State obligations may differ.

## My pick

At Prescience, we design and run health plans for companies with 2 or more employees. Compare our quote with your other options using the same census, covered services and employee cost scenarios. Include the network and support your team needs, then choose the option that best fits those requirements and your budget.

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** On the five criteria above, Diamond is our answer: total cost usually 10–20% below comparable fully insured coverage, a cost fixed before the plan year, an effective $0 deductible, a broad network and 24/7 care navigation.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What type of health insurance is best for a small business?**

Compare cost, employee access, service and contractual obligations using the same census. No arrangement is best at a universal employee count.

**Is a PEO good for small business health insurance?**

It can be useful when the bundled services are worth their quoted cost. Compare the actual benefits, fees, renewal terms and cost of replacing those services separately.

**What's the best health insurance for a 10-person company?**

Compare a PEO renewal, a carrier small group plan and a Prescience quote on two-year total cost and what employees pay at the point of care.

**What is the minimum number of employees for group health insurance?**

SHOP generally requires a qualifying employee other than an owner or spouse. State and product eligibility rules can differ. Prescience works with groups of 2 or more employees; confirm the proposed group qualifies before relying on a quote.

**Is ICHRA better than a group plan?**

It depends on local individual plans, employee contributions, tax-credit interactions and administration. Review each employee location and compliant class design; a capped allowance alone does not establish better value.

**What is a QSEHRA and who can use it?**

An eligible employer that is not an ACA applicable large employer and offers no group health plan may provide a QSEHRA. The 2026 full-year limits are $6,450 self-only and $13,100 family. Tax-free reimbursements require minimum essential coverage and substantiation.

**Do small businesses have to offer health insurance?**

Federal ACA employer shared-responsibility rules generally apply at 50 full-time employees including equivalents, measured under the prior-year rules. State laws and other obligations can apply below that threshold.

**What's a good deductible for a small business plan?**

Choose a deductible employees can manage alongside premiums and the maximum. Compare specific service costs and employer account contributions rather than aiming at a survey average.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS, Employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)
- [CMS, Health Reimbursement Arrangements (ICHRA) overview](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [U.S. Department of Labor, Field Assistance Bulletin 2021-03 (broker compensation disclosure)](https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2021-03)
- [IRS, 2026 adjusted limits](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [eCFR, Guaranteed availability](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-147/section-147.104)
- [HealthCare.gov, QSEHRA rules](https://www.healthcare.gov/small-businesses/learn-more/qsehra/)
- [HealthCare.gov, Health insurance plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)

# What is the most affordable health insurance for a small business?

Source: https://www.getprescience.com/guides/most-affordable-health-insurance-for-small-business
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-23
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "What is the most affordable health insurance for a small business?." Prescience, October 28, 2026. https://www.getprescience.com/guides/most-affordable-health-insurance-for-small-business

The most affordable health plan balances employer spending with what employees pay to enroll and use care. I compare premiums, fees, account contributions, network access and maximum covered cost sharing. A lower premium can be valuable, but it should be evaluated alongside the actual benefits and the costs that move to employees.

- **Compare affordability:** Premiums, fees and employee cost sharing
- **Small business tax credit:** Up to 50% of premiums
- **Prescience Choice administration:** $20 per enrolled employee/month
- **Typical Prescience savings:** Usually 10–20% vs. fully insured, fixed in your quote

## Cheap vs. affordable

A low premium does not tell you why the plan costs less. Compare networks, covered medicines, deductible rules and service-specific charges. KFF's 2025 small-firm single deductible average was $2,631 among workers whose plans had a general deductible, for firms with 10–199 workers. That is context, not a prediction for your group or evidence that a particular benefit will pay for itself through avoided medical care.

**The lean plan vs. the richer plan when someone has a baby (illustrative)**

Fictional comparison, not actual quotes: ten single enrollees, fully employer-paid premiums. Lean plan: $600 monthly, $5,000 deductible, then 20%, $8,000 maximum. Richer plan: $780 monthly, $1,000 deductible, then 20%, $4,000 maximum. One maternal episode has $20,416 of covered in-network allowed claims in one year, all subject to these rules. Newborn and preventive claims are excluded.

- Extra premium for the richer plan, 10 × $180 × 12: $21,600 a year (company)
- Lean plan: $5,000 + 20% of $15,416, capped: $8,000 (employee)
- Richer plan: $1,000 + 20% of $19,416, capped: $4,000 (employee)

The lean design saves the company $21,600 in premiums and costs this member $4,000 more. This example does not establish which option is best for all ten people. Run other scenarios and compare payroll contributions, access and account funding before deciding.

## Eight ways to lower cost without gutting coverage

**Cost levers, what they save and what they cost you**

| Lever | What it saves | Trade-off |
| --- | --- | --- |
| Cut PEO or platform fees | The actual fee removed, less replacement services | You may need separate payroll and HR tools |
| Check introductory terms | Avoid relying on an expiring discount | Future renewals still need a sensitivity test |
| HDHP with employer HSA money | Actual premium difference less HSA contributions | Employees face a higher deductible unless you fund it |
| Section 125 premium-only plan | Applicable income and payroll tax exclusions | Written plan, eligibility and nondiscrimination administration |
| Small business tax credit | Up to 50% of employer premiums for two years | Eligibility, wage phaseouts and SHOP rules; limited exceptions |
| Contribution policy | Depends on enrollment and the contribution formula | Families pay more |
| Network choice | Only the saving shown in comparable quotes | Check service areas, providers and network exceptions |
| Steer care to fairly priced providers | Difference in actual covered allowed prices | Confirm clinical appropriateness, network and authorization |

1. **Compare all service fees.** If a hypothetical service costs $100 per employee monthly, fifteen employees cost $18,000 annually. That is an illustration, not a PEO benchmark. Subtract the cost of any replacement payroll or HR work before calling it a saving.
2. **Avoid teaser rates.** Ask how year two is priced before you sign.
3. **Pair a high-deductible plan with employer HSA money.** A cheaper plan plus employer HSA contributions can beat a rich plan on total cost. See the worked example below.
4. **Use tax rules.** Section 125 for pre-tax employee premiums; HSAs for tax-free medical money.
5. **Check the small business tax credit** if you have fewer than 25 full-time equivalents and modest average wages.
6. **Choose the contribution formula deliberately.** Paying all employee-only premiums and half the incremental dependent cost is one option, not an industry default. Show family employees the dollar result and check affordability requirements.
7. **Match the network to where people live.** A narrow HMO is good value for a team in one metro with a strong health system, and a bad deal for a distributed team.
8. **Compare covered prices for planned care.** Ask for estimates at suitable facilities, including professional and facility charges. Do not promise savings until network status, authorization and the allowed amount are confirmed.

## When an HDHP with HSA money is the cheapest good plan

HSA-qualified coverage can be worth quoting, but the comparison should hold network and benefits as constant as practical. For conventional HDHPs in 2026, minimum deductibles are $1,700 self-only and $3,400 family. HSA contribution limits are $4,400 and $8,750 including employer deposits, plus the eligible age-55 catch-up. Special individual-market bronze and catastrophic rules apply separately.

**Switching 10 single employees from a PPO to an HSA plan (illustrative)**

Fictional annual premiums, not market quotes: $9,818 for Plan A and $8,575 for an HSA-qualified Plan B. Assume ten eligible employees, full employer premium payment, a $1,000 upfront HSA deposit per person and no additional fees.

- PPO premiums, 10 × $9,818: $98,180
- HSA plan premiums, 10 × $8,575: $85,750
- Employer HSA deposits, 10 × $1,000: $10,000
- HSA plan total: $95,750
- Company saves: $2,430 a year

The saving is $2,430 under these assumptions. The HSA deposit belongs to employees even if they leave, but a $1,000 balance may not cover a large early claim. Check the actual deductible and deposit schedule. See [HDHP vs. copay plan](https://www.getprescience.com/guides/hdhp-vs-copay-plan).

## The small business health care tax credit

The federal small business health care tax credit can reach 50% of qualifying employer premiums for taxable employers, or 35% for eligible tax-exempt employers. The maximum is not automatic. Have the tax adviser compute the credit before including it in the budget.

- Fewer than 25 full-time equivalent employees. The full 50% needs 10 or fewer FTEs and average wages in the lowest band.
- For 2026, the wage phaseout begins above $34,100 average annual wages and reaches zero at $68,200; the employee-count phaseout also matters. Use the special Form 8941 counting and rounding rules.
- Generally pay a uniform percentage of at least 50% of employee-only premiums, subject to permitted arrangements and exclusions.
- Generally obtain SHOP coverage; IRS guidance provides limited exceptions where SHOP coverage is unavailable.
- Available for two consecutive tax years only.

The credit uses its own employee, owner, family-member and seasonal-worker counting rules. It is not the same calculation as ALE status. Check Form 8941 and applicable instructions; premiums used for the credit also affect the business deduction.

## ICHRA and QSEHRA: cheapest for the company, not always for the team

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If you take the allowance route, keep administration small too: Choice is $20 per enrolled employee per month, with no setup or platform fee.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

An ICHRA or QSEHRA defines reimbursements under a formal arrangement, not unrestricted cash. A fixed per-person allowance limits that component, but new enrollees, dependent tiers and administration can still raise total spending. QSEHRAs are for eligible non-ALE employers without a group health plan, with 2026 full-year caps of $6,450 self-only and $13,100 family.

Compare actual local individual plans and tax-credit effects. An affordable ICHRA offer generally prevents premium tax credits; an employee must opt out of an unaffordable ICHRA to seek credits if otherwise eligible. QSEHRA coordination can reduce or eliminate credits. Neither arrangement guarantees that a particular employee pays less. See [switching to ICHRA](https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra).

## Things that look cheap but aren't real health insurance

- **Short-term plans** aren't ACA-compliant. They can exclude pre-existing conditions and cap benefits.
- **Fixed indemnity plans** pay a set dollar amount per day or per service, not a share of the bill. A $100-a-day benefit means little against a $20,000 hospital stay.
- **Health care sharing ministries** are not insurance and don't guarantee payment.
- **Discount cards and telehealth-only memberships** are fine extras but cover nothing big.

> **Offering one of these as your health benefit can backfire:** These products should not be assumed to substitute for comprehensive group medical coverage or satisfy an ALE's offer obligations. Review applicable law and product terms before presenting them as an employee health plan. I would first compare comprehensive options and compliant allowances with clearly stated employee costs.

## What I would not cut, as a doctor

- **Manageable covered cost sharing.** Compare the actual maximum with employee resources. The 2026 ACA ceiling for covered in-network essential health benefits is $10,600 self-only on non-grandfathered plans; plans can set lower limits.
- **Mental health access.** Check actual covered services, appointment availability and applicable parity obligations. Do not infer access from a benefit category on a sales slide.
- **Affordable routine care.** Compare office visits, labs and prescriptions. Required preventive services on non-grandfathered plans generally have no deductible, copay or coinsurance in network when guideline conditions are met. Diagnostic care can be billed separately.
- **Usable drug coverage.** Check the exact formulary, tiers, authorization and pharmacy rules. A low generic copay does not show what a member pays for every medication.

## How to cut cost at your next renewal

1. **90 days out: get your numbers** Ask for the renewal, your claims summary if your group is large enough to get one, and a list of every fee you pay per employee per month.
2. **75 days out: get competing quotes** Quote at least two other routes on the same census: a carrier plan through a broker, a PEO or leaving one, and a newer option like ours.
3. **60 days out: compare total cost** Add premiums, fees and a realistic second-year increase. Then add what a typical employee pays for an MRI, an ER visit and a birth on each plan.
4. **45 days out: set your contribution** Decide employee-only and dependent percentages, and whether you'll add HSA money. Write down what each employee tier pays per paycheck.
5. **30 days out: run open enrollment** Explain changes in plain numbers. See [how to run open enrollment](https://www.getprescience.com/guides/how-to-run-open-enrollment).

**Compare the next renewal against your own employee list**

Use the full employer cost and employee contribution, rather than premium alone. Start a quote, create your account and complete the census before comparing the replacement proposal with your renewal.

[Compare my renewal costs](https://www.getprescience.com/quote)

[Check the full employer budget](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

## How we make it affordable

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Affordable for the company and for employees at the same time: a cost usually 10–20% below comparable fully insured coverage, and an effective $0 deductible.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What is the cheapest health insurance for a small business?**

Get comparable quotes. The lowest premium is not necessarily the lowest combined employer and employee cost; compare benefits, fees and usable providers.

**How can a small business afford health insurance?**

Cut admin fees, avoid teaser-rate PEO plans, use Section 125 and HSAs, check the small business tax credit, and consider a plan like Prescience's that's usually 10–20% below comparable fully insured coverage.

**Is ICHRA the most affordable option?**

Not necessarily. Compare actual individual-market prices, administration, employee contributions and premium-tax-credit eligibility under the offered allowance.

**Who qualifies for the small business health care tax credit?**

Employers with fewer than 25 full-time equivalents, average wages under an annually adjusted limit, at least a 50% uniform premium contribution and coverage bought through SHOP. It lasts two consecutive years.

**Is a high-deductible plan cheaper for a small business?**

Sometimes. Use comparable quotes and include employer account contributions and fees. Survey averages compare different enrolled populations and cannot guarantee your saving.

**How much can a small business save with a Section 125 plan?**

Savings depend on applicable tax rates, wages, eligibility and compliant plan administration. The 7.65% combined employee Social Security and Medicare rate does not apply without limit to all wages.

**Can I offer a short-term plan instead of group health insurance?**

Do not treat short-term coverage as a substitute for comprehensive employer coverage. Benefits, exclusions and state availability differ, and it does not automatically satisfy ACA employer obligations.

**Is it cheaper to pay employees more and let them buy their own insurance?**

Compare after-tax employee value and employer cost under the actual options. Unrestricted extra wages are taxable. Compliant ICHRA or QSEHRA reimbursements have separate coverage, eligibility and tax-credit rules.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [HealthCare.gov, The Small Business Health Care Tax Credit](https://www.healthcare.gov/small-businesses/provide-shop-coverage/small-business-tax-credits/)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Revenue Procedure 2025-19 (2026 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [HealthCare.gov, Out-of-pocket maximum/limit](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [IRS, 2026 adjusted limits](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS, Small business health credit](https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace)
- [IRS, Publication 15-B](https://www.irs.gov/publications/p15b)
- [CMS, HRAs](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [IRS, HSA changes](https://www.irs.gov/pub/irs-drop/n-26-05.pdf)
- [HealthCare.gov, QSEHRA rules](https://www.healthcare.gov/small-businesses/learn-more/qsehra/)
- [HealthCare.gov, Preventive services](https://www.healthcare.gov/coverage/preventive-care-benefits/)

# HMO vs. PPO vs. EPO: which should your company offer?

Source: https://www.getprescience.com/guides/hmo-vs-ppo-vs-epo
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-10
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "HMO vs. PPO vs. EPO: which should your company offer?." Prescience, October 28, 2026. https://www.getprescience.com/guides/hmo-vs-ppo-vs-epo

HMO and EPO plans generally limit non-emergency coverage to a network; PPOs generally also cover some out-of-network care at higher cost. Referral rules and prices depend on the actual product. I start with employees' locations, providers and medicines, then compare benefits and premiums. A familiar network label is not enough to establish access.

- **Workers on employer PPOs:** 46% (KFF, 2025)
- **Network check:** Verify the exact product and service area
- **Out-of-network care:** Check exceptions and balance-billing exposure
- **Prescience network:** Broad national PPO + direct contracts

## The four plan types

**How network types differ**

|  | HMO | EPO | PPO | POS |
| --- | --- | --- | --- | --- |
| Out-of-network coverage | Generally emergencies and approved/legal exceptions | Generally emergencies and approved/legal exceptions | Usually covered at higher cost, subject to terms | Some coverage, subject to terms |
| Referrals to specialists | Usually required | Usually not | Not required | Usually required |
| Primary care doctor required | Usually | Depends on product | No | Usually |
| Premium | Quote required | Quote required | Quote required | Quote required |
| Share of covered workers at employers, 2025 | 12% | Not reported separately | 46% | 9% |
| Average single deductible at employers, 2025 | $1,649 | Not reported separately | $1,337 | $2,122 |

KFF counts high-deductible plans with a savings option separately: they cover 33% of workers, with an average single deductible of $2,609. An HDHP is a cost-sharing design, not a network type, so it can sit on an HMO, EPO or PPO network. Deductible figures are for workers whose plan has one.

- **HMO (health maintenance organization):** you pick a primary care doctor who coordinates care and refers you to specialists in the network. Some HMOs are tied to one health system, such as an integrated group of hospitals and clinics.
- **EPO (exclusive provider organization):** generally covers services only in network, with emergency and other exceptions. Many allow direct specialist appointments, but verify the exact referral and primary-care rules.
- **PPO (preferred provider organization):** a network with lower prices, plus partial coverage outside it. No referrals.
- **POS (point of service):** an HMO-style plan with some out-of-network coverage, usually with a referral.

## What a member pays in three illustrative situations

To show the network effect alone, the examples below give all three plans the same in-network design: a $1,500 deductible, then 20% coinsurance, a $350 ER copay and a $6,000 out-of-pocket maximum. The PPO's out-of-network tier has a separate $3,000 deductible and 40% coinsurance. Prices are illustrative and assume none of the deductible has been met yet. All claims are assumed covered and authorized. The ER copay replaces deductible and coinsurance for the emergency claim. For the elective out-of-network example, assume no surprise-billing protection or approved network exception.

**1. An ER visit while traveling, at an out-of-network hospital**

A broken wrist on a ski trip. The hospital is out of network for all three plans. The plan's allowed amount for the visit is $2,500.

- HMO: $350 ER copay
- EPO: $350 ER copay
- PPO: $350 ER copay
- Can the hospital bill the balance?: No, for the emergency care itself

For covered emergency services subject to the No Surprises Act, in-network cost sharing generally applies even at an out-of-network facility. Later non-emergency follow-up can be subject to ordinary network rules. Post-stabilization services have additional rules; ask the plan about a disputed bill.

**2. A knee MRI ($3,000) and 10 physical therapy visits ($120 each)**

An employee wants to see a well-known sports medicine group. On the HMO, they first need a primary care visit and a referral. If the group is in network, the cost is the same on all three plans. The question is what happens when it isn't. Assume the out-of-network group bills $4,500 for the MRI and $150 per therapy visit. Assume the PPO recognizes $3,000 for the MRI and $120 for each therapy session; billed charges are not the allowed amounts.

- In network, any plan: $1,500 deductible + 20% of $1,500 MRI balance: $1,800
- In network, any plan: 20% of $1,200 PT: $240
- In network, total: $2,040
- Out of network, PPO: $3,000 deductible on the MRI + $1,500 balance bill: $4,500
- Out of network, PPO: 40% of $1,200 PT + $300 balance bill: $780
- Out of network, PPO, total: $5,280
- Out of network, HMO or EPO: full billed charges, not covered: $6,000

The PPO's out-of-network benefit helps, but much less than people expect: out-of-network spending often doesn't count toward the in-network out-of-pocket maximum, and balance bills don't count at all. A broad network matters more than an out-of-network tier.

**3. Having a baby**

Assume $20,416 in covered maternal allowed claims, subject to the deductible and coinsurance in a single plan year. The obstetrician and hospital are in network. This is fictional arithmetic, not a pregnancy quote; preventive benefits and newborn claims are excluded.

- Deductible: $1,500
- 20% of the remaining $18,916: $3,783
- Mother's share, any plan type: $5,283 (under the $6,000 maximum)
- If the anesthesiologist is out of network at the in-network hospital: No extra bill; federal law requires in-network cost sharing
- If the employee's long-time OB is out of network: HMO/EPO: not covered. PPO: out-of-network rates.

At the displayed whole-dollar precision, the member owes $5,283. The obstetrician and facility network status matter before enrollment. Newborn claims are separate and also affect family accumulators; confirm timely enrollment and the family limits.

## What the law protects, whatever the plan type

**Federal protections that apply to HMOs, EPOs and PPOs alike**

| Situation | Protected? | What the member pays |
| --- | --- | --- |
| Most covered emergency services | Generally protected under the No Surprises Act | In-network cost sharing; balance-billing restrictions apply |
| Certain out-of-network services at in-network hospitals or ambulatory surgical centers | Protected; ancillary services such as anesthesia cannot use the consent waiver | In-network cost sharing; some other non-emergency services permit a valid advance notice and consent exception |
| Covered air ambulance services | Yes | In-network cost sharing |
| Ground ambulance | No, under federal law (some states protect it) | Can be balance-billed |
| A specialist you choose to see out of network | No | HMO/EPO: full price. PPO: out-of-network tier plus balance bill |
| Required preventive services in network on non-grandfathered plans | Yes | no deductible, copay or coinsurance |

For covered in-network essential health benefits, non-grandfathered plans have 2026 ACA cost-sharing ceilings of $10,600 self-only and $21,200 family. Plans can set lower limits. Premiums, excluded services and permitted balance bills are not capped by that in-network limit.

## Is the HMO saving worth it for your team?

**20 employees: 15 in Austin, 5 remote in other states (illustrative)**

Fictional premium assumptions, not quotes: $818 monthly for a PPO and $720 for a local HMO. Assume all twenty employees need single coverage, the company pays the full premium, and the HMO offers no routine network access outside Texas. Actual plan availability and enrollment rules must be checked.

- PPO for all 20, 20 × $818: $16,360/month
- HMO for the 15 in Austin, 15 × $720: $10,800/month
- Something else for the 5 remote employees (PPO), 5 × $818: $4,090/month
- Split total: $14,890/month
- Saving vs. PPO for all: $1,470/month ($17,640/year)

The difference is $73.50 per employee per month across all twenty employees. Compare that saving with the extra administration and access limits. A move or a child attending college elsewhere calls for a service-area and eligibility review; do not assume routine care away from home is covered.

## What matters for employees

I test the network against both routine and complex care. Ask about nearby primary care, specialist appointments, children's hospitals and planned travel. If a medically necessary service is unavailable in network, ask whether the plan offers a network exception and what written approval is needed before treatment.

Employer-plan and individual-market networks can differ even under the same insurer name. Check each product directly. Market-wide plan counts do not tell you which doctors an employee can actually see. The chart shows covered-worker enrollment across employer-plan types in the same KFF survey. It does not measure individual-market availability. Use current plan directories and written benefit documents for a purchase decision.

_Chart: KFF 2025 covered-worker enrollment at firms with 10+ workers: PPO 46%, HDHP with savings option 33%, HMO 12%, POS 9%. Conventional plans, below 1%, are omitted._

- **Referrals add a step, not just a form.** An HMO referral can mean an extra visit and a wait before seeing a specialist.
- **Networks differ by state.** A regional HMO may have no doctors at all where your remote hires live, apart from emergencies.
- **Children's hospitals matter.** Check whether the nearest children's hospital and its specialists are in network before families enroll.
- **Prior authorization is separate from referrals.** PPOs don't need referrals, but every plan type can still require approval before an MRI, surgery or an expensive drug. Ask what needs approval and how long it takes.
- **Mental health networks are often thin.** Before choosing any plan type, check how many in-network therapists and psychiatrists near your team are taking new patients. A PPO's out-of-network benefit is often how people keep a therapist they already see.
- **Mid-treatment changes hurt.** Switching plan types during pregnancy or cancer care can force a change of doctor. Ask about continuity-of-care rules before you switch.

## Which to offer

- **Distributed team or people with established doctors:** a PPO.
- **Everyone in one metro with a strong integrated system:** an HMO can be good value.
- **Budget-constrained but want some flexibility:** an EPO with a broad network.
- **Want to save premium and offer choice:** offer two plans side by side, for example an HMO and a PPO, and let employees pick. Check your carrier's participation rules first. See [offering two health plans](https://www.getprescience.com/guides/two-health-insurance-plans).

1. **Collect the must-have providers** Ask employees (anonymously if they prefer) for the doctors, hospitals and children's hospitals they rely on, by ZIP code.
2. **Check each one in the carrier's directory, then by phone** Directories are often out of date. Call the office and ask whether they take that exact plan and network name, not just the carrier.
3. **Map where people live** For each state with an employee, confirm in-network primary care, an in-network hospital and a mental health provider taking new patients.
4. **Compare the cost of the same claims** Run the three situations above through each quote: an ER visit, an MRI with physical therapy and a birth.

Prescience offers a broad national PPO network, plus providers we contract with directly. I would still check the proposed network for each employee location and important provider before enrollment.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For distributed teams, the PPO row usually wins, and Diamond is built on a broad national PPO network plus providers we contract with directly.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

**Compare the plan options for your team's locations**

Keep network access, family costs and the contribution policy in the comparison. Start with company details and complete your employee census after account creation before relying on a written proposal.

[Compare plans for my team](https://www.getprescience.com/quote)

[Check the plan terms](https://www.getprescience.com/guides/health-insurance-glossary)

## Get an access answer you can rely on

I would send the administrator the exact plan name, network identifier, provider name, practice address and planned service. A provider can participate at one location and not another. Ask the provider and plan to confirm their answer, and keep the date and reference number. A directory entry is a starting point, especially for a specialist who is not accepting new patients.

Before changing plans, ask about ongoing authorizations, scheduled procedures and any continuity-of-care process. Record who will handle a denied authorization or inaccurate directory listing. Employees can supply this information directly to the administrator rather than sharing diagnoses with HR. A comparison is complete only when the coverage can work where the employee needs care.

## Frequently asked questions

**What is the difference between an HMO and a PPO?**

An HMO usually requires a primary care doctor and referrals, and covers only in-network care except emergencies. A PPO lets you see any provider, with lower costs in network, and doesn't require referrals.

**Is an EPO better than a PPO?**

Neither is universally better or cheaper. An EPO generally restricts elective care to its network; a PPO generally offers an out-of-network benefit with higher cost sharing. Compare actual premiums, providers and exceptions.

**Why are most marketplace plans HMOs and EPOs?**

Networks vary by product and location. Check the actual available plans rather than assuming an individual-market policy has the same network as an employer plan from the same insurer.

**Does an HMO cover emergencies out of network?**

For most covered emergency services subject to the No Surprises Act, out-of-network facilities must use in-network cost sharing and cannot balance bill. Ground ambulance and certain post-stabilization situations have different rules.

**Is a PPO worth the higher premium?**

For distributed teams, families with established doctors and anyone with a complex condition, usually yes. For a healthy team in one metro with a strong HMO, often no.

**What is a POS plan?**

A point-of-service plan is an HMO-style plan with a primary care doctor and referrals that also pays something for out-of-network care. KFF found 9% of covered workers in POS plans in 2025.

**Does out-of-network care count toward my out-of-pocket maximum?**

Ordinary elective out-of-network spending often does not count toward the in-network limit. Services protected by the No Surprises Act generally receive in-network cost-sharing treatment. Check separate out-of-network limits and balance-billing exposure.

**Can an HDHP be a PPO?**

Yes. A high-deductible plan describes the cost sharing, not the network. HSA-eligible plans come on HMO, EPO and PPO networks.

## Sources

- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, No Surprises Act: ending surprise medical bills](https://www.cms.gov/nosurprises)
- [HealthCare.gov, Out-of-pocket maximum/limit](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [HealthCare.gov, Plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)
- [CMS, Medical bill rights](https://www.cms.gov/initiatives/your-patient-rights/medical-bill-rights)

# HDHP vs. copay plan: which is better for employees?

Source: https://www.getprescience.com/guides/hdhp-vs-copay-plan
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-27
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "HDHP vs. copay plan: which is better for employees?." Prescience, October 28, 2026. https://www.getprescience.com/guides/hdhp-vs-copay-plan

An HSA-qualified high-deductible health plan can offer lower premiums and tax-advantaged saving, while a copay plan may make routine visits more predictable. Neither design wins for every employee. I compare annual premiums, employer contributions, covered services, cash needed early in the year and out-of-pocket limits using the same network and enrollment assumptions.

- **2026 HDHP minimum deductible:** $1,700 / $3,400
- **2026 HSA limit:** $4,400 / $8,750
- **Workers in HDHP with savings option:** 33% (KFF, 2025)
- **Prescience plans:** Effective $0 deductible

## Side by side

**HDHP vs. a traditional copay plan**

|  | HDHP | Copay plan |
| --- | --- | --- |
| Monthly premium | May be lower; compare actual quotes | May be higher; compare actual quotes |
| Average single premium at employers, 2025 (KFF) | $8,620 a year ($718/month) | PPO average: $9,818 a year ($818/month) |
| Deductible | At least $1,700 / $3,400 in 2026 | Often lower, sometimes none for visits |
| Average single deductible, 2025 (KFF) | $2,609 | PPO average: $1,337 |
| Office visit | Usually negotiated price before deductible; permitted exceptions apply | Flat copay (KFF average: $27 primary care, $45 specialist) |
| Preventive care | Covered before the deductible | Covered before the deductible |
| Out-of-pocket maximum, 2026 legal ceiling | $8,500 / $17,000 | $10,600 / $21,200 |
| Conventional HDHP / ACA ceiling, 2026 | Yes | No |
| HSA contributions | Only if plan and individual eligibility rules are met | Generally unavailable for conventional first-dollar medical coverage; statutory exceptions apply |

"Copay plan" here means a plan where most common services have a flat copay and the deductible is low or doesn't apply to visits. Many PPOs work this way; HMOs can too. An HDHP can sit on any network, so the comparison is about cost sharing, not doctors. See [HMO vs. PPO vs. EPO](https://www.getprescience.com/guides/hmo-vs-ppo-vs-epo) for networks.

KFF's HDHP/SO and PPO categories describe survey groups, not otherwise identical competing quotes. A PPO can also use an HSA-qualified design. The difference between the survey averages therefore cannot establish your employer's savings or the best plan for any particular employee.

## The 2026 HDHP and HSA rules

**HSA and HDHP limits for 2026 (IRS Rev. Proc. 2025-19)**

|  | Self-only | Family |
| --- | --- | --- |
| Minimum HDHP deductible | $1,700 | $3,400 |
| Maximum HDHP out-of-pocket | $8,500 | $17,000 |
| HSA contribution limit (employer + employee) | $4,400 | $8,750 |
| Extra catch-up contribution, age 55+ | $1,000 | $1,000 |

- **Telehealth before the deductible** is now permanently allowed without losing HSA eligibility, for plan years starting in 2025 or later.
- **Individual-market bronze and catastrophic coverage:** qualifying coverage is treated as HSA-compatible from 2026 under IRS Notice 2026-5, including specified off-Exchange situations. The change does not automatically qualify every employer bronze plan.
- **Direct primary care:** qualifying arrangements can preserve HSA contribution eligibility in 2026 when aggregate monthly fees stay within $150 for one person or $300 for more than one. Eligible fees may be paid from an HSA; service and payment restrictions apply.
- **Preventive care,** including many screenings and some chronic-condition medicines on the IRS list, can be covered before the deductible.

## Four years in one employee's life, on each plan

These are fictional plan designs, not actual quotes. The company pays the entire premium in both cases. A $100 monthly premium difference saves $1,200 per employee annually; after a $1,000 employer HSA deposit, its saving is $200, before fees. Assume a full upfront HSA deposit and full-year eligibility.

- **HDHP:** $718 a month, $2,000 deductible, then 20% coinsurance, $5,000 out-of-pocket maximum, $1,000 employer HSA deposit.
- **Copay plan:** $818 a month, $30 primary care, $40 therapy and $10 generic drug copays, $350 ER copay, $500 deductible then 20% for imaging and hospital care, $4,000 out-of-pocket maximum. Physical therapy is $40 per visit. The ER copay replaces all other cost sharing for the illustrated ER claim.

**Illustrative employee spending and unused HSA value; each scenario is separate**

| Year | HDHP | Copay plan | Better for the employee |
| --- | --- | --- | --- |
| Healthy: a physical, 2 sick visits ($150 each), a generic prescription ($15/month) | $480 paid from the HSA; $520 left over | $180 ($60 visits + $120 drug copays) | HDHP has $700 more combined cash/account value; it is not $700 less in claim payments |
| One ER visit (allowed amount $2,500) | $2,100, or $1,100 after the HSA deposit | $350 | Copay plan, by $750 |
| Knee MRI ($3,000) + 10 physical therapy visits ($120 each) | $2,440, or $1,440 after the HSA deposit | $1,400 ($1,000 MRI + $400 PT) | About even |
| High-cost covered episode ($20,416 assumed allowed claims) | $5,000 maximum, or $4,000 after the HSA deposit | $4,000 maximum | Even |

**The ER line, step by step**

Broken wrist, in-network ER, allowed amount $2,500. Nothing spent yet this year.

- HDHP: deductible: $2,000
- HDHP: 20% of the remaining $500: $100
- HDHP: paid from the $1,000 employer HSA deposit: –$1,000
- HDHP: employee's own money: $1,100
- Copay plan: ER copay: $350

Under these specific assumptions, the employee pays $750 less on the copay plan. A different premium contribution, HSA deposit, ER benefit or remaining deductible could reverse the comparison. This does not predict results for a workforce.

The table separates a quiet year, moderate bills and a high-cost year. It is a decision aid, not a general rule that one design always wins in each category. I would also calculate annual employee premiums plus the applicable maximum, less employer account contributions, for covered in-network care. Exclusions and out-of-network bills remain additional exposure.

## What the HSA is really worth

Under federal rules, eligible HSA contributions receive favorable income-tax treatment, earnings can grow tax-free, and withdrawals for qualified medical expenses can be tax-free. Contributions through a Section 125 cafeteria plan can also avoid payroll tax. State treatment can differ. Unused balances carry over and remain the employee's after leaving the company.

**Tax saved on a $2,000 employee contribution (illustrative)**

Illustrative eligible employee in the 22% federal bracket, contributing through a Section 125 payroll arrangement. Assume wages remain below the Social Security wage base and no Additional Medicare Tax effect. Ignore state taxes.

- Federal income tax saved (22%): $440
- Social Security and Medicare saved (7.65%): $153
- Employee saves: $593
- Company payroll tax saved (7.65%): $153

Valuable for people with spare cash. Less useful for an employee who lives paycheck to paycheck and can't fund the account before a bill arrives.

## Who each plan suits

- **Consider an HDHP:** when actual premium savings and employer HSA deposits compensate for cost sharing, and the employee can handle the early-year bill.
- **Consider a copay plan:** when its actual benefits make recurring services affordable and its premium is sustainable. Compare medicines, therapy and specialist costs individually.
- **Either, after comparing employer funding:** an employer HSA deposit can reduce the cash an employee needs to supply, but does not change the insurance deductible. KFF found that 3% of workers with single coverage in HSA-qualified HDHPs received an employer contribution at least as large as their deductible. Check deposit timing as well as the annual amount.

The problem is that employers can't pick plans person by person, and people don't know in January whether they'll need surgery in June. Offering both side by side is common; see [offering two health plans](https://www.getprescience.com/guides/two-health-insurance-plans).

## Two ways to close the deductible gap

Employers who like the HDHP's lower premium but not its effect on sick employees can fund part of the deductible. There are two tools, and they behave differently.

**HSA deposit vs. HRA for funding the deductible**

|  | Employer HSA deposit | HRA paired with the plan |
| --- | --- | --- |
| When the company pays | On the contribution schedule, regardless of claims | Only when an employee has a bill |
| Who owns the money | The employee, permanently | The company; unused money stays with it |
| Keeps HSA eligibility | Yes | Only if the HRA is limited (for example, post-deductible or dental and vision) |
| Average 2025 employer contribution (KFF) | $690 single | $1,966 single |
| Best for | Recruiting, long-tenure teams, people who save | Keeping cost low while protecting the employees who get sick |

**HDHP plus an HRA for the first $1,500 of the deductible (illustrative)**

Fictional alternative that is not HSA-compatible. Ten single employees; assume $100 monthly premium savings each. An HRA pays the first $1,500 of a $2,000 deductible. Three employees use the full allowance and the other seven use none. Ignore administration fees.

- Premium saving, 10 × $100 × 12: $12,000
- HRA payments, 3 × $1,500: –$4,500
- Company saves: $7,500
- Most an employee pays before coinsurance: $500

The illustrated saving is $7,500 before fees. If all ten use the allowance, reimbursements total $15,000 and exceed the $12,000 premium saving by $3,000. This first-dollar general medical HRA blocks HSA contributions; it cannot preserve eligibility merely by keeping the HDHP name.

## HSA traps employees and employers hit

- **Medicare.** Once an employee enrolls in any part of Medicare, including Part A, they can't contribute to an HSA. See [employer health insurance and Medicare](https://www.getprescience.com/guides/employer-health-insurance-and-medicare).
- **A spouse's health FSA.** If a spouse has a general-purpose health FSA that can pay the employee's bills, the employee isn't HSA-eligible. A limited-purpose (dental and vision) FSA is fine.
- **Other coverage.** Being covered by a non-HDHP plan, such as a spouse's copay plan, also ends eligibility.
- **Mid-year enrollment.** Contribution limits are prorated by month unless the employee uses the last-month rule, which requires staying HSA-eligible for the next full year.
- **Family deductibles.** Conventional HSA-qualified family coverage generally cannot pay non-exempt benefits before the $3,400 family minimum in 2026. Individual-market bronze and catastrophic exceptions should be checked separately.
- **Employer deposits must be comparable.** Outside a Section 125 plan, employer HSA contributions must be the same amount or percentage for comparable employees.

## How to decide for your team

1. **Look at who you employ** Ask for anonymous benefit priorities and affordability concerns. Have employees review personal medical scenarios privately with the administrator. Do not ask managers to collect diagnoses or pregnancy plans.
2. **Price both on the same census** Get an HDHP and a copay plan quote on the same network. Note the monthly difference per employee and per family.
3. **Decide what you'll give back** Choose an HSA deposit or HRA amount. Model several deposit amounts against covered claims and available cash. Even funding the full deductible does not change the plan’s coinsurance, network or maximum.
4. **Run the four scenarios** Use the healthy year, ER visit, MRI and baby above with your quoted numbers. Share the table with employees during open enrollment so they can choose with real figures.
5. **Consider offering both** If your carrier allows it, offer both plans and let employees choose. Set your contribution so the HDHP's lower premium is visible in their paycheck.

**Price the plan and the account contribution together**

Use the same employee tiers and employer budget when comparing an HDHP with a copay plan. Start a quote, create your account and complete the census before deciding which written proposal works for your team.

[Compare plans for my team](https://www.getprescience.com/quote)

[Work through the HDHP versus PPO calculation](https://www.getprescience.com/tools/hdhp-vs-ppo-calculator)

## Getting both

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** You don't have to choose between a low premium and predictable visits: Diamond pairs an effective $0 deductible with simple copays, at a cost usually below comparable fully insured plans.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Is an HDHP better than a PPO copay plan?**

Compare the actual premium, network, account contribution and cost sharing. HDHP describes a benefit design; PPO describes a network arrangement. Neither label establishes which plan has lower total cost.

**What is the minimum deductible for an HDHP in 2026?**

$1,700 for self-only coverage and $3,400 for family coverage.

**Can an HDHP have copays?**

Yes, generally after the applicable deductible. Certain preventive benefits and permitted telehealth can receive earlier coverage. An HSA deposit helps pay bills but does not change how the insurer applies its deductible.

**How much can I put in an HSA in 2026?**

$4,400 for self-only coverage and $8,750 for family coverage, including employer deposits, plus $1,000 more if you are 55 or older.

**How much do employers put into HSAs?**

KFF found an average of $690 for single coverage and $1,296 for family coverage in 2025, counting workers whose employer put in nothing. Among employers that contribute, it was $806 and $1,523.

**Is an HDHP cheaper for the employer?**

It can be, but use comparable quotes. Subtract employer HSA deposits and fees from premium savings. Different survey averages are not a guaranteed discount for the same group.

**What happens to HSA money when an employee leaves?**

It stays with them. HSA money belongs to the employee, including the employer's deposits, once it is in the account.

**Can someone on Medicare use an HDHP?**

They can stay on the plan, but they can't contribute to an HSA after enrolling in Medicare. They can still spend money already in the account.

## Sources

- [IRS Revenue Procedure 2025-19 (2026 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS, Guidance on new HSA tax benefits under the One, Big, Beautiful Bill](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-on-new-tax-benefits-for-health-savings-account-participants-under-the-one-big-beautiful-bill)
- [IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans](https://www.irs.gov/publications/p969)
- [IRS, Notice 2026-5](https://www.irs.gov/pub/irs-drop/n-26-05.pdf)
- [IRS, Publication 15-B](https://www.irs.gov/publications/p15b)
- [HealthCare.gov, Out-of-pocket maximum](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)

# How do insurance companies price small business health insurance?

Source: https://www.getprescience.com/guides/how-carriers-price-health-insurance
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-31
Updated: 2026-10-31
Cite as: Aditya Jain, MD. "How do insurance companies price small business health insurance?." Prescience, October 31, 2026. https://www.getprescience.com/guides/how-carriers-price-health-insurance

ACA-compliant fully insured small-group premiums cannot vary by your company's health status or claims. For a given product, federal rules permit age, tobacco, geography and family variation, subject to state restrictions. Large-group and underwritten arrangements can use different methods. I first identify the market, then separate plan rates, member factors and enrollment changes.

- **Allowed rating factors:** Age, tobacco, location, family size
- **Age band limit:** Up to 3:1 for adults
- **Small group MLR floor:** 80%
- **2027 group medical trend:** 9.0% (PwC)

## Which pricing rules apply to your company

The federal small-employer definition generally covers 1–50 employees, and states can extend it to 100. California, New York and Vermont use the expanded market. Colorado changed to 1–50 for 2026, with transition provisions for some existing 51–100 groups. Market-size counting and timing are not interchangeable with the ACA employer-mandate test; confirm both separately.

**How each kind of plan is priced**

| Arrangement | Who it's for | What sets your price |
| --- | --- | --- |
| ACA small group (fully insured) | Generally 1–50; some states extend to 100; Colorado transition rules apply | Carrier's pooled base rate, adjusted only for age, tobacco, area and who is covered. Your claims don't count. |
| Large group (fully insured) | 51+ (or 101+) employees | May blend group claims with manual rates and other permitted factors; method varies |
| Level-funded | Small and midsize groups; minimums vary by carrier | Medical underwriting: health questionnaires or prior claims, plus your census. |
| PEO master plan | Companies that join the PEO | Depends on the offered plan, market rules and PEO contract; do not assume every PEO uses one method |
| ICHRA | Any size | Individual market rates for each employee, which use the same ACA age, tobacco and area rules. |

## The four ACA rating factors

- **Age:** premiums can rise with age, up to three times as much for a 64-year-old as for a 21-year-old.
- **Tobacco:** federal maximum 1.5:1, with stricter state limits possible and wellness-program requirements in small-group coverage.
- **Location:** carriers set rates by geographic rating area, usually groups of counties or ZIP codes.
- **Family coverage:** federal per-member rating generally sums covered members, subject to the child cap; community-rated states can use approved family tiers.

Health status, claims history, gender, industry and group size can't be used in the small group market. Some states go further: New York and Vermont require pure community rating with no age adjustment, and use fixed family tiers instead (in New York, two adults with children pay 2.85 times the single rate).

**Federal default age curve (age 21 = 1.000). States without their own curve use these factors.**

| Age | Factor | Age | Factor |
| --- | --- | --- | --- |
| 0–14 | 0.765 | 40 | 1.278 |
| 18 | 0.913 | 45 | 1.444 |
| 21–24 | 1.000 | 50 | 1.786 |
| 25 | 1.004 | 55 | 2.230 |
| 30 | 1.135 | 60 | 2.714 |
| 35 | 1.222 | 64 and older | 3.000 |

At age 40 the default factor is 1.278, about 28% above age 21; at 55 it is 2.230. The effect of an older hire depends on whom the hire adds to or replaces in the census, not a universal rule about the number of younger employees. States can use different permitted curves. Confirm the applicable state method rather than treating this federal table as a quote.

**Selected state tobacco limits shown in the CMS state-rating table; confirm current state/product rules**

| Tobacco ratio | States |
| --- | --- |
| No tobacco surcharge (1:1) | California, District of Columbia, Massachusetts, New Jersey, New York, Rhode Island, Vermont; Connecticut small group |
| 1.15:1 | Colorado |
| 1.2:1 | Arkansas; North Carolina small group |
| 1.4:1 | Kentucky |
| Up to 1.5:1 | Most other states |

> **Only the three oldest children count:** Under federal per-member rating, at most the three oldest covered children under age 21 count toward a family premium. Covered adults and children aged 21 or older are separate. State-specific family-tier methods can differ. This is a premium rule, not a limit on the number of children eligible for coverage.

## How the base rate is set

An ACA small-group issuer develops its index rate using the expected claims costs of its state small-group risk pool. Permitted adjustments then produce product and member rates. A simplified explanation groups the cost inputs as follows; this is not a substitute for the insurer's actual rate filing:

- **Medical trend:** projected changes in prices and utilization. PwC's 2027 report projects 9.0% group trend for 2027 and restates 2026 group trend to 9.0%, up from its earlier 8.5% estimate. These forecasts are not guaranteed policy renewals.
- **Administration:** claims processing, customer service, technology.
- **Distribution:** broker commissions and general agency fees.
- **Taxes and fees:** state premium taxes and federal fees.
- **Profit or contingency margin.**

Product benefits, network and permitted geographic/member factors affect the final premium. Small-group rates can change with the effective quarter, subject to applicable rules. Request the exact filing and effective date from the insurer or state regulator. A public filing's average increase is not necessarily the percentage for your product or census.

Federal MLR standards generally use an 80% minimum in individual/small-group markets and 85% in large group, with statutory adjustments and multi-year averaging. The calculation is at insurer/state/market level, not a claim-spending target for each employer. Applicable rebates do not establish that your group's unused premium is refundable, and 20% is not simply a profit allowance.

## Worked example: pricing an 8-person team

**One small group plan, priced member by member**

Illustrative. An 8-employee company in a state using the federal age curve. The carrier's base rate for the chosen plan in this area is $430 a month for a 21-year-old. Employees are 25, 29, 31, 34, 38, 42, 47 and 55. The 42-year-old covers a 40-year-old spouse and two children under 14. No tobacco users. The children are ages 8 and 10, so they remain in the 0–14 band at renewal. The rate and 9% increase are fictional assumptions, not a quoted product or forecast.

- Age 25 employee (1.004): $431.72
- Age 55 employee (2.230): $958.90
- Age 42 family: 1.325 + 1.278 + 0.765 × 2: $1,777.19
- Eight employee factors: 1.004 + 1.119 + 1.159 + 1.214 + 1.246 + 1.325 + 1.563 + 2.230: 10.860
- Sum of all 11 member factors: 13.668
- Total monthly premium (13.668 × $430): $5,877.24
- Next year: everyone one year older, factors sum to: 13.983 (+2.3%)
- Next year: base rate after 9% trend: $468.70
- Next year: total monthly premium (13.983 × $468.70): $6,553.83

The calculated renewal is 11.51% higher: a 9% rate assumption compounded with a 2.30% increase in summed age factors. It is not simply their sum. Some composite billing methods average member rates into tiers; approved state methods can differ.

Replacing the age-55 factor of 2.230 with the age-28 factor of 1.087 reduces this fictional monthly total by $491.49 at a $430 unit rate. That is a census change, not a health-status discount. A different rating area could also change the unit rate, but its direction must come from the actual filing.

**Price the people on your own employee list**

Age, home ZIP and family mix can change the total. Use your actual census for a proposal, and keep the pricing rules for each funding arrangement separate when comparing results.

[Get a quote for my actual team](https://www.getprescience.com/quote)

## How large groups are priced on their own claims

Large-group insurers may consider experience rating: adjusting available claims for expected changes and blending them with broader pricing assumptions. The weight assigned to group experience, treatment of large claims and other permitted factors vary by insurer, group and jurisdiction. Request an explanation instead of assuming every large group receives the same formula.

**A large group renewal, simplified**

Fictional simplified weighting exercise, not an insurer quote. A 150-employee company has a $700 per-member monthly manual estimate and a comparable $780 experience estimate. Assume both are on the same cost basis before trend, with 60% experience weight and 9% trend. Exclude other pricing adjustments.

- Own experience × 60%: $468.00
- Manual rate × 40%: $280.00
- Blended rate: $748.00
- Trended forward 9%: $815.32

The blended, trended estimate is $815.32, about 16.5% above the untrended $700 manual input. This illustrates weighting only. In practice, ask how the carrier treats large claims, administrative costs, timing and uncertainty before treating any experience calculation as a premium.

Past claims do not settle next year's price. The insurer's expected future costs, pooling assumptions and contract terms matter. An employer can request an explanation and alternative quotes without asking coworkers for medical details or assuming that a diagnosis explains a particular percentage increase.

> **Edge case: crossing the small group line:** Confirm the state definition, counting period and renewal treatment before assuming growth changes markets. Colorado's 2026 change has a transition path for qualifying existing 51–100 groups, potentially lasting five years from issuance, with limits on switching. Ask the insurer to document how the rules apply to the specific policy.

## What's different for PEOs and level-funded plans

- **PEO proposals:** identify the actual policy, pricing basis, included services and renewal terms. If an introductory discount exists, ask for its expiration in writing. Do not infer the cause of a renewal from the PEO label.
- **Level-funded proposals:** medical underwriting and stop-loss terms can affect availability and price. Check claims obligations, exclusions, surplus conditions and termination exposure. Scheduled payments do not by themselves describe maximum employer liability.
- **ICHRA:** individual premiums follow applicable individual-market rating rules; the employer sets a compliant reimbursement offer. Compare actual local products and tax-credit effects instead of applying a national rate-change headline to every employee.

Different arrangements allocate obligations differently. I would compare current cost, renewal uncertainty, covered services and employee access using the same census. A low first-year figure is not proof of durable savings, and a general statement about a healthy workforce cannot replace the actual underwriting and contract review.

## What you can actually change

1. **Send a clean census** Submit accurate dates of birth, locations and proposed enrollment through a secure process. Supply only information required for that product and pricing method. Reconcile quote assumptions with final enrollment before accepting the bill.
2. **Price more than one plan design** Request several available benefit designs, ideally on the same network. Compare employee cost sharing and employer annual expense as well as the premium difference.
3. **Check the network factor** Ask for comparable network options and verify important providers and remote locations. A network label does not establish either price or access.
4. **Pick the start date on purpose** Because small group rates can change quarterly, quote the plan for the start date you'll actually use.
5. **Compare across markets** Get at least one quote from a different kind of arrangement: ACA small group, level-funded or another option. They price on different inputs, so the gap can be large.

For what renewals look like in practice, see [why did our health insurance renewal go up](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up). For current averages, see [average employee health insurance cost](https://www.getprescience.com/guides/average-employee-health-insurance-cost).

## How we price

Prescience sets one monthly cost in the quote before the plan starts. Compare that written cost and the proposed benefits with the alternatives; it does not establish a future multi-year renewal guarantee.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Instead of a rate built from your team's ages each renewal, a Diamond quote gives you one monthly cost for the plan year, set before the plan starts.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Can insurers charge more for pre-existing conditions in small group plans?**

No. In the ACA small group market, premiums can vary only by age, tobacco use, location and family size, plus the plan you choose.

**Why do small group premiums go up every year?**

Rates may change with pooled costs, benefits and permitted member factors. Aging is not a universal 2–3% surcharge, and some ages share the same factor. Compare the actual census and rate filing.

**Do carriers look at our claims?**

Not for ACA small group pricing. Large group, level-funded and many PEO arrangements do consider claims or health information.

**How much more does a 60-year-old cost than a 25-year-old?**

On the federal default age curve, a 60-year-old's factor is 2.714 and a 25-year-old's is 1.004, so about 2.7 times as much for the same plan.

**Do children cost the same as adults?**

No. Under the federal curve, a child 0–14 has a factor of 0.765, and only the three oldest children under 21 are charged.

**What does the 80% medical loss ratio mean for my premium?**

In the small group market, carriers must spend at least 80% of premium on medical care and quality improvement, or pay rebates. It limits overhead and profit, not the growth of medical costs.

**Is a composite rate different from age rating?**

Composite billing averages rates into specified tiers under the applicable method. Federal and approved state methods differ; ask how changes in enrollment affect your invoice and renewal.

**Where can I see why my carrier raised rates?**

Small group rate filings are public. Look up the carrier at ratereview.healthcare.gov or on your state insurance department's site, and ask your carrier or broker to split your renewal into trend, aging and plan changes.

## Sources

- [HealthCare.gov, How insurance companies set health premiums](https://www.healthcare.gov/how-plans-set-your-premiums/)
- [CMS, State-specific age curve variations (federal default age curve)](https://www.cms.gov/files/document/statespecagecrv042517pdf)
- [CMS, Market rating reforms: state rating requirements](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/state-rating)
- [CMS, Medical Loss Ratio](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)
- [PwC, Medical cost trend 2027 (including restated 2026 trend)](https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2027.pdf)
- [Mercer, Employers expect health benefit costs to jump in 2027 (September 2026)](https://www.mercer.com/en-us/about/newsroom/employers-expect-health-benefit-costs-to-jump-in-2027/)
- [Colorado DOI, 2026 small-employer change](https://content.govdelivery.com/accounts/CODORA/bulletins/3ebe767)
- [Colorado General Assembly, SB24-073](https://leg.colorado.gov/bills/sb24-073)
- [CMS, Market rating reforms](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)

# Why did our health insurance renewal go up so much?

Source: https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-20
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Why did our health insurance renewal go up so much?." Prescience, October 28, 2026. https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up

A larger renewal bill can reflect higher rates, age factors, benefit changes, enrollment changes or a different employer contribution. I separate those components before deciding whether to accept, adjust or switch coverage. Your pricing arrangement matters: an ACA small-group insurer cannot raise your group's rate because of its own health status or claims.

- **2027 group medical trend:** 9.0% (PwC)
- **2025 family premium growth:** 6% (KFF)
- **Start with:** Same census, benefits and contribution formula
- **Prescience pricing:** Fixed in each quote

## Use market forecasts as context

Before you decide whether your renewal is high, compare it with the market. These are the benchmarks I use:

**Market benchmarks for renewal increases**

| Measure | Figure | Source |
| --- | --- | --- |
| Average premium growth, 2025 | +5% single, +6% family | KFF Employer Health Benefits Survey |
| Family premium growth over 5 years | +26% (2020–2025) | KFF |
| Employer cost per employee, 2026 | +6.7% (projected) | Mercer |
| Employer cost per employee, 2027 | +8.2% after plan changes, +11% with no changes | Mercer, September 2026 |
| Group medical cost trend | 9.0% for 2026 (restated) and 2027 (projected) | PwC Health Research Institute |

These measures describe different things: survey premiums, employer benefit spending and medical cost trend. None creates a normal renewal range for every small group. PwC's 2027 report revised its earlier 2026 group estimate from 8.5% to 9.0%. Use the forecasts to frame questions, then request the rate and census calculation for your policy.

## The six usual causes

1. **Medical trend.** Higher provider prices, specialty drugs like GLP-1s, more behavioral health care and more aggressive billing push the carrier's base rate up. PwC projects 9.0% for group plans in 2027; Mercer attributes a full percentage point of 2027 cost growth to GLP-1 use alone.
2. **Age factors.** Where age rating applies, compare the current and renewal census under the actual curve. The federal default is flat at ages 21–24, then varies by age; it reaches 1.786 at 50 and 2.230 at 55. The group effect must be calculated, not assumed.
3. **Expiring discounts or contract terms.** If the provider used introductory pricing, ask when it ends and what replaces it. Do not infer a discount or its size just because a PEO renewal is higher.
4. **Market classification.** Group-size rules and counting periods can affect available products. Most states use a 50-employee small-group ceiling, while some use 100. Colorado changed to 50 for 2026 with transition provisions for qualifying existing groups.
5. **Underwriting and experience.** Large-group and level-funded arrangements may reflect group experience, broader assumptions and stop-loss terms. Ask which component changed; a health condition alone does not explain a particular rate increase.
6. **Product changes.** Compare plan identifiers, benefits, networks and formulary before and after renewal. A replacement product may differ from the one used in the original quote. Ask the PEO or insurer to explain its own pricing basis.

Two causes that look like rate increases but aren't: **enrollment changes** (an employee adds a spouse and two children, which can triple that person's premium) and **contribution changes** (if you pay a fixed percentage, your cost rises in step with premium). Separate them before you negotiate.

## Worked example: breaking a 16% renewal into its parts

**A 14-person ACA small group renewal**

Fictional sensitivity calculation, not a carrier filing or customer renewal. Start with $10,500 monthly. Assume a 9% underlying rate change, then a 2.4% age-factor effect, then a 4% coverage-tier effect. Hold other benefits constant and round displayed dollars only after calculation.

- Current monthly premium: $10,500
- Base rate trend, +9.0% ($10,500 × 1.090): $11,445
- Aging on the age curve, +2.4% ($11,445 × 1.024): $11,720
- Coverage tier changes, +4.0% on $11,719.68: $12,188.47
- Total increase: About $1,688.47 monthly (16.08%)
- Like-for-like increase (trend and aging only): +11.6%

The rate-and-aging component is 11.616%; with the assumed enrollment effect, the bill rises 16.081%. Those components compound. This arithmetic does not establish that either assumed increase is justified. In an ACA small-group policy, examine the filed rate and possible census errors rather than assuming the filed rate is individually negotiable.

**A PEO renewal after the first year**

Fictional stress case, not observed PEO pricing. Ten enrollees at an assumed $575 monthly premium in year one and $1,000 in year two. Enrollment and other fees stay constant solely for this illustration.

- Year one, 10 × $575 × 12: $69,000
- Year two, 10 × $1,000 × 12: $120,000
- Increase: +$51,000 a year (+74%)

The assumed increase is $51,000 annually, or 73.91%. The calculation cannot identify its cause. Ask for the actual rate basis, changed benefits, census and expiring terms before attributing any portion to claims or introductory pricing.

## How to read your renewal

Ask for information appropriate to the policy and your lawful plan role. Reports differ by arrangement and are not always available to a small employer. Request a written pricing explanation without asking managers to collect individual diagnoses.

**What to ask for, by type of plan**

| Plan type | Ask for |
| --- | --- |
| ACA small group | Base rate change for your plan and area; aging effect; any plan mapping or benefit changes; census changes. Check the carrier's filing at ratereview.healthcare.gov. |
| Level-funded | Appropriate aggregate experience, stop-loss and other payment changes, surplus conditions and termination terms |
| Large group | Claims experience for the last 24 months; trend assumption; credibility weight; pooling point for large claims; administrative fees and commissions. |
| PEO | Medical rate change separate from admin fees; how your rate relates to the pool; whether first-year pricing was introductory; termination notice terms. |

For experience-rated coverage, ask the authorized adviser how the projection treats claim timing, unusual claims, trend and credibility. The employer should not decide that someone's treatment is finished or challenge individual care. Aggregate reporting can still identify people in a tiny group, so request appropriate suppression and access controls. A national trend estimate is a benchmark, not proof that the insurer's different assumption is wrong.

> **Know your deadlines first:** Write down the actual cancellation, renewal and application deadlines in the contracts. Allow time for insurer approval, payroll and enrollment. Do not terminate the existing coverage until replacement coverage and its start date are confirmed.

**Put another proposal next to the renewal breakdown**

Keep the enrollment and contribution assumptions consistent. Use your actual census and effective date to compare the written renewal with a Prescience proposal before deciding whether to switch.

[Compare my renewal](https://www.getprescience.com/quote)

[Calculate the renewal change](https://www.getprescience.com/tools/health-insurance-renewal-calculator)

## A renewal negotiation checklist

1. **90–120 days before renewal: gather the data** Export your current census (dates of birth, ZIP codes, coverage tiers), your plan's summary of benefits and coverage, and your current monthly invoice. For level-funded or large group, request the claims report now; it can take weeks.
2. **When the renewal arrives: break it down** Separate rates, aging, benefits, enrollment and employer contributions. Compare the same people and coverage tiers. Use national forecasts as context, not a permitted renewal ceiling.
3. **Ask for the justification in writing** Request the rate explanation and alternatives within the current network. Check whether a lower quoted premium changes deductibles, drugs or providers before treating it as the same coverage.
4. **Price two or three alternatives** At least one should be a different arrangement (small group vs. level-funded vs. PEO vs. something else), because they price on different inputs. Share competing quotes with your current carrier or broker.
5. **Model plan design changes honestly** Calculate the actual quoted saving from each design change alongside employee cost sharing. A change in the contribution formula reallocates premium cost rather than lowering the total premium.
6. **Check your broker's incentives** Ask how your broker is paid and whether the alternative quotes change their compensation. See [do I need a health insurance broker](https://www.getprescience.com/guides/do-i-need-a-health-insurance-broker).
7. **Decide 30–45 days out** Leave time for applications, payroll deduction changes and open enrollment. Tell employees early if their contributions or networks will change.

## Levers that lower a renewal, and what each one costs you

**Common renewal levers and their trade-offs**

| Lever | How it lowers cost | The trade-off |
| --- | --- | --- |
| Higher deductible or coinsurance | May lower the quoted premium; compare actual alternatives | Changes member exposure; KFF's deductible averages exclude workers without a general deductible |
| Narrower or regional network | Lower negotiated prices or fewer high-cost hospitals | Some employees may have to change doctors; check remote staff in other states |
| Change contribution formula | Fixes the employer contribution per enrollee, subject to legal requirements | Employees absorb more of future increases, which they notice |
| Offer a second, lower-cost plan | Cost-conscious employees can choose a cheaper option | More administration; can split a small pool |
| Change arrangement | A different pricing basis: ACA pooled rates, medical underwriting or a PEO pool | New carrier, network and paperwork; underwritten options can re-rate after a bad year |
| Drop dependent or spouse subsidies | Family tiers cost far more than single | Hurts the employees with families most; affects retention |

## Common renewal mistakes

- **Comparing the headline to last year's bill.** Enrollment changes aren't rate changes. Always compare like for like.
- **Starting too late.** Short timelines can limit quoting and enrollment choices. Use contractual deadlines to build the schedule.
- **Raising the deductible without telling people what it means.** An employee who learns about a $3,000 deductible at the pharmacy counter is a retention problem.
- **Ignoring remote employees.** A network that works in your headquarters city may be thin where your remote staff live.
- **Assuming identical rating rules mean identical prices.** Carriers can have different networks, permitted product factors and pooled costs. Compare actual offers.

## Accept, adjust or switch?

- **Accept** when the written renewal, benefits and employee access remain the best available fit after a fair comparison. A number close to a market forecast is not enough by itself.
- **Adjust** (same carrier, different plan or contribution) if the increase is driven by plan mapping, a richer plan than you need, or a fixed-percentage contribution formula.
- **Switch** when another approved offer provides better total value after fees, transition costs, employee exposure and contract obligations are counted.
- **Be careful switching away from ACA small group** if someone on the team has a serious condition. Underwritten options may price that in at the next renewal.

You don't have to wait for your renewal date to switch from every arrangement. Some contracts allow a mid-year move; see [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year). For the mechanics behind each number, see [how carriers price health insurance](https://www.getprescience.com/guides/how-carriers-price-health-insurance).

## Compare the next written quote

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Bring your renewal. We'll quote the same census and show one monthly cost for the plan year, set before the plan starts.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Make the comparison usable before the deadline

I would keep a decision sheet with the current offer, renewal and each alternative on the same enrollment basis. Add a column for one-time transition costs and another for unresolved questions. A missing formulary answer is not a zero cost. Assign an owner and due date to each missing item, especially ongoing authorizations, deductible credit requests and the handling of claims incurred before termination.

The timeline above is my planning recommendation, not a statutory notice schedule. Ask the administrator which notices and election deadlines actually apply. Before announcing a switch, confirm the effective date, employee eligibility and payroll deductions in writing. Then explain the changed network, prescription rules and covered cost sharing to employees. A lower employer invoice is not a complete decision if a family discovers after enrollment that its routine care is outside the network.

## Frequently asked questions

**What is a normal health insurance renewal increase?**

There is no universal normal range. PwC projects 9.0% group medical trend for 2027, while the Marsh survey reports expected employer cost growth of 8.2% after changes. Neither is a quote for your group.

**Why did my PEO raise our rates so much?**

Ask for the rate basis, benefit and census changes, service fees and any expiring terms. The PEO label alone does not prove why an increase occurred.

**Can we switch plans instead of accepting a renewal?**

Yes. Prescience plans can start mid-year, so you can switch at renewal or when your current contract allows.

**Does aging really raise our premium every year?**

It can where age rating applies, but some ages share a factor and some states prohibit or restrict age rating. Calculate the change for your actual census rather than assuming a fixed annual percentage.

**Can a carrier raise our small group rate because someone got sick?**

Not in ACA small group plans: rates can't use claims or health status. Level-funded, large group and many PEO plans can and do reflect claims at renewal.

**Can we negotiate a small group renewal?**

You can't negotiate the filed base rate, but you can change plan, network, contribution strategy or arrangement, and competing quotes often surface a lower plan with the same carrier.

**How early should we start looking at alternatives?**

About 90–120 days before renewal. Claims reports, quotes and applications take time, and PEO contracts usually require written notice to leave.

**Why did our renewal go up when nobody used the plan much?**

ACA-compliant small-group pricing uses the insurer's applicable pooled rates and permitted factors, not your group's health status or claims. Benefits and enrollment can also change the invoice.

## Sources

- [PwC, Medical cost trend 2027 (including restated 2026 trend)](https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2027.pdf)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [Mercer, Employers expect health benefit costs to jump in 2027 (September 2026)](https://www.mercer.com/en-us/about/newsroom/employers-expect-health-benefit-costs-to-jump-in-2027/)
- [HealthCare.gov, How insurance companies set health premiums](https://www.healthcare.gov/how-plans-set-your-premiums/)
- [CMS, State-specific age curve variations (federal default age curve)](https://www.cms.gov/files/document/statespecagecrv042517pdf)
- [HealthCare.gov, Rate review (proposed and final rate filings)](https://ratereview.healthcare.gov/)
- [Colorado DOI, 2026 small-employer change](https://content.govdelivery.com/accounts/CODORA/bulletins/3ebe767)
- [CMS, Market rating reforms](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)

# Group health insurance statistics for 2026

Source: https://www.getprescience.com/guides/group-health-insurance-statistics
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-29
Updated: 2026-10-29
Cite as: Aditya Jain, MD. "Group health insurance statistics for 2026." Prescience, October 29, 2026. https://www.getprescience.com/guides/group-health-insurance-statistics

Average employer health insurance premiums reached $9,325 for single coverage and $26,993 for family coverage in 2025, up 5% and 6% in a year, according to KFF. Workers paid $1,440 and $6,850 of that. These are the numbers I use when I talk to founders about health benefits, organized by topic, each with its source: premiums over time, deductibles, who offers coverage, funding, GLP-1s and where costs are heading.

- **Average family premium:** $26,993
- **Average single premium:** $9,325
- **Workers in self-funded plans:** 67%
- **2027 group medical trend:** 9.0%

## Key statistics at a glance

- **$26,993:** average annual family premium for employer coverage, 2025 (KFF).
- **$9,325:** average annual single premium, 2025 (KFF).
- **$6,850:** what the average worker pays toward family coverage each year; **$8,889** at small firms (KFF).
- **$1,886:** 2025 single deductible among workers with a general deductible; **$2,631** at firms with 10–199 workers (KFF).
- **59%:** share of firms with 10–199 workers offering health benefits, vs. **97%** of larger firms (KFF).
- **53.8%:** share of Americans with employment-based coverage in 2024 (Census).
- **9.0%:** PwC's projected group medical cost trend for 2027.

## Premiums in 2025

**Average annual premiums, 2025 (KFF Employer Health Benefits Survey)**

| Group | Single | Family |
| --- | --- | --- |
| All covered workers | **$9,325** | **$26,993** |
| Firms with 10–199 workers | $9,211 | $26,054 |
| Firms with 200+ workers | $9,361 | $27,280 |
| PPO plans | $9,818 | $28,272 |
| High-deductible plans with a savings option | $8,620 | $25,379 |
| Firms where 35%+ of workers are 50 or older | $9,599 | $27,699 |
| Firms where 35%+ of workers earn $80,000+ | $9,600 | $27,957 |

KFF reports similar single premiums across firm sizes but lower family premiums at small firms in this survey. These are weighted averages of covered workers, not quotes for an otherwise identical group. Network, benefit design and enrollment mix differ across categories.

_Chart: Bar chart of average monthly employer health premiums in 2025: $777 single with $657 paid by the employer, and $2,249 family with $1,679 paid by the employer._

## Premiums over time

**Originally published annual premium estimates; 2015–2024 include firms with 3–9 workers, while 2025 does not**

| Year | Single | Family | Family growth that year |
| --- | --- | --- | --- |
| 2015 | $6,251 | $17,545 | 4% |
| 2020 | $7,470 | $21,342 | 4% |
| 2024 | $8,951 | $25,572 | 7% |
| 2025 | $9,325 | $26,993 | 6% |

- KFF's 2025 report puts five-year family premium growth at **26%**, compared with **28.6%** wage growth and **23.5%** inflation.
- It reports ten-year family premium growth of **53%**, compared with **35.8%** inflation.
- Do not recompute those trend percentages by dividing the original older reports in the table. KFF adjusts historical comparisons to the 2025 survey population of firms with at least ten workers.
- Keep both the survey year and population definition with any chart copied into a budget presentation. Rounded figures also need not reproduce every published percentage exactly.

## What workers pay

**Worker contributions, 2025 (KFF)**

| Measure | All firms | Small firms (10–199) | Large firms (200+) |
| --- | --- | --- | --- |
| Share of family premium paid by worker | 26% | 36% | 23% |
| Family contribution per year | $6,850 | $8,889 | $6,227 |
| Covered workers paying $12,000+ for family coverage | 11% | 28% | n/a |
| Covered workers whose employer pays full single premium | n/a | 29% | 7% |
| Worker pays over half the family premium | n/a | 29% | 5% |

Across all firms, workers contribute **16%** of single premiums ($1,440 a year) and **26%** of family premiums ($6,850). Small firms split the extremes: they're more likely to pay all of the single premium and more likely to leave families paying most of theirs.

## Deductibles, out-of-pocket limits and plan types

**KFF 2025: deductible averages exclude workers without a general deductible**

| Measure | Figure |
| --- | --- |
| Average general deductible | **$1,886** |
| At small firms (10–199) | $2,631 |
| At large firms (200+) | $1,670 |
| Growth over 5 years / 10 years | +17% / +43% |
| Covered workers with a deductible of $2,000+ | 34% (53% at small firms, 28% at large) |
| Out-of-pocket limit of $2,000 or less | 12% of covered workers in plans with an out-of-pocket maximum |
| Out-of-pocket limit above $6,000 | 21% of covered workers in plans with an out-of-pocket maximum |

**Enrollment by plan type, 2025 (KFF)**

| Plan type | Share of covered workers |
| --- | --- |
| PPO | 46% |
| High-deductible plan with savings option | 33% |
| HMO | 12% |
| POS | 9% |
| Conventional (indemnity) | under 1% |

## Who offers coverage, by firm size

**Share of firms offering health benefits, 2025 (KFF)**

| Firm size | Offer rate |
| --- | --- |
| 10–24 workers | 51% |
| 25–49 workers | 64% |
| 50–199 workers | 89% |
| All 10–199 | 59% |
| 200–999 workers | 96% |
| 1,000+ workers | over 99% |
| All firms with 10+ workers | 61% (65% in 2024) |

Offer rates describe firms that offer coverage to at least some workers, not universal enrollment. They do not tell you whether a particular employee is eligible, can afford the contribution or uses another source of coverage. Do not combine firm-level offer rates with establishment-level measures from other surveys without checking definitions and the underlying year.

> **Offering health insurance sets a small company apart:** KFF found that 51% of firms with 10–24 workers offered health benefits in 2025. That statement does not cover firms below ten workers. Use it as context for a benefits decision, not as proof that your offer will win a particular candidate.

## How many people have employer coverage

- **53.8%** of Americans had employment-based coverage for some or all of 2024, the most common type, ahead of Medicare (19.1%), Medicaid (17.6%) and direct-purchase coverage (10.7%) (Census).
- **8.0%** lacked health insurance throughout 2024 in the Census CPS ASEC measure. That annual measure is different from being uninsured on a particular day.
- At firms that offer coverage, **80%** of workers are eligible, **76%** of those eligible enroll, and **61%** of all workers end up covered (KFF, 2025).
- Across all firms, **55%** of workers are covered by their own employer's plan, down from 57% a year earlier (KFF).
- **91%** of workers are employed by a firm that offers coverage to at least some workers (KFF).

## Who enrolls when coverage is offered

At offering firms where at least 35% of workers were age 26 or younger, KFF found 39% of workers covered by their employer, versus 64% at other offering firms. At firms where at least 35% earned $37,000 or less, the comparison was 43% versus 64%. These associations do not prove why workers declined coverage or predict enrollment at a particular startup.

Among offering firms, reported own-employer coverage was 72% for public-sector workers, 59% at private for-profit firms and 60% at nonprofits. These figures should not be presented as coverage rates for all workers in each sector, including firms that offer no health benefits.

## The numbers that matter most for small businesses

Small-firm averages highlight different contribution and cost-sharing choices. For family coverage, the premium average was $26,054 at firms with 10–199 workers and $27,280 at larger firms, while worker shares averaged 36% and 23%. Do not multiply those average percentages by the average premiums and label the result the published worker dollar contribution.

I would compare a proposed benefit with these benchmarks across several dimensions. A lower employer contribution may leave families paying more even when total premiums are similar. A deductible average alone does not summarize the whole policy. See [employer contributions](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance) and [average premium cost](https://www.getprescience.com/guides/average-employee-health-insurance-cost) for examples using explicit assumptions.

## Funding models

- **67%** of covered workers are in self-funded plans; **80%** at firms with 200 or more workers.
- At firms with 10–199 workers: **27%** self-funded and **37%** level-funded.

_Chart: 2025 covered-worker shares in self-funded plans: 67% at all firms with 10+ workers, 80% at firms with 200+ workers and 27% at firms with 10–199 workers._

These survey categories overlap. KFF reports 51% of small-firm covered workers in either a level-funded or self-insured plan; adding 27% and 37% to get 64% would be wrong. Its questions account for respondents who describe level-funded coverage as insured or self-funded. The legal funding arrangement and the respondent's label are not always identical.

The funding shares do not establish that self-funding causes lower deductibles. Employers select their benefit designs separately, and the survey does not isolate a causal effect of financing on employee cost sharing. Compare the actual deductible, copays and maximum in each proposal.

## GLP-1 coverage

**KFF 2025: among firms offering health benefits, reported GLP-1 weight-loss coverage**

| Firm size | Cover for weight loss |
| --- | --- |
| 200–999 workers | 16% |
| 1,000–4,999 workers | 30% |
| 5,000+ workers | 43% (28% in 2024) |

- Among firms with at least 5,000 workers that covered these medicines for weight loss, 59% reported use above expectations and 66% reported a significant effect on prescription-drug spending. Those percentages do not describe all large employers.
- Coverage depends on the exact drug, indication and policy. A diabetes benefit does not establish obesity-treatment coverage. See [GLP-1 coverage decisions](https://www.getprescience.com/guides/should-our-health-plan-cover-glp1s).

## The individual market (relevant to ICHRA)

- Individual-market data describe a different market from employer coverage. Check plan availability by employee location before evaluating an ICHRA.
- A plan-count network share is not an enrollment-weighted share of people. Neither establishes whether an employee's doctor participates.
- Compare premium before assistance, premium after assistance and cost sharing separately. A national premium-change percentage cannot determine a specific employee's net cost.
- Marketplace plan counts and employer enrollment measure different things. Do not treat the chart percentages as employee enrollment shares or as a forecast of the plans available in a particular ZIP code. Confirm current choices using CMS files and the actual policies.

_Chart: CMS 2026 federal-platform plan-county offerings: HMO 44,390 (46%), EPO 32,100 (33%), PPO 14,174 (15%), POS 6,418 (7%), out of 97,082 rows. Rounded shares total 101%; these are not unique nationwide plan or enrollment shares._

_Chart: Marketplace plan selections: bronze rose from 30% in 2025 to 40% in 2026; silver fell from 57% to 43%. These are aggregate selections, not the same individuals switching._

## Where costs are heading

**Projections for employer health costs**

| Projection | 2026 | 2027 |
| --- | --- | --- |
| PwC group medical cost trend | 9.0% (restated in 2027 report) | 9.0% |
| PwC individual market trend | 8.5% (restated in 2027 report) | 8.5% |
| Mercer employer cost per employee | 6.7% | 8.2% after plan changes (11% with none) |

The September 2026 Marsh release on Mercer's site reports preliminary employer expectations, not realized 2027 spending. PwC's medical trend measures expected cost growth before individual employers' specific benefit decisions. Treat both as scenarios for planning rather than direct renewal forecasts. PwC revised its earlier 2026 group estimate upward from 8.5% to 9.0%.

## What the averages mean for a 20-person company

**Applying national averages to one small employer**

Illustrative budgeting exercise, not a quote. Fourteen single and six family enrollees use KFF's 2025 small-firm premium averages, $9,211 and $26,054. Assume the employer pays all single premiums and exactly 64% of each family premium. Apply an arbitrary 8.2% sensitivity increase once to the entire premium total; this is not a forecast translating 2025 directly into 2027.

- Single premiums: 14 × $9,211: $128,954
- Family premiums: 6 × $26,054: $156,324
- Total annual premium: $285,278
- Paid by families (36%): $56,277
- Paid by the company: $229,001
- Company cost per employee: $11,450
- Total premium after one hypothetical 8.2% increase: $308,671

The assumed employer cost is $229,001.36 and the family contribution total is $56,276.64, rounded in the lines above. Each family pays $9,379.44 annually under this formula. That differs from KFF's published $8,889 average because average shares and average dollars are separate measures. The sensitivity raises total premium by $23,392.80 before deciding who pays the increase.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** These averages are what a quote has to beat. Our quotes usually come in 10–20% below comparable fully insured coverage, with an effective $0 deductible instead of the $2,631 small-firm average.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## How to read these numbers

- **Check the denominator.** KFF premium averages weight covered workers, while offer rates describe firms. Neither is automatically an average over every employee in the economy.
- **The 2025 KFF survey excludes firms with 3–9 workers,** so it says little about the smallest companies.
- **Keep household and employer surveys separate.** Census counts people and coverage during the year; KFF surveys employers. People may have more than one coverage type, so Census percentages need not sum to 100%.
- **Projections are not renewals.** PwC and Mercer describe market averages. Your renewal also depends on aging, plan changes and how your plan is priced. See [why did our health insurance renewal go up](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up).

## Turn statistics into a decision without overstating them

I start a comparison by writing down the question. A company setting its premium contribution needs contribution and enrollment data. A family choosing a plan needs covered service costs, annual payroll deductions and the relevant maximum. A chart about the percentage of employers offering benefits does not answer either question on its own. Select the measure that matches the decision before choosing a statistic because its number looks compelling.

For a budget, make a column for measured facts and another for assumptions. Put the survey year next to every external number. Replace provisional premiums with written quotes when they arrive, and preserve the original census so you can explain any difference. Keep scenarios for family enrollment separate from scenarios for premium growth. That allows a reviewer to see whether the company is buying richer benefits, covering more people or paying more for comparable coverage.

For a presentation, retain uncertainty and definitions even when shortening the slide. Do not label the small-firm deductible as what every employee pays, or the national employer premium as the employee payroll deduction. Avoid ranking individual insurers from employer-level averages. The strongest use of these statistics is to identify questions for the actual proposal, then document the answers from the policy and quote.

**Replace the benchmark with your team's proposal**

These statistics describe populations, not the people on your census. Use them as a reference, then compare written coverage and costs for your actual employee locations and family tiers.

[Price coverage for my team](https://www.getprescience.com/quote)

[Model an employer budget](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator)

## Frequently asked questions

**What is the average cost of employer health insurance in 2026?**

The verified KFF figures cited here are 2025 survey results: $9,325 single and $26,993 family annually. They are not measured 2026 premiums. Obtain current quotes rather than multiplying them by a different survey's cost forecast.

**What percentage of employers self-fund?**

KFF's 67% figure is the share of covered workers, not employers. At small firms, 27% are reported in self-funded plans and 37% in level-funded plans, with overlap; KFF gives 51% in either category.

**How fast are health insurance costs rising?**

KFF reported 6% family premium growth in 2025. PwC's 2027 report gives 9.0% group medical trend for both restated 2026 and projected 2027. These are different measures from an individual policy renewal.

**What percentage of small businesses offer health insurance?**

KFF reported 59% among firms with 10–199 workers and 51% among those with 10–24 workers in 2025. These estimates do not include firms below ten workers.

**How much do employees pay for health insurance?**

On average $1,440 a year for single coverage and $6,850 for family coverage in 2025. At small firms the family figure is $8,889.

**What is the average deductible for employer health insurance?**

KFF's 2025 single deductible average was $1,886 among covered workers whose plans had a general deductible: $2,631 at small firms and $1,670 at large firms.

**How many Americans have employer-sponsored health insurance?**

53.8% of the population had employment-based coverage for some or all of 2024, according to the Census Bureau.

**How many employers cover GLP-1s for weight loss?**

Among firms offering health benefits, KFF reported weight-loss coverage at 43% of firms with 5,000 or more workers and 16% of those with 200–999 workers in 2025. This does not establish coverage at a particular employer.

## Sources

- [KFF, 2026 Marketplace plan selections and deductibles](https://www.kff.org/affordable-care-act/what-we-know-so-far-about-2026-aca-marketplace-enrollment-premiums-and-deductibles/)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [KFF, 2024 Employer Health Benefits Survey](https://www.kff.org/health-costs/2024-employer-health-benefits-survey/)
- [KFF, 2020 Employer Health Benefits Survey](https://www.kff.org/health-costs/2020-employer-health-benefits-survey/)
- [KFF, 2015 Employer Health Benefits Survey](https://www.kff.org/health-costs/2015-employer-health-benefits-survey/)
- [U.S. Census Bureau, Health Insurance Coverage in the United States: 2024](https://www.census.gov/library/publications/2025/demo/p60-288.html)
- [PwC, Medical cost trend 2027 (including restated 2026 trend)](https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2027.pdf)
- [Mercer, Employers expect health benefit costs to jump in 2027 (September 2026)](https://www.mercer.com/en-us/about/newsroom/employers-expect-health-benefit-costs-to-jump-in-2027/)
- [CMS, 2026 Marketplace enrollment data](https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2026-marketplace-open-enrollment-period-public-use-files)

# What is a QSEHRA, and is it better than a group plan?

Source: https://www.getprescience.com/guides/what-is-a-qsehra
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-18
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "What is a QSEHRA, and is it better than a group plan?." Prescience, October 28, 2026. https://www.getprescience.com/guides/what-is-a-qsehra

A qualified small employer HRA (QSEHRA) lets an eligible employer that is not an applicable large employer help employees with substantiated health expenses. For 2026, the annual limits are $6,450 self-only and $13,100 family. The employer cannot offer a group health plan, and tax-free reimbursement requires minimum essential coverage. I would compare the allowance with employees' local premiums and premium tax credits before choosing it.

- **2026 limit, self-only:** $6,450 ($537.50/month)
- **2026 limit, family:** $13,100 (about $1,091.67/month)
- **Who can offer it:** Under 50 FTEs, no group plan
- **Notice to employees:** 90 days before the plan year

## How a QSEHRA works

Congress created the QSEHRA in the 21st Century Cures Act (December 2016). The rule is in Internal Revenue Code section 9831(d). Before it existed, a small employer that reimbursed individual premiums tax-free was running an "employer payment plan", which IRS Notice 2013-54 said fails the ACA market reforms. The QSEHRA is the narrow exception Congress carved out for small employers.

- **Who can offer one:** only an employer that is not an [applicable large employer](https://www.getprescience.com/guides/what-is-an-applicable-large-employer) (fewer than 50 full-time employees including equivalents) and that does not offer any group health plan to any employee. Under Notice 2017-67 that includes a health FSA, another HRA, and even an employer-provided stand-alone dental or vision plan. Employer HSA contributions alone do not disqualify the employer.
- **Funding:** the employer pays it all. Employees can't contribute through salary reduction.
- **Same terms for everyone eligible:** the allowance must be offered on the same terms to all eligible employees. It may vary only with the price of an individual policy that changes with the employee's age or number of family members.
- **Tax-free only with coverage:** obtain proof of minimum essential coverage for the employee and anyone whose expense is reimbursed before paying. A mistaken reimbursement for a month without that coverage is taxable. That is a correction rule, not permission to knowingly reimburse uninsured employees.
- **Substantiated reimbursement:** employees submit proof of a premium or medical expense, and you reimburse up to the allowance. Unused money stays with the company unless your plan document allows a carryover, and any carryover still counts toward the next year's cap.
- **It affects premium tax credits:** the allowance reduces, and can wipe out, an employee's marketplace subsidy. More on this below.

> **Dental, vision and FSAs disqualify you too:** This surprises people. IRS Notice 2017-67 says an employer offering a QSEHRA can't offer any other group health plan, and that includes stand-alone dental or vision plans and health FSAs. Employees can still buy dental and vision on their own and seek reimbursement for those costs through the QSEHRA, if the plan allows.

## QSEHRA limits for 2026 and the monthly math

The IRS adjusts the caps for inflation each year. For 2026 they come from Revenue Procedure 2025-32, section 4.63. The cap is prorated by month: an employee eligible for only part of the year gets 1/12 of the annual cap for each month they are eligible.

**QSEHRA maximum allowance, 2026**

| Coverage | Annual cap | Monthly cap | Source |
| --- | --- | --- | --- |
| Self-only | $6,450 | $537.50 | Rev. Proc. 2025-32 |
| Family | $13,100 | about $1,091.67 | Rev. Proc. 2025-32 |

You can set a lower allowance than the cap. One permitted approach is the same percentage of each statutory limit, such as 50%: $3,225 self-only and $6,550 family for a full 2026 year. Other age or family-size variations must follow the same relevant individual-market policy. Managers cannot receive a larger allowance merely because of their job title. Monthly figures are rounded illustrations; administer the annual and partial-year limits without exceeding them.

For a partial-year example, six eligible months in 2026 permit at most $3,225 self-only or $6,550 family. A company starting a new arrangement should verify initial notice timing rather than assume the October renewal deadline governs every launch. IRS Notice 2017-67 also allows reimbursement claims to be submitted during an established run-out period for expenses incurred while eligible; that does not create coverage for later expenses.

## Who must be offered a QSEHRA, and who can be left out

Every employee is an eligible employee unless the plan terms exclude them. Under section 9831(d)(3)(A) and Notice 2017-67, the plan may exclude only these groups:

- Employees with fewer than 90 days of service.
- Employees under age 25 at the start of the plan year.
- Part-time and seasonal employees under Notice 2017-67: normally under 35 hours weekly or under nine months annually when comparable workers work substantially more. Workers customarily under 25 hours or seven months may qualify without that comparison. These are QSEHRA exclusion definitions, not ACA full-time definitions.
- Employees covered by a collective bargaining agreement, if health benefits were bargained in good faith.
- Nonresident aliens with no U.S.-source earned income.

**Owners are a common trap.** A QSEHRA is only for employees. Sole proprietors, partners and more-than-2% S corporation shareholders are not employees for this purpose, so they can't be reimbursed through it. A C corporation owner on payroll generally can be. If the company is just the founders and they are all partners or more-than-2% shareholders, a QSEHRA does nothing for them.

## How a QSEHRA changes an employee's premium tax credit

This is the part most employers miss, and it decides whether the QSEHRA helps a given employee at all. Section 36B(c)(4) sets a special affordability test for QSEHRAs:

1. Take the monthly premium of the second-lowest-cost silver plan (the benchmark) for self-only coverage where the employee lives.
2. Subtract 1/12 of the employee's self-only QSEHRA allowance (even if they get the family allowance).
3. Compare the result with 1/12 of 9.96% of the employee's household income (the 2026 required contribution percentage).
4. If the result is at or below that line, the QSEHRA is **affordable**: the employee and family get no premium tax credit at all.
5. If the result is above it, the QSEHRA is **unaffordable**: the employee can still claim a credit, but it is reduced by the full monthly QSEHRA allowance.

**Higher earner: the QSEHRA beats the subsidy**

Illustrative. Single employee, age 40, household income $60,000 (about 383% of the 2025 poverty line used for 2026 coverage). Assumed benchmark silver premium $625 a month, not a market average or quote. Assumes residence in the contiguous U.S., eligibility for the credit absent the QSEHRA, and purchase of that benchmark plan. Employer offers the maximum self-only QSEHRA.

- Benchmark premium: $625.00/month
- Minus 1/12 of QSEHRA ($6,450 / 12): −$537.50
- Net benchmark cost: $87.50
- Affordability line: 9.96% × $60,000 / 12: $498.00
- Is $87.50 ≤ $498.00?: Yes: affordable
- Premium tax credit without a QSEHRA: $625 − $498 = $127/month
- Premium tax credit with the QSEHRA: $0

The employee trades a $127 monthly subsidy for $537.50 of tax-free reimbursement. They are $410.50 a month better off, and the QSEHRA works as intended.

**Lower earner: the QSEHRA just replaces the subsidy**

Illustrative. Single employee, household income $31,300 (200% of the 2025 poverty line of $15,650). Assumes residence in the contiguous U.S. and credit eligibility absent the QSEHRA. The 2026 applicable percentage at 200% is 6.60%. The $625 benchmark premium is hypothetical, not a quote. Employer offers $300 a month self-only.

- Expected contribution: 6.60% × $31,300 / 12: $172.15/month
- Subsidy without QSEHRA: $625 − $172.15: $452.85
- QSEHRA test: $625 − $300: $325.00
- Affordability line: 9.96% × $31,300 / 12: $259.79
- Is $325 ≤ $259.79?: No: unaffordable
- Subsidy with QSEHRA: $452.85 − $300: $152.85
- Employee's net premium: $625 − $152.85 − $300: $172.15

The employee pays $172.15 a month either way. Every QSEHRA dollar replaced a federal subsidy dollar. The company spent $3,600 a year and this employee gained nothing on premiums. Using the same allowance for medical bills instead of premiums does not create an additional $300 benefit: the premium tax credit reduction still applies to the permitted benefit.

The takeaway: a QSEHRA helps most for employees who earn too much for a large subsidy, and least for lower-paid employees who already qualify for one. Since the enhanced credits expired at the end of 2025, households above 400% of the poverty line get no credit at all, so for them every QSEHRA dollar is new money. Employees must report the QSEHRA to the marketplace when they apply, or they may have to repay credits at tax time.

The subsidy calculation uses the permitted benefit, not just claims actually paid. An eligible employee cannot waive the QSEHRA to preserve a larger credit. Employees should give the Marketplace the written notice and keep their W-2 code FF amount for reconciliation. These examples isolate premium math; they do not predict a household's tax return, Medicaid eligibility or medical spending.

## QSEHRA vs. ICHRA vs. a group plan

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Outgrowing the QSEHRA caps, or need different amounts for different groups? Choice is an ICHRA with no annual cap, at $20 per enrolled employee per month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Three ways a small employer can fund health coverage**

|  | QSEHRA | ICHRA | Group plan (Prescience) |
| --- | --- | --- | --- |
| Employer size | Under 50 FTEs | Any | 2+ employees |
| Budget cap | $6,450 / $13,100 in 2026 | None (employer sets) | Contribution set in your quote |
| Different amounts by class | No (age and family size only) | Yes (full-time, part-time, location and other classes) | Contribution can vary by tier |
| Can employees pay their share pre-tax? | No | Off-exchange premiums, through a cafeteria plan | Yes, through a Section 125 plan |
| Effect on premium tax credit | Reduces it dollar for dollar if unaffordable | Employee must choose: ICHRA or subsidy, not both | No credit if the plan is affordable and minimum value |
| Employee arranges qualifying coverage | Yes | Yes | No |
| Exposure to individual-market prices | Full | Full | None |
| Deductible your team sees | Whatever they buy | Whatever they buy | Effective $0 |

- **Choose a QSEHRA if** you have a handful of employees, a fixed budget well under group premiums, staff who mostly earn above subsidy levels, and you are fine with everyone shopping alone.
- **Choose an ICHRA if** you need different allowances for different classes of workers, or you are over 50 FTEs. Read our [ICHRA comparison](https://www.getprescience.com/compare/ichra-alternative) first.
- **Choose a group plan if** a shared network, enrollment process and employer-selected benefits fit the team. Family status or a diagnosis alone does not establish which option is best.

**Compare a reimbursement budget with a group proposal**

Use the same employees, family tiers and employer budget when comparing QSEHRA, ICHRA and group coverage. Your census turns the illustrative comparison into a team-specific proposal.

[Compare options for my team](https://www.getprescience.com/quote)

[Check the QSEHRA allowance calculation](https://www.getprescience.com/tools/qsehra-calculator)

## How to set up a QSEHRA, step by step

1. **Confirm you qualify** Count full-time employees plus equivalents for last year (the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) helps). You must be under 50 and offer no group medical plan. Combine related companies under common ownership.
2. **Pick the allowance and plan year** Set annual self-only and family amounts at or below $6,450 and $13,100 for 2026, and prorate for partial-year eligibility. Do not use rounded monthly amounts to exceed an annual cap. Decide whether you cover premiums only or premiums plus medical expenses, and whether unused amounts carry over.
3. **Adopt a written plan document** Write the terms down: who is eligible, the allowance, what expenses count, how to claim, and whether carryovers apply. Give employees a plain-language summary. Most QSEHRA administrators provide both documents for a monthly fee.
4. **Send the written notice on time** Give each eligible employee a notice at least 90 days before the plan year starts. For an existing arrangement renewing January 1, 2027, the 90-day date was October 3, 2026. Newly eligible employees, including employees newly eligible mid-year, must receive notice by their eligibility date; provide it earlier so they can shop. New hires get it by the day they become eligible. It must state the allowance, say to tell the marketplace about it, and explain that reimbursements are taxable without minimum essential coverage. Missing it costs $50 per employee, up to $2,500 a year (IRC section 6652(o)).
5. **Collect proof of coverage** Get proof of minimum essential coverage before the first reimbursement and an attestation with each claim.
6. **Reimburse and report** Pay substantiated claims through payroll or a separate payment. Report each employee's permitted benefit in box 12 of Form W-2 with code FF.

## Common QSEHRA mistakes

- **Offering a group plan to some people and a QSEHRA to others.** Not allowed. If you have any group medical plan, the QSEHRA fails.
- **Giving different amounts by role.** Only age and family size can change the amount.
- **Paying it as a flat monthly stipend without receipts.** That turns it into taxable pay, or worse, a noncompliant employer payment plan exposed to a $100 per day per employee excise tax. See our [stipend guide](https://www.getprescience.com/guides/health-insurance-stipend).
- **Forgetting the subsidy effect.** Employees who don't report the QSEHRA can owe back premium tax credits when they file taxes.
- **Growing past 50 FTEs without a plan.** Once you become an ALE, you can no longer offer a QSEHRA, and the employer mandate starts to apply.

## My take

I see a QSEHRA as a budget choice, not an automatic upgrade or a temporary-only benefit. A $537.50 monthly self-only allowance can be useful, but the value depends on local premiums, household income and existing coverage. Compare actual available networks and prescriptions before deciding that a group plan or individual coverage is better for a particular team.

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** When the budget reaches group-plan territory, compare Diamond: real group coverage priced usually 10–20% below comparable fully insured plans.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What is the QSEHRA limit for 2026?**

$6,450 for self-only coverage and $13,100 for family coverage, prorated monthly ($537.50 and about $1,091.67).

**Can I offer a QSEHRA and a group plan?**

No. A QSEHRA is only for employers that don't offer any group health plan. Under IRS Notice 2017-67 that even includes a group dental or vision plan or a health FSA.

**Is a QSEHRA better than ICHRA?**

A QSEHRA is simpler but capped and limited to employers under 50 FTEs. An ICHRA has no federal annual allowance cap and allows specified classes, with conditions. Employees arrange qualifying coverage; a QSEHRA can also reimburse eligible expenses for someone with qualifying coverage through a spouse.

**Can owners use a QSEHRA?**

Only if they are employees. Sole proprietors, partners and more-than-2% S corporation shareholders can't be reimbursed through a QSEHRA.

**Can an employee on a QSEHRA still get a premium tax credit?**

Only if the QSEHRA is unaffordable for them under the section 36B test, and then the credit is reduced by the monthly allowance. If it is affordable, they get no credit.

**Is QSEHRA money taxable?**

No, as long as the employee has minimum essential coverage for the month and the expense is substantiated. The employer must obtain proof of coverage before reimbursement; mistakenly paid amounts for months without coverage are taxable.

**What happens if I miss the 90-day notice?**

The penalty is $50 per employee who didn't get the notice, up to $2,500 a year. Send it as soon as you notice the miss.

**Can a QSEHRA pay for a spouse's employer plan premiums?**

Yes, if the plan allows it, but the reimbursement is taxable to the extent the spouse already paid those premiums pre-tax through their employer.

**Do unused QSEHRA funds roll over?**

Only if your plan document allows it, and the carryover plus the new year's allowance can't exceed that year's statutory cap. The employer keeps any money not carried over.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [IRS Notice 2017-67, Qualified small employer HRAs](https://www.irs.gov/pub/irs-drop/n-17-67.pdf)
- [IRS Revenue Procedure 2025-32 (2026 inflation adjustments, including QSEHRA)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS Revenue Procedure 2025-25 (2026 applicable percentage table and 9.96% required contribution percentage)](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Notice 2013-54, Application of market reforms to HRAs and employer payment plans](https://www.irs.gov/pub/irs-drop/n-13-54.pdf)
- [CMS, Health Reimbursement Arrangements (ICHRA) overview](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [IRS, Premium Tax Credit questions and answers](https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit)

# Can I give employees a health insurance stipend instead of a plan?

Source: https://www.getprescience.com/guides/health-insurance-stipend
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-24
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Can I give employees a health insurance stipend instead of a plan?." Prescience, October 28, 2026. https://www.getprescience.com/guides/health-insurance-stipend

Yes, but only as taxable pay. You can give employees extra money and tell them it's for health insurance. What you can't do is reimburse individual premiums tax-free, or require people to buy insurance with it, outside an approved arrangement like a QSEHRA or ICHRA. Getting that wrong can trigger an excise tax of $100 per day per employee.

- **Taxable stipend:** Allowed, taxed as wages
- **Pre-tax premium reimbursement:** Use a qualifying arrangement
- **Penalty for getting it wrong:** Up to $100/day per employee
- **Group plan alternative:** Prescience, from 2 employees

## The rules, and where they come from

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the reason you wanted a stipend was a fixed budget, Choice gets you the same fixed budget, tax-free to employees and compliant, for $20 per enrolled employee per month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

- **Taxable stipend:** extra wages, subject to income and payroll taxes, not conditioned on buying insurance. Allowed. IRS Notice 2015-17, Q&A 4, says a pay increase that isn't conditioned on buying coverage (and doesn't endorse a particular policy or insurer) is not an employer payment plan.
- **Reimbursing individual premiums tax-free** outside a QSEHRA or ICHRA is an "employer payment plan" that fails ACA market reforms (Notice 2013-54) and can trigger an excise tax of $100 per day per affected employee under IRC section 4980D.
- **Reimbursing premiums after tax doesn't fix it.** Notice 2015-17, Q&A 5, says putting premium reimbursements through payroll as taxable wages still leaves an employer payment plan. What matters is that the money is tied to buying health coverage.
- **QSEHRA or ICHRA:** common lawful ways to reimburse individual coverage tax-free. A QSEHRA is capped at $6,450 self-only and $13,100 family for 2026. An ICHRA has no cap.

> **The one-line test:** If an employee who doesn't buy insurance would get the same money, it's a stipend and it's fine. If they only get it by showing a premium bill, it's an employer payment plan, and it needs a lawful arrangement and review of any applicable exception, commonly a QSEHRA or ICHRA for current employees.

## What a $500 stipend is worth on a paycheck

Treat an unconditional stipend as taxable compensation. A separately identified supplemental payment can use 22% federal withholding when the IRS conditions are met, or an aggregate method; a recurring amount included in regular wages may use regular withholding. Withholding is not the employee's final tax rate. Social Security is 6.2% up to the wage base and Medicare is generally 1.45% for each side. State treatment depends on applicable payroll rules.

**$500 a month as a taxable health stipend**

Illustrative. Employee earns $90,000 (below the 2026 Social Security wage base of $184,500), lives in a state with a 5% income tax, and is paid the stipend through payroll with 22% federal supplemental withholding.

- Gross stipend: $500.00
- Federal income tax withheld (22%): −$110.00
- Social Security (6.2%): −$31.00
- Medicare (1.45%): −$7.25
- State income tax (5%, assumed): −$25.00
- Employee's net: $326.75
- Employer FICA (7.65%): +$38.25
- Employer's total cost: $538.25

The company spends $538.25 a month and the employee has $326.75 to put toward a premium: about 61 cents of buying power per dollar spent. A qualifying $500 QSEHRA reimbursement or employer premium contribution may deliver $500 toward eligible expenses without those wage taxes, but QSEHRA subsidy effects matter. Do not allocate $538.25 every month to a self-only QSEHRA in 2026: that would exceed its $6,450 annual limit.

The employee usually can't deduct the premiums they then pay. Individual premiums count toward the itemized medical deduction only above 7.5% of adjusted gross income, and only if the employee itemizes and meets the deduction rules.

## Stipend vs. QSEHRA vs. group plan for the same budget

**Spending about $500 per employee per month, three ways**

|  | Taxable stipend | QSEHRA | Group plan |
| --- | --- | --- | --- |
| Employer cost | $538.25 (with FICA) | $500 | $500 contribution |
| Value to employee | About $327 after tax | $500 tax-free | $500 of premium, pre-tax |
| Must employee buy insurance? | No | Yes, to be reimbursed | Enrolls or waives |
| Can amounts differ by role? | Yes, it's just pay | No (age and family size only) | Contribution can vary by tier |
| Effect on premium tax credit | None, except higher income | Reduces or eliminates it | Affordable minimum-value offer generally blocks the employee's credit |
| Admin | None beyond payroll | Notice, claims, W-2 code FF | Enrollment, carrier or plan administrator |
| Legal exposure | Ordinary wage rules still apply | Low if run correctly | Low |

A stipend has one real advantage: it leaves employees free to claim marketplace premium tax credits, because the employer offers no health plan. For a low-income employee, a subsidy can be worth more than anything a small employer would put into a QSEHRA. Our [QSEHRA guide](https://www.getprescience.com/guides/what-is-a-qsehra) walks through that math.

## When a stipend is the right call, and when it isn't

- **A stipend fits** a very small team where most people are lower-paid and get large marketplace subsidies, a team where most people are already covered by a spouse or parent, or a company with workers abroad where U.S. plans don't help.
- **A stipend also fits** as a short bridge: a few months before a group plan starts, or while you decide between a QSEHRA and a group plan.
- **A QSEHRA fits better** when most employees earn above subsidy levels and you want each dollar to arrive tax-free, but you can't afford group premiums yet.
- **A group plan fits better** once you hire people with families, people with ongoing care needs, or candidates comparing your offer with a larger company's benefits.

A stipend does not define a family deductible, provider network or prescription formulary. Those come from whichever policy an employee obtains. I would explain this distinction in a hiring offer: extra taxable compensation is not an insurance contract. If candidates need a benefits comparison, provide the stipend amount and tax treatment without implying a particular policy is included.

1. **Write a one-paragraph policy** State the amount, who is eligible (for example, all full-time employees), and that it is paid as taxable wages with no requirement to buy coverage.
2. **Set it up in payroll as a taxable earning** Use an earning type that is subject to income tax and FICA, not a nontaxable reimbursement code.
3. **Point people to the marketplace, not a policy** You may share HealthCare.gov or your state exchange and explain premium tax credits. Don't recommend a specific insurer or policy: endorsing one can turn the arrangement into a group health plan.
4. **Revisit it every renewal season** Check whether a QSEHRA or a group plan would buy more coverage for the same spend before the next plan year.

## Edge cases that trip up small companies

- **Paying the premium directly to the insurer** for an employee's individual policy is an employer payment plan, the same as reimbursing it.
- **Conditioning payment on individual insurance** changes the analysis. Requiring receipts for that policy is different from an unrestricted wage increase; an opt-out arrangement tied to other group coverage has separate rules.
- **Owners of S corporations.** Notice 2015-17 lets an S corporation pay or reimburse individual premiums for a more-than-2% shareholder-employee. The amount goes on the W-2 as wages (box 1), and the shareholder can usually deduct it as self-employed health insurance under IRC section 162(l). This does not extend to rank-and-file employees.
- **Medicare premiums.** Reimbursing Medicare Part B or D premiums for active employees is also an employer payment plan unless it meets the narrow integration rules in Notice 2015-17. Companies with 20 or more employees also face Medicare secondary payer rules. See our [Medicare guide](https://www.getprescience.com/guides/employer-health-insurance-and-medicare).
- **Calling it a "wellness stipend" or "benefits allowance"** doesn't change anything. If employees can spend it on anything, it's taxable pay. If payment is conditioned on individual premiums, it may create an employer payment plan.
- **A one-employee company.** The market reforms don't apply to a plan with fewer than two participants who are current employees on the first day of the plan year, but count participating current employees and any required aggregation, not simply the number of people on payroll. Tax-free treatment still has its own rules; ask your CPA.
- **A stipend on top of a group plan** is fine as taxable pay. Paying it only to people who waive the group plan is an opt-out payment, which has its own rules. See [opting out](https://www.getprescience.com/guides/can-employees-opt-out-of-health-insurance).

## What happens if you get it wrong

A noncompliant employer payment plan fails the ACA's market reforms (for example, the ban on annual dollar limits and the preventive care mandate). Section 4980D imposes an excise tax of $100 per day for each affected employee for as long as the failure lasts. That is up to $36,500 per employee per year. The employer reports and pays it on IRS Form 8928.

**Exposure for a 6-person team reimbursing premiums for a year**

Illustrative. A startup reimburses individual premiums for 6 employees for all of 2026, outside a QSEHRA or ICHRA.

- Daily excise tax per employee: $100
- Days in the year: 365
- Employees affected: 6
- Illustrative calculation before statutory relief: $219,000

For failures due to reasonable cause and not willful neglect, section 4980D caps the tax at the lesser of 10% of what the employer paid for group health plans the prior year or $500,000, and the IRS can waive it. You still don't want to be in that conversation. Fixing it usually means converting to a QSEHRA or ICHRA, or turning the payments into an unconditional raise.

Section 4980D includes relief for failures corrected within the statutory period when reasonable cause and lack of willful neglect are established. Correction generally means undoing the failure as far as possible and putting affected people in the position they would have occupied without it, not simply renaming future payroll. Document when the company learned of the issue and what it did. An ALE also cannot satisfy its separate coverage-offer obligations merely by paying a taxable stipend.

## How to move from a premium reimbursement to something compliant

1. **Stop asking for premium receipts** If you want a stipend, pay the same amount to everyone eligible whether or not they buy insurance, through payroll, as taxable wages.
2. **Or formalize it as a QSEHRA** If you have under 50 FTEs and no group plan, adopt a QSEHRA plan document and give the written notice 90 days before the plan year (or when a new hire becomes eligible).
3. **Or set up an ICHRA** If you need different amounts by employee class or are over 50 FTEs, an ICHRA lets you reimburse individual coverage with no cap. The regular ICHRA notice is due 90 days before the plan year, with exceptions for newly eligible employees and certain newly established employers.
4. **Or price a group plan** Get a quote before deciding. Compare the actual group proposal with local individual premiums, subsidies, networks and employee tax costs; a national percentage cannot determine which is better for this team.
5. **Clean up past periods** Ask your CPA whether you owe Form 8928 for past periods of premium reimbursement and whether reasonable-cause relief applies.

**Replace the stipend with a documented benefits comparison**

Compare the employer's full cost and what employees can actually buy. Use your employee census for a written proposal before changing the stipend or promising a replacement benefit.

[Compare benefits for my team](https://www.getprescience.com/quote)

[Compare an allowance with group coverage](https://www.getprescience.com/compare/ichra-alternative)

## Why stipends disappoint

In the hypothetical paycheck calculation above, $500 produces $326.75 after the stated withholding. A different worker or withholding method produces a different result. Compare the stipend with actual available coverage and subsidies before deciding that a group plan or reimbursement arrangement is better. I would make the benefit understandable first, then assess the net cost to both employer and employee.

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** A taxable $500 stipend leaves employees about $327 to shop with. The same budget spent on a group plan goes much further.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Is a health insurance stipend taxable?**

Yes. A stipend paid as wages is taxable income and subject to payroll taxes, for both the employee and the employer.

**Can I reimburse employees' individual health insurance premiums?**

Tax-free reimbursement is only allowed through a qualifying arrangement like a QSEHRA or ICHRA. Otherwise it can trigger a $100-per-day excise tax per employee.

**What if I reimburse premiums but report them as taxable wages?**

That's still an employer payment plan under IRS Notice 2015-17. The problem is tying the money to buying coverage, not the tax treatment.

**Can a stipend vary by employee?**

Yes. It's ordinary pay, so normal pay rules and anti-discrimination laws apply, not health plan rules.

**Does a stipend affect an employee's marketplace subsidy?**

Only by raising their income. Because you offer no health plan, they stay eligible for premium tax credits based on household income.

**Can S corporation owners get their premiums paid by the company?**

Yes, for more-than-2% shareholder-employees. The premiums are added to W-2 wages, and the owner can usually deduct them as self-employed health insurance.

**Is a stipend better than a group plan?**

It's simpler, but after taxes it buys less coverage. A group plan may be a better fit, but compare actual terms, tax effects and individual-market subsidies.

**Is a stipend better than a QSEHRA?**

For employees with large marketplace subsidies, sometimes, because a QSEHRA reduces their subsidy. For others, tax-free reimbursement may help, subject to coverage, expense and allowance rules; administration and local plan choices still matter.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [IRS, Employer health care arrangements (employer payment plans)](https://www.irs.gov/affordable-care-act/employer-health-care-arrangements)
- [IRS Notice 2013-54, Employer payment plans and the ACA market reforms](https://www.irs.gov/pub/irs-drop/n-13-54.pdf)
- [IRS Notice 2015-17 (pay increases, after-tax premium reimbursement and 2% S corporation shareholders)](https://www.irs.gov/pub/irs-drop/n-15-17.pdf)
- [IRS Notice 2017-67, Qualified small employer HRAs](https://www.irs.gov/pub/irs-drop/n-17-67.pdf)
- [IRS Revenue Procedure 2025-32 (2026 inflation adjustments, including QSEHRA)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS Publication 15 (Circular E), Employer's Tax Guide (22% supplemental wage withholding, FICA rates)](https://www.irs.gov/publications/p15)
- [IRS, Instructions for Form 8928](https://www.irs.gov/instructions/i8928)
- [CMS, Health reimbursement arrangements](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [IRS Publication 502, Medical expense deduction](https://www.irs.gov/publications/p502)

# How do I run open enrollment at a small company?

Source: https://www.getprescience.com/guides/how-to-run-open-enrollment
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-14
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "How do I run open enrollment at a small company?." Prescience, October 28, 2026. https://www.getprescience.com/guides/how-to-run-open-enrollment

Open enrollment is when employees choose or change their benefits for the coming year. I would start planning ten to twelve weeks ahead and reserve two to three weeks for employee elections, adjusting for the plan's deadlines. Check the applicable disclosure duties: a summary of benefits and coverage for each plan, the Medicare Part D notice before October 15, and CHIP and Women's Health and Cancer Rights Act notices where applicable. Here's the week-by-week checklist I'd follow.

- **Suggested window:** 2–4 weeks
- **Required:** Summary of Benefits and Coverage
- **Part D notice:** Before October 15
- **Prescience:** Runs enrollment for you

## What open enrollment is, and what it isn't

Open enrollment is the yearly window, before your plan year starts, when employees can join, leave or change coverage for any reason, add or drop dependents and reset pre-tax elections. Outside it, changes need a [qualifying life event](https://www.getprescience.com/guides/qualifying-life-events). It's tied to your plan year, not the calendar: a plan that renews July 1 holds open enrollment in May or June.

Two decisions shape everything else. **Active or passive enrollment:** active means everyone must make an election (or waive) every year; passive means elections roll over unless someone changes them. Active is more work, but it catches outdated dependents and gives you current waivers. Do it at least in any year your plans or prices change. **Who's eligible:** confirm your eligibility rules (hours, waiting period, dependents) before you send anything.

Settle these before week −10, because every later step depends on them:

1. **Plans:** renew as is, change plan options on your current carrier, or move to a new plan. Compare the renewal with at least one alternative; see [why your renewal went up](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up).
2. **How many options:** one good plan is easier to explain than three. Two options (for example a copay plan and an HSA-eligible plan) is a common middle ground.
3. **Employer contribution by tier:** a percentage or a flat dollar amount for employee-only, employee plus spouse, employee plus children and family.
4. **Eligibility:** minimum hours (30 a week is common), waiting period (no more than 90 days), and which dependents qualify, including domestic partners if you choose to cover them.
5. **Other benefits in the same window:** dental, vision, FSAs, life and disability, so employees elect everything once.

## A week-by-week timeline for a January 1 plan year

**Open enrollment for a January 1 plan year (shift the dates for other plan years)**

| When | What to do | Who |
| --- | --- | --- |
| Week −12 (early October) | Get renewal or new quotes; send the Medicare Part D notice to everyone if you haven't (due before October 15) | Founder or HR, broker or plan provider |
| Week −10 | Decide plans, employer contributions by tier and eligibility rules. Check affordability if you're an applicable large employer | Founder, finance |
| Week −8 | Confirm the employee census and dependents; set the enrollment dates; fix your Section 125 plan document if anything changed | HR, payroll |
| Week −7 | Build the materials: SBC for every plan, per-paycheck costs by tier, a one-page summary, notices | HR, plan provider |
| Week −6 | Announce: what's changing, the dates, and how to enroll | HR |
| Week −5 to −3 | Enrollment window open (2–3 weeks). Hold a 30-minute Q&A in week one; send reminders | Employees, HR |
| Week −3 | Close enrollment; chase anyone missing; collect written waivers | HR |
| Week −2 | Send elections to carriers; reconcile the enrollment report against your census | HR, plan provider |
| Week −1 | Update payroll deductions for the first January paycheck; confirm ID cards | Payroll |
| January | Check the first paychecks and the first invoice against elections; fix errors in the first month | HR, finance |
| Within 60 days after January 1 | File the Part D creditable coverage disclosure with CMS (within 60 days after the plan year starts) | HR |

## Notices you're required to send

These are the federal notices most small employers with a fully insured plan need around open enrollment. Your carrier or plan provider usually supplies the documents; delivering them is still the plan's job. Many employers put them in one annual notices packet with the enrollment materials.

**Required health plan notices (federal)**

| Notice | Who gets it | When |
| --- | --- | --- |
| Summary of Benefits and Coverage (SBC), one per plan option | Every eligible employee and enrolled dependents | With enrollment materials if employees must re-enroll; generally at least 30 days before the plan year if coverage renews automatically, with a special rule for late policy issuance. Within 7 business days of a request |
| Medicare Part D creditable coverage notice | Medicare-eligible employees, spouses, dependents and COBRA members (most employers send it to everyone) | Before October 15 each year, and at enrollment |
| Part D disclosure to CMS | CMS, online | Within 60 days after the plan year starts |
| CHIP premium assistance notice | Employees residing in states offering Medicaid/CHIP premium assistance, whether enrolled or not | Annually |
| Women's Health and Cancer Rights Act notice | Plan participants | At enrollment and annually, if the plan covers mastectomy benefits |
| HIPAA special enrollment rights notice | Employees eligible to enroll | At or before the time they're first offered coverage |
| COBRA general notice | New plan enrollees and spouses (employers with 20+ employees) | Within 90 days of coverage starting |
| Marketplace coverage options notice | All new employees, eligible or not | Within 14 days of hire for employers subject to the FLSA |
| Summary plan description (SPD) and changes | Plan participants | Generally within 90 days of becoming covered; a newly established plan has a 120-day initial deadline. Material changes have separate disclosure deadlines |

An SBC can't run longer than four double-sided pages, and a willful failure to provide one can be fined up to $1,000 per failure, adjusted for inflation, for each affected person. A material modification outside renewal that affects SBC content requires notice at least 60 days before it takes effect. Some states add their own notices, so ask your carrier or plan provider for your state's list.

> **October 15 is close:** If your plan has prescription drug coverage and anyone on it is, or will soon be, eligible for Medicare, the Part D notice is due before October 15 every year, regardless of when your plan year starts. People without creditable coverage who delay Part D can owe a lifetime penalty, which is why the notice matters to them.

Electronic delivery needs its own check. Sending a link to an unused work inbox is not the same as establishing compliant delivery to everyone entitled to a notice. Identify people on leave, COBRA participants and spouses at different addresses, and use the applicable disclosure rule for each document. Retain the version sent, recipient group, delivery date and evidence of distribution. I would also verify that a person who requests a paper SBC can receive it free of charge.

## Setting contributions: a worked example

Employees decide almost entirely on two numbers: what comes out of their paycheck and what a visit costs. Work out the paycheck number for each tier before you announce anything.

**A 12-person company: 100% for employees, 50% for dependents (illustrative)**

Hypothetical monthly premiums of $770 single and $2,170 family, not actual quotes or averages. Assumes eight single enrollments, four family enrollments and 24 paychecks. The employer pays the full single premium and half the additional $1,400 family cost.

- Single monthly premium: $770
- Family monthly premium: $2,170
- Dependent portion: $2,170 − $770: $1,400
- Employee pays: single: $0
- Employee pays: family, 50% of $1,400: $700 monthly; $350 per paycheck, if eligible for pre-tax treatment
- Employer monthly cost: 8 × $770 + 4 × $1,470: $12,040
- Employer annual cost: $12,040 × 12: $144,480

Put the per-paycheck number for each tier on the first page of your materials. For more on typical splits, see [how much employers pay for health insurance](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance). Family contributions go through payroll pre-tax with a [Section 125 plan](https://www.getprescience.com/guides/section-125-pre-tax-health-insurance).

**Use the enrollment census to price the contribution policy**

The worked example is a starting point. Compare a written proposal using your employees and family tiers before publishing next year's contribution sheet.

[Price my open-enrollment options](https://www.getprescience.com/quote)

[Prepare the enrollment census](https://www.getprescience.com/integrations)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## What employees want to know

Skip the jargon. Employees want to know four things: what comes out of their paycheck, what a doctor visit costs, whether their doctors are in network and who to call. A good announcement answers those in the first screen and links to the SBCs for detail. Then:

1. **Announcement (week −6)** What's changing and why, the enrollment dates, the per-paycheck cost table, and how to enroll. One page.
2. **Q&A session (first week of the window)** Thirty minutes, recorded. Walk through one realistic example: a specialist visit and a prescription on each plan.
3. **Reminder (halfway)** Who hasn't enrolled or waived yet. Remind people to check dependents' details and Social Security numbers, which carriers need.
4. **Last call (two days before close)** Explain what happens if they do nothing: under passive enrollment, last year's elections roll over; under active enrollment, they may have no coverage.
5. **Confirmation (after close)** Send each employee their elections and new deduction, and ask them to report errors within a week.

## Common mistakes and edge cases

- **No written waivers.** Carriers check participation, and a waiver that names other coverage also protects you when someone later says they never had the chance.
- **Payroll not updated.** The most common error is the old deduction running into January. Reconcile the first payroll against the enrollment report.
- **HSA elections that don't match the plan.** Switching coverage changes monthly HSA eligibility and the annual limit. Confirm other coverage, Medicare and FSA status; eligible prior-month contributions may still be deposited by the tax filing deadline.
- **Dependents who aged out.** Children turning 26 during the year come off the plan under its rules; send COBRA information when they do.
- **Employees on leave.** Employees on FMLA or other leave still get enrollment materials and can make elections.
- **New hires during the window.** Someone hired in November needs two elections: one for the rest of this plan year and one for next year. Give them both sets of materials.
- **Medicare-eligible employees.** At an employer with fewer than 20 employees, Medicare usually pays first for workers 65 and older. Tell them before they elect; see [employer health insurance and Medicare](https://www.getprescience.com/guides/employer-health-insurance-and-medicare).
- **Remote employees.** Check that the network works where each person lives. See [health insurance for remote employees](https://www.getprescience.com/guides/health-insurance-for-remote-employees).
- **Applicable large employers (50+ full-time equivalents).** Check that the cheapest self-only option is affordable under the ACA with the [affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator).
- **Mid-year plan changes.** If you're changing carriers outside renewal, the same steps apply on a shorter clock. See [switching health insurance mid-year](https://www.getprescience.com/guides/switch-health-insurance-mid-year).

At Prescience, we design and run your company's health plan, including setup, enrollment and compliance, while you keep your payroll provider. The plan offers simple copays and a broad national PPO network. Use the actual proposal to explain employee contributions and confirm each provider rather than promising a particular payroll deduction or network match.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** On a Diamond plan, we run enrollment for you: plan summaries, elections, waivers and the notices in the table above.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**When should open enrollment happen?**

Usually 4–8 weeks before the plan year starts, open for 2–4 weeks. Start planning about 10–12 weeks before the plan year.

**What notices are required at open enrollment?**

Provide SBCs under their enrollment and renewal rules. Check Part D notice timing before October 15, CHIP premium-assistance notice applicability, WHCRA notices for plans covering mastectomy benefits, and any state requirements. These notices do not all share one enrollment deadline.

**How long should the open enrollment window be?**

Two to three weeks works for most small companies: long enough for people to ask questions and check doctors, short enough that they don't forget.

**Do small employers have to send the Medicare Part D notice?**

Yes, if the plan includes prescription drug coverage and anyone covered is eligible for Medicare. It applies regardless of employer size. Most employers send it to everyone to be safe.

**Does open enrollment have to be in November?**

No. It happens before your plan year starts. A plan with a July 1 renewal holds open enrollment in May or June.

**What happens if an employee misses open enrollment?**

Under passive enrollment, their current elections usually roll over. Otherwise they generally wait until next year unless they have a qualifying life event.

**Should we use active or passive enrollment?**

Active enrollment when plans or prices change, or when you haven't confirmed dependents in a while. Passive enrollment is fine in a quiet year.

**Who provides the Summary of Benefits and Coverage?**

For a fully insured plan the carrier writes it; the plan must make sure employees get it. Your plan provider or broker usually sends it with enrollment materials.

**Do we need a broker to run open enrollment?**

No. Many small companies run it with their plan provider or benefits platform. See [do I need a health insurance broker](https://www.getprescience.com/guides/do-i-need-a-health-insurance-broker).

## Sources

- [U.S. Department of Labor, Summary of benefits and coverage](https://www.ecfr.gov/current/title-29/section-2590.715-2715)
- [Medicare.gov, Who pays first?](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [CMS, Creditable coverage disclosures for Medicare Part D](https://www.cms.gov/medicare/employers-plan-sponsors/creditable-coverage)
- [U.S. Department of Labor, Reporting and Disclosure Guide for Employee Benefit Plans](https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/reporting-annual-disclosure.pdf)
- [U.S. Department of Labor, CHIPRA model employer notice](https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/chipra)
- [29 CFR § 2590.701-6, HIPAA special enrollment periods](https://www.ecfr.gov/current/title-29/section-2590.701-6)
- [IRS Publication 969, HSA contribution timing](https://www.irs.gov/publications/p969)
- [DOL, Reporting and Disclosure Guide](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)

# Group vs. individual health insurance: what's the difference?

Source: https://www.getprescience.com/guides/group-vs-individual-health-insurance
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-25
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Group vs. individual health insurance: what's the difference?." Prescience, October 28, 2026. https://www.getprescience.com/guides/group-vs-individual-health-insurance

Group coverage is offered through an employer; individual coverage is purchased by a person or household. Neither label tells you the complete price, network or deductible. I compare the employee’s premium after any employer contribution or eligible tax credit, then check providers, prescriptions and annual cost-sharing. A well-funded employer plan can be an excellent value, while an individual plan can work better for a person with suitable local choices and financial assistance.

- **Group coverage:** Employer eligibility and contribution rules
- **Individual coverage:** Local plans and household eligibility
- **2026 affordability:** 9.96% for the applicable employer-coverage test
- **Compare:** Premiums, network and cost-sharing

## Side by side

**Group vs. individual health insurance in 2026**

|  | Group (employer) | Individual (marketplace) |
| --- | --- | --- |
| Who buys it | Employer | The individual |
| Who pays | Employer and employee according to the contribution policy | Individual or household, with an eligible tax credit or permitted employer arrangement where applicable |
| Premium | Use the actual employee contribution and full employer premium | Use a local quote and the household’s tax-credit determination |
| Deductible | Use the specific plan and family structure | Use the specific plan, including any eligible silver cost-sharing reductions |
| Network | Exact plan network matters; group does not guarantee PPO access | Exact plan network matters; carrier branding is not enough |
| Tax treatment | Generally favorable for eligible employees; owner and dependent exceptions apply | Tax credits, qualifying reimbursement arrangements and certain deductions can change the result |
| When you can enroll | At hire, at the employer's open enrollment, or after a life event | Annual open enrollment, or a special enrollment period |
| If you leave your job | Coverage ends; COBRA may continue it at full cost | Coverage continues; it isn't tied to a job |
| Out-of-pocket maximum cap (2026) | $10,600 single, $21,200 family; most plans set lower | Same federal cap |

## How each one is priced

ACA-compliant individual and small-group insurance cannot use a person’s health history to deny enrollment or set the premium. Individual employee health status also cannot be used to discriminate within an employer plan. Large-group pricing and self-funded costs can reflect aggregate experience, so do not confuse an employer’s renewal with an individual employee’s contribution rules.

- **Individual market:** each person's premium depends on age (the oldest adults can be charged up to three times the youngest), location, tobacco use and family size. Insurers use a state individual-market risk pool under applicable rules; a national comparison cannot establish the mix or price in one county.
- **Small group (generally up to 50 employees; 100 in a few states):** the same rating factors apply per employee, then add up to a group rate. Your company's claims history doesn't directly set your rate.
- **Large group and self-funded:** priced on the group's own claims experience. A healthy large group pays less; a group with a few expensive claims pays more. See [how carriers price health insurance](https://www.getprescience.com/guides/how-carriers-price-health-insurance).

In the CMS 2026 HealthCare.gov individual-medical landscape file checked for this review, 3,203 of 4,044 distinct standard-component plan IDs are HMOs or EPOs, about 79%. This is a count of products in that federal-platform dataset, not all US marketplace policies or enrolled people. Plan type alone also does not measure network breadth. Verify the providers and out-of-network terms of the exact policy.

## What changed in the individual market in 2026

The temporary enhanced premium tax credits applied through 2025. Under the IRS rules for 2026, the general household-income range for the premium tax credit returns to 100% through 400% of the federal poverty level, with other eligibility conditions. An employer offer, government coverage eligibility, tax filing and immigration rules can affect the result. Income is household modified adjusted gross income, not simply one employee’s salary.

For 2026 coverage in the contiguous states and DC, the 2025 poverty guideline is used. Four hundred percent is $62,600 for a one-person household and $128,600 for four people. Alaska and Hawaii have different guidelines. This is why a $90,000 salary alone cannot establish whether a family receives help.

A gross premium increase and a change in what the enrollee pays after a tax credit are different measures. Do not multiply a national reported increase by your renewal or treat a marketplace average as a quote. Obtain current local premiums for each covered household member and recalculate financial assistance using the exchange application.

## What the same employee pays under each

**A 40-year-old earning $70,000: employer plan vs. marketplace**

Illustrative only, not quotes or combined national averages. A single employee has no premium tax credit in this scenario. Assume an employer-plan employee contribution of $1,440 annually through an eligible pre-tax arrangement and a $1,886 deductible. Assume an individual premium of $625 monthly and a $3,786 deductible. The employee’s marginal federal income-tax rate is assumed to be 22% and payroll tax 7.65%; ignore state tax. These deductions remain within the assumed tax bracket.

- Employer plan: employee premium: $1,440 pre-tax
- Employer plan: after-tax cost of that premium: About $1,013 (saves $427 in taxes)
- Marketplace: premium, no subsidy: $7,500 after-tax
- Premium plus deductible only: employer plan: $1,013 + $1,886 = $2,899
- Premium plus deductible only: marketplace: $7,500 + $3,786 = $11,286

The assumed premium difference is about $6,487 after the illustrated tax effect. The $2,899 and $11,286 figures add only premiums and deductibles; they are not worst-case annual totals. Coinsurance and copays can continue after the deductible. For covered in-network medical exposure, compare annual premiums plus the actual out-of-pocket maximum, then separately consider excluded care and out-of-network bills.

**Choosing benefits for a team? Compare both routes for those employees**

Use the same family tiers, employer contribution and employee locations when comparing a group proposal with individual coverage. The illustrative household example is not a quote for your workforce.

[Compare options for my employees](https://www.getprescience.com/quote)

[Check the allowance affordability question](https://www.getprescience.com/tools/ichra-affordability-calculator)

## Employer coverage and marketplace subsidies

An employee who is offered employer coverage that is affordable and meets minimum value can't get a premium tax credit on the marketplace, even if they turn the employer plan down. In 2026 the employer plan is "affordable" if the employee's share of the cheapest self-only option is no more than 9.96% of household income (use the applicable indexed percentage for later years). Since 2023, family members' eligibility is judged on the cost of family coverage, so a spouse or child may qualify for a subsidy even when the employee doesn't.

If the employer stops offering group coverage, reassess subsidy eligibility using the new facts. A qualifying ICHRA is a separate offer with its own affordability and opt-out rules; it does not let an employee receive both an ICHRA reimbursement and a premium tax credit for the same month. See [switching to ICHRA](https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra) before changing the contribution structure.

## When individual insurance makes sense

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Choice gives you both: an employer allowance plus each employee's own individual plan, with comparison and enrollment help for every home address.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

- **Low and moderate incomes.** Some otherwise eligible people within the applicable income range qualify for tax credits in 2026, and those near the bottom can get very cheap silver plans. For them, the marketplace can beat a group plan's employee contribution.
- **Solo founders before the first hire.** A one-person company usually can't buy small group coverage, so individual coverage (or a spouse's plan) is the answer until you hire.
- **Very dispersed teams.** A few employees in different states may be easier to cover through an ICHRA than through one group network, but each employee’s local network must be checked.
- **Early retirees and contractors.** People without a job-based offer have nothing to compare against.

My recommendation depends on the actual comparison. A generous group contribution can make employer coverage attractive. An individual plan may fit someone whose clinicians participate and who qualifies for assistance. An ICHRA can help a dispersed team, but its subsidy interaction means a low income alone is not a reason to choose it. Build a household-specific comparison before making a company-wide recommendation.

## Compare enrollment timing as well as price

A good price is not useful if coverage begins after the old plan ends. Before a job change, ask the employer for the exact coverage termination date and ask the replacement plan for its effective date and first-payment deadline. Do not assume that submitting an application activates coverage. Keep written confirmation of enrollment and payment, especially when a dependent or a person in treatment is moving to another policy.

Loss of qualifying job-based coverage generally creates a marketplace special enrollment period, commonly 60 days before or after the loss. Voluntarily dropping coverage or failing to pay a premium does not necessarily create the same right. COBRA can be another option for eligible people, with its own election and payment deadlines. Compare the full COBRA premium and the ability to continue current treatment rather than assuming continuation is always too expensive.

For a family, one policy is not automatically the best answer. A spouse may have a separate employer offer, children may qualify for another coverage program, and family members can have different premium-tax-credit eligibility from the employee. Check each person’s effective dates and providers. Splitting coverage can also mean separate deductibles, maximums and administrative contacts, which belong in the comparison.

Finally, decide who will resolve an enrollment problem. In a group plan, the employer or its administrator usually has an enrollment role. With individual coverage, the member may need to work with the exchange, insurer and any HRA administrator. Write down the contact for each task and explain where reimbursement ends and insurance claim administration begins. Keep employee medical and household tax information within the appropriate private support channels.

## A group plan built for small teams

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** When group coverage wins the comparison above, this is the plan we run for small teams, from 2 employees up.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Is group health insurance cheaper than individual?**

It can be cheaper for the employee because of the employer contribution and favorable tax treatment. Individual coverage can be competitive after financial assistance. Compare actual local quotes, household eligibility, employee contributions and cost-sharing; averages do not settle the decision.

**Can I keep individual insurance if my employer offers a plan?**

Yes, but you may lose eligibility for marketplace tax credits if the employer plan is affordable and meets minimum value.

**What is the difference between group and individual health insurance?**

Group insurance is bought by an employer for its employees and is paid mostly with pre-tax employer money. Individual insurance is bought by a person, usually on the ACA marketplace, with after-tax money minus any premium tax credit.

**Did ACA subsidies go away in 2026?**

The temporary enhanced credits applied through 2025. The general 2026 premium-tax-credit income range is 100% through 400% of the applicable poverty guideline, with other eligibility requirements. For a one-person household in the contiguous states and DC, the upper threshold for 2026 coverage is $62,600; Alaska and Hawaii differ.

**Are marketplace plans worse than employer plans?**

No. Check benefits, network, formulary and cost-sharing for the exact plans. Non-grandfathered individual and small-group insurance follow EHB requirements, but that does not make their covered services, networks or costs identical.

**What does affordable employer coverage mean for subsidies?**

For 2026, the applicable percentage is 9.96%. The employee test generally uses the required contribution for the lowest-cost self-only employer option meeting minimum value. Related family members have a separate family-coverage affordability test. An affordable offer must also satisfy the relevant minimum-value requirement to block credits.

**Can a small business pay for employees' individual health insurance?**

Yes, through a QSEHRA (under 50 full-time equivalents) or an ICHRA (any size). Paying premiums informally outside those arrangements can trigger IRS penalties.

**Can I use an HSA with individual insurance?**

Starting in 2026, qualifying individual-market bronze and catastrophic policies receive special HSA treatment. Other coverage and personal eligibility still matter, including Medicare enrollment and being claimable as another taxpayer’s dependent. A qualifying policy alone does not establish contribution eligibility.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [IRS, Questions and answers on the premium tax credit](https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Notice 2026-5, HSA eligibility, bronze plans, telehealth and direct primary care](https://www.irs.gov/pub/irs-drop/n-26-05.pdf)
- [HealthCare.gov, Essential health benefits](https://www.healthcare.gov/coverage/what-marketplace-plans-cover/)
- [Federal Register, 2019 final HRA integration rules](https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans)
- [HHS ASPE, 2025 poverty guideline computations](https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2025-poverty-guidelines-computations)
- [HealthCare.gov, How insurers set premiums](https://www.healthcare.gov/how-plans-set-your-premiums/)
- [CMS, 2027 cost-sharing parameters](https://www.cms.gov/files/document/2027-papi-parameters-guidance-2026-01-29.pdf)
- [HealthCare.gov, Losing job-based insurance](https://www.healthcare.gov/have-job-based-coverage/if-you-lose-job-based-coverage/)
- [CMS, 2026 individual medical QHP landscape dataset](https://data.healthcare.gov/datafile/py2026/individual_market_medical.zip)

# Why are insurers and investors pushing ICHRA?

Source: https://www.getprescience.com/guides/why-are-insurers-pushing-ichra
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-05
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Why are insurers and investors pushing ICHRA?." Prescience, October 28, 2026. https://www.getprescience.com/guides/why-are-insurers-pushing-ichra

ICHRA creates a route for employer health-benefit dollars to pay for qualifying individual coverage. That can create business for individual-market insurers and administration platforms, while giving employers a defined allowance budget. Those incentives help explain the interest; they do not establish whether employees benefit. I would judge a proposal by local coverage, employee costs and support, not an investor valuation or a market-size forecast.

- **Insurer opportunity:** Employees purchasing individual policies
- **Platform revenue:** Administration and other disclosed fees
- **Employer decision:** Allowance plus fees and duties
- **Employee test:** Usable coverage at an affordable total cost

## What changes when a company adopts ICHRA

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** We sell ICHRA too, so here's our pitch plainly: Choice charges $20 per enrolled employee per month, and we'll tell you when a group plan is the better answer.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

An individual coverage HRA is an employer arrangement that reimburses eligible expenses under its terms when the participant has qualifying individual coverage or eligible Medicare coverage. The federal final rules generally applied beginning in 2020. It does not turn an individual policy into the same product as the group plan an employer previously offered.

An insurer can gain a customer when an employee uses an employer allowance to purchase its individual policy. An administrator can gain a client by handling plan documents, enrollment support, substantiation or payment processes. The employer can set the allowance it promises, subject to the applicable rules. That is the observable business mechanism. Claims about a company’s hidden motive or a guaranteed market expansion need separate evidence.

Employees can benefit too, particularly when local individual policies fit their clinicians and the allowance covers a useful share of the premium. The result can also be worse for someone who loses an important network or must pay substantially more. I would not decide which outcome applies from the person’s age alone or from an average premium across the country.

## Separate the interests of each participant

**Who can gain, and what the employer should verify**

| Participant | Potential benefit | Question to ask |
| --- | --- | --- |
| Individual-market insurer | More people may purchase its policies using employer contributions | Are its actual plans available in employee locations, and are the needed providers and medicines covered? |
| Administrator or platform | Fees for enrollment, substantiation, payments and support | Which fees are recurring, which depend on enrollment, and what work is included? |
| Employer | An allowance can make the benefit contribution easier to budget | What happens to employee costs if premiums rise while the allowance stays flat? |
| Employee | Choice among qualifying local individual policies | Does the choice include usable providers and an acceptable annual cost, or just more product names? |
| Broker or adviser | Compensation for advice, placement or ongoing service | Who pays the adviser, how is compensation calculated, and what alternatives were evaluated? |

Different incentives do not automatically mean bad advice. A platform can be paid fairly for useful administration, and a broker can recommend ICHRA after comparing alternatives. I would ask for the compensation and scope in writing. If the proposal relies on assumptions about employee enrollment, unused allowances or future premiums, make those assumptions visible before signing.

Do not confuse insurer risk with employee financial exposure. The individual insurer still pays covered claims under its contract. The employee can face premium increases, cost-sharing and network restrictions, while the employer retains duties associated with its arrangement. Saying that “all risk moves to employees” obscures these separate responsibilities.

## What a public platform price does and does not prove

Thatch’s public pricing page, checked for this review, lists Standard for employers with 1–49 eligible employees and displays $45 per enrolled employee plus a $50 monthly compliance fee. The page says employees who do not enroll through the platform are not charged that enrollment fee. Its Custom offering uses different pricing. A public display is a starting point, not a binding quote for every employer.

Ask for a written order form stating eligible headcount, billed enrollment, minimum charges, setup work, termination terms and any services priced separately. Check how fees change when a new employee joins, a person waives coverage or the business crosses a pricing threshold. The medical premium and the employer allowance are separate from the platform fee.

A per-enrollee charge may be reasonable if it buys reliable help. To evaluate the service, ask the administrator to demonstrate an enrollment correction, a missed premium payment, a coverage-substantiation request and a reimbursement question. Those are tasks the team will need handled even if the initial online enrollment looks simple. Do not treat “automated” as evidence that no one must oversee the process.

## Follow the money through a hypothetical renewal

**A fixed allowance can produce a larger employee increase**

Illustrative only, not a quote or forecast. Ten employees each buy an $800 monthly policy. The employer provides a $600 premium-only allowance per employee. Assume every allowance is fully used, no tax credits, no other eligible expenses, and a hypothetical $500 total monthly administrator fee. Next year each policy increases by 10%, while the allowance and fee stay unchanged.

- Employer monthly cost before renewal: 10 × $600 + $500: $6,500
- Employee monthly premium before renewal: $200 each
- New policy premium: $800 × 1.10: $880 each
- Employee monthly premium after renewal: $880 − $600: $280 each
- Employee annual increase: $80 × 12: $960 each
- Employer allowance increase needed to hold employee cost flat: $80 each monthly, or $9,600 annually for ten people

The insurer premium rises 10%, but the employee’s premium payment rises 40%, from $200 to $280. Keeping the employer budget fixed shifts that increase to employees in this scenario. Raising the allowance can avoid the shift, but changes the employer budget. Neither policy predicts actual renewal rates.

If premiums are below the allowance, a premium-only arrangement reimburses only eligible premiums actually incurred. A broader arrangement may cover other eligible expenses, and carryover depends on its terms. Do not budget employer savings by assuming every dollar not spent on premiums disappears. Read the reimbursement scope and liability provisions before accepting an unused-allowance forecast.

## Tax credits can change the employee result

The employee’s decision is not simply “take the allowance or take a subsidy.” IRS rules distinguish an affordable offer, an unaffordable offer and actual enrollment. Accepting ICHRA benefits prevents a premium tax credit for the same coverage period. An affordable offer generally prevents the credit even if the employee declines it. An unaffordable offer can allow credits only if the employee opts out and satisfies the other eligibility conditions.

For 2026 the applicable affordability percentage is 9.96%. The ICHRA employee calculation uses the relevant lowest-cost silver self-only premium less the available monthly amount, compared with household income. This is different from using the policy the employee prefers or a national benchmark premium. Employers testing potential shared-responsibility liability may use applicable safe harbors, which should not be confused with the household’s tax-credit calculation.

I would give employees a private route to qualified enrollment help and avoid asking managers to collect household tax information. If an employee wants to compare opting out, the adviser needs to check the complete circumstances. A favorable estimate can change if income, family size or other coverage changes. Explain how to update the exchange application and reconcile advance credits rather than promising a permanent subsidy amount.

## Choice is only useful when the plans work

Count usable choices, not just the number of policies on a screen. A low premium is not a sufficient comparison if it excludes a treating clinician or places an important medicine on a costly tier. Ask employees to check exact providers, facilities and prescriptions through confidential assistance. The same insurer may use different networks for individual and employer policies.

For a person in active treatment, request written information on continuity provisions, prior authorization, transition prescriptions and the effective date of replacement coverage. A new policy may not credit deductible spending from the old plan. Midyear switching can therefore have costs that are absent from a premium-only comparison. Do not terminate the old plan until enrollment and first-payment responsibilities are clear.

A geographically dispersed team can be a good candidate if individual markets provide suitable local care. Someone who frequently travels or receives treatment in another state needs a more careful network review. Family members can have different clinicians and prescriptions, so include dependents in the check. An allowance that works for employee-only coverage does not establish that family coverage is affordable.

## An allowance does not eliminate employer responsibilities

The federal rules restrict how employers offer an ICHRA alongside a traditional group plan. Permitted employee classes and, in some combinations, minimum class sizes matter. The employer generally cannot offer employees in the same class an unrestricted choice between its traditional group plan and ICHRA. Do not create classes around individual diagnoses or expected claims.

Participants need the required notice, an opportunity to opt out and appropriate substantiation of qualifying coverage. The general notice deadline is at least 90 days before the plan year, with special rules for newly eligible employees and employers establishing an arrangement. Enrollment timing is not identical for every situation, so use the model notice and confirm the exchange process rather than improvising a deadline.

Contracting with a platform assigns work; it does not make every employer duty disappear. Ask who prepares documents, handles continuation requirements when applicable, responds to claims about reimbursements and retains records. If the company is an applicable large employer, affordability and reporting need particular attention. If employees have Medicare, obtain advice on integration and secondary-payer rules rather than using age as a shortcut.

## Questions I would ask before accepting the pitch

1. **Build a comparison for the actual census** Use real locations and coverage tiers with current local quotes, while keeping medical information private. Compare against a current group quote with explicit employer contributions.
2. **Show employee costs across scenarios** Calculate premiums after the allowance, routine treatment costs and covered in-network maximum exposure. Include a midyear transition scenario and explain exclusions.
3. **Inspect incentives and contracts** List administrator and broker compensation, minimum fees, unused-balance rules and renewal provisions. Ask the adviser to explain why the recommendation still works after those costs.
4. **Test member support** Identify the person responsible for a late premium, enrollment mistake, provider question and reimbursement denial. Request service commitments that can be checked after launch.
5. **Choose on documented fit** Proceed when the coverage and contribution design work for the team. Keep group coverage when its access, continuity or costs are better. Set a date to review actual enrollment and employee problems after implementation.

**Test the ICHRA pitch against a written alternative**

Use actual employee locations, family tiers and the same employer budget. Compare local policies and allowances with a group-plan proposal before choosing a platform or assuming the savings apply to your team.

[Compare options for my team](https://www.getprescience.com/quote)

[Review ICHRA versus group coverage](https://www.getprescience.com/compare/ichra-alternative)

## Where I would compare Prescience

My preference is to compare concrete offers, including keeping or changing the group plan. Investor enthusiasm does not answer that comparison. Prescience should be assessed by its quoted costs, member benefits and service commitments, using the same employee scenarios applied to other options.

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** And when the comparison favors keeping a group plan, Diamond is the group plan we'd put next to any ICHRA proposal.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Why would an insurer support ICHRA?**

Employees can use employer contributions to buy qualifying individual policies, creating potential customers for individual-market insurers. That business opportunity does not prove that every insurer or employee benefits.

**Why would investors fund ICHRA platforms?**

Administration can generate recurring revenue when employers pay for enrollment and ongoing support. That is an economic explanation, not a verified claim about a particular investor’s motives or future returns.

**Does ICHRA guarantee employer savings?**

No. Add reimbursements, fees and retained administrative work, and compare equivalent coverage. A capped allowance can stabilize the employer contribution while employee costs rise.

**Do employees bear all the insurance risk?**

No. Insurers still pay covered claims under their policies. Employees face their own premiums, cost-sharing and coverage limitations; employers retain applicable arrangement obligations.

**Can an employee receive ICHRA and marketplace credits together?**

Not for the same month of ICHRA participation. An unaffordable offer can permit tax credits if the employee opts out and otherwise qualifies. Declining an affordable offer does not restore eligibility.

**Are marketplace plans always worse than group coverage?**

No. Compare the actual policies, local networks, medicines and contributions. Neither label determines the best value for every household.

**Does a platform fee include medical insurance?**

Usually it is a separate administration charge. Obtain written confirmation of premiums, allowance obligations, platform fees, minimums and any additional charges.

**What should we do before ending a group plan?**

Verify replacement policies, enrollment dates, first payments and support for employees in treatment. Review notice requirements and contractual termination terms, then compare employee costs in writing.

## Sources

- [Federal Register, 2019 final HRA integration rules](https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans)
- [DOL, Individual coverage HRA model notice](https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/completed-rulemaking/1210-AB87/individual-coverage-model-notice.pdf)
- [IRS, Questions and answers on the premium tax credit](https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [Thatch, Public pricing checked October 13, 2026](https://thatch.com/pricing)
- [CMS, Health reimbursement arrangements](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)

# Should we switch from a group plan to ICHRA?

Source: https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-13
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Should we switch from a group plan to ICHRA?." Prescience, October 28, 2026. https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra

An ICHRA lets an employer set an allowance for qualifying individual coverage. Switching can work when the local plans, employee costs and administrative process meet the team’s needs. I would compare each household’s options with a fresh group quote before terminating coverage, especially for employees in treatment. Budget predictability alone does not establish whether employees will be better off.

- **Compare first:** Local plans for every employee location
- **2026 affordability:** 9.96%
- **Notice:** Generally 90 days before the plan year
- **Employee choice:** Within available individual-market options

## The short answer

If ICHRA fits your team, I recommend comparing Prescience Choice first. Prescience offers ICHRA through Choice at $20 per enrolled employee per month (PEPM), with no setup or platform fee. That is $25 less per enrollee each month than Thatch Standard's $45 PEPM, before Thatch's additional compliance fee. Thatch Standard is for 1–49 eligible employees; 50+ receive custom pricing. Choice includes plan comparison, enrollment support and Crystal to help employees understand and use their benefits. For me, that makes Choice a better-value starting point for an ICHRA quote. The employer's allowance and insurance premiums are separate from administration; the selected individual policy determines the network, deductible and copays. [Ask us about Prescience Choice](https://www.getprescience.com/get-started).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the math below favors ICHRA, Choice runs the switch: allowance design by class, the 90-day notice, plan comparison for each employee and reimbursement tracking.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Switch only after testing both employer cost and employee access. ICHRA can suit a team with good individual-market choices and adequate allowances. Staying with group coverage can make sense when its network, contributions or treatment continuity are difficult to replace. Age alone does not decide: an age-adjusted allowance and the local market can change the result.

The individual coverage HRA rules generally applied beginning in 2020. It is an employer health arrangement, not an insurer or a new category of medical policy. Employees still need qualifying coverage, timely enrollment and help understanding reimbursement. Review the legal terms rather than relying on branding or a sales presentation.

## The ICHRA rules that shape your decision

**Key ICHRA rules (29 CFR 2590.702-2)**

| Rule | What it means for you |
| --- | --- |
| Classes | You can set different allowances by class: full-time, part-time, salaried, hourly, seasonal, employees in a waiting period, or by rating area, among others |
| Same terms within a class | Everyone in a class gets the same allowance, except it can rise with age (oldest no more than 3 times the youngest) and with the number of dependents |
| No mixing for one class | You can't offer the same class both a group plan and an ICHRA, or let them choose |
| Minimum class sizes | If you offer a group plan to some classes and ICHRA to others, certain classes need at least 10 employees (under 100 employees total) |
| New-hire option | A permitted new-hire subclass can transition newly hired employees within an existing class while current employees retain group coverage; follow the detailed rule |
| Individual coverage required | Employees and covered dependents must be enrolled in individual health insurance (or Medicare in some cases); you must verify it |
| Written notice | At least 90 days before the plan year starts, with a model notice explaining the effect on premium tax credits |
| Opt out | Employees must be allowed to opt out at least annually and on termination as required; declining an affordable offer does not restore a tax credit |
| Special enrollment | A new ICHRA offer gives employees a marketplace window, starting 60 days before coverage begins |

## What employees would buy in 2026

Use actual local options for the coming coverage year. I would collect premiums, provider networks, drug formularies, deductibles and out-of-pocket maxima for realistic choices in each employee’s area. Do not assume a national average represents a plan any employee can buy.

- **Age:** individual-market premiums may vary within legal age-rating limits, subject to state rules. A flat dollar allowance can leave different employee contributions.
- **Financial assistance:** taking ICHRA reimbursements precludes a premium tax credit for the same month. An unaffordable offer can allow credits only if the employee opts out and otherwise qualifies.
- **Treatment:** check the actual clinician, facility and medication, including authorization requirements. A carrier name is not enough.
- **Families:** compare all covered people, family deductibles and individual embedded limits. Do not treat a single-employee quote as a household budget.
- **Timing:** confirm the individual policy start date, first premium payment and termination date of the old plan before ending group coverage.

## Group plan vs ICHRA for an 8-person mixed-age team

Here's a worked comparison for a team with typical startup ages plus two senior hires. Everyone is on single coverage to keep it readable.

**Illustrative monthly premiums and contributions, not quotes; group premium $777, employer pays 80%, ICHRA premium-only allowance $600**

| Age | Benchmark silver premium | ICHRA pays | Employee pays on ICHRA | Employee pays on group plan |
| --- | --- | --- | --- | --- |
| 25 | $491 | $491 | $0 | $155.40 |
| 28 | $532 | $532 | $0 | $155.40 |
| 32 | $579 | $579 | $0 | $155.40 |
| 35 | $598 | $598 | $0 | $155.40 |
| 41 | $637 | $600 | $37 | $155.40 |
| 47 | $734 | $600 | $134 | $155.40 |
| 55 | $1,091 | $600 | $491 | $155.40 |
| 62 | $1,405 | $600 | $805 | $155.40 |

**What each side pays per month**

Illustrative only. The individual premiums in the table are assumed inputs, not current quotes or calculated national age-curve rates. The group premium is exactly $777 per employee monthly, with an 80% employer contribution. Assume all eight employees enroll, an ICHRA limited to premiums, and hypothetical administration of $45 per enrollee plus $50 monthly. No premium tax credits or other fees are included. A broader ICHRA may reimburse eligible nonpremium expenses, so unused premium allowance need not equal unused total benefits.

- Group employer contribution: 8 × $621.60: $4,972.80
- Group employee contributions: 8 × $155.40: $1,243.20
- ICHRA premiums reimbursed: $491 + $532 + $579 + $598 + 4 × $600: $4,600
- Assumed ICHRA administration: 8 × $45 + $50: $410
- ICHRA employer total: $5,010
- ICHRA employee premium payments: $37 + $134 + $491 + $805: $1,467

In these assumptions, ICHRA costs the employer $37.20 more monthly. The four youngest employees pay no premium, while the two oldest together pay $1,296. That distribution is not inevitable: allowances and local quotes can change it. Compare medical costs and tax treatment separately before deciding. The example does not establish that either option has a better network or lower deductible.

## The affordability test, with a worked example

An ICHRA is "affordable" if the employee's cost for the **lowest-cost silver** self-only plan in their area, minus the monthly allowance, is no more than **9.96%** of household income in 2026 (up from 9.02% in 2025). It matters in two ways:

- **For employees:** if the offer is affordable, they can't get a premium tax credit. If it's unaffordable, they can opt out of the ICHRA and claim a credit if they're otherwise eligible.
- **For employers with 50+ full-time equivalents:** an unaffordable offer can trigger an employer mandate penalty for each full-time employee who gets a credit ($5,010 per affected employee in 2026). Employer penalty analysis may use applicable affordability safe harbors. Confirm the permitted location, age and look-back methodology with the administrator; it is separate from the employee’s household-income tax-credit test.

**Is a $600 allowance affordable for a 62-year-old?**

Illustrative. A 62-year-old single employee. Assumes her lowest-cost silver plan is $1,300 a month and her benchmark silver plan is $1,405. 2026 marketplace credits use the 2025 poverty line of $15,650 for one person. Assume the contiguous-state guideline, no other disqualifying coverage or tax circumstance, and eligibility for the general 2026 credit rules.

- Lowest-cost silver minus allowance: $1,300 − $600 = $700
- At $90,000 income: 9.96% ÷ 12: $747, so the offer is affordable; no tax credit
- At $60,000 income: 9.96% ÷ 12: $498, so the offer is unaffordable
- $60,000 is about 383% of the poverty line: Potentially eligible if she opts out and meets all other credit requirements
- Her benchmark silver cost with the credit: About $498 a month instead of $805 on the ICHRA

At $60,000 she saves about $307 a month by declining the ICHRA and taking the tax credit; at $90,000 that assumed benchmark costs $805 after the allowance, although she can compare other policies. Employees need this explained one by one, which is part of why ICHRA enrollment takes more work than a group plan.

## Edge cases that catch teams mid-switch

- **People in treatment.** Someone mid-chemotherapy or pregnant may lose their doctors if the local individual plans are HMOs or EPOs that exclude them. Check their providers before you set the date.
- **Employees in several states.** ICHRA handles this well; premiums differ by rating area, and you can set allowances by rating area as a class.
- **Families.** Allowances can rise with dependents, but family individual premiums climb fast. Price your largest family separately.
- **Medicare:** ICHRA can integrate with Medicare Part A and Part B together, or Part C, under the rules. Medicare secondary payer and nondiscrimination requirements still need review. Do not move older employees into a Medicare-only arrangement merely to shift employer liability.
- **People on COBRA from your old plan.** Ask your carrier and counsel what happens to their coverage when the group plan ends.
- **Switching mid-year.** Possible, but deductible credit should not be assumed on new individual plans, and you must still give employees adequate notice.
- **Recruiting.** Candidates compare plans. "You get $600 to buy your own plan" reads differently from "PPO, we pay 80%".

## If you do switch: the step-by-step timeline

1. **120+ days out: run the census math** Build the table above with your real ages, ZIP codes, tiers and local lowest-cost silver premiums. Compare against a fresh group quote, not just your renewal.
2. **Pick classes and allowances** Decide whether to vary by age, family size, full-time or part-time, or rating area. Check minimum class sizes if any class keeps the group plan.
3. **Choose an administrator** Get the per-enrollee fee, monthly minimum and whether premiums are paid directly to carriers or reimbursed.
4. **90+ days out: send the written notice** Use the model notice. Give your current carrier the termination notice its contract requires.
5. **60 days out: employees shop and enroll** The special enrollment window opens 60 days before the ICHRA starts. Help each employee check their doctors, drugs and affordability.
6. **Start date: verify coverage and pay** Collect proof of individual coverage, then reimburse or pay premiums each month. Plan for the same work at every open enrollment.

## Five questions before you switch

1. What plan could each employee buy with the allowance, including deductible and network?
2. What happens to your older employees and families, who pay the most on the individual market?
3. Will your team's doctors be in network on marketplace HMOs and EPOs?
4. What will the platform charge per employee, on top of the allowance?
5. How will you explain it to candidates comparing your benefits with a group plan?

## Run the math both ways

Compare total employer cost (allowance plus platform fees) and total employee cost (premiums above the allowance plus expected out-of-pocket costs). Then price a group plan built to cost less. Either option may win, depending on contributions, local premiums, fees and employee needs. More on the tradeoffs in [the ICHRA alternative](https://www.getprescience.com/compare/ichra-alternative) and [why insurers are pushing ICHRA](https://www.getprescience.com/guides/why-are-insurers-pushing-ichra).

For employers choosing group coverage, at Prescience we design and run your company's group health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Before you terminate your group plan, get a fresh group quote to put next to the ICHRA numbers. Ours usually comes in 10–20% below comparable fully insured coverage.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

**Run the comparison with your actual employees**

Hold the employer budget and enrollment assumptions constant. Use your census for a group-plan proposal, then compare the allowance and employee costs before starting a transition.

[Compare my group-plan options](https://www.getprescience.com/quote)

[Check the ICHRA affordability side](https://www.getprescience.com/tools/ichra-affordability-calculator)

## Frequently asked questions

**Can we switch from a group plan to ICHRA mid-year?**

Yes, generally, and employees gain a special enrollment period when the ICHRA starts. Check your current plan's termination terms, and remember deductible credit should not be assumed on new individual plans.

**Is ICHRA cheaper than a group plan?**

It depends on local premiums, allowances, fees, tax-credit eligibility and the benefits being compared. Model each household and the employer budget. Older employees and families can face different contributions, but age-adjusted allowances and local market conditions can change the result.

**What is the ICHRA affordability percentage for 2026?**

9.96% of household income, up from 9.02% in 2025. It's measured against the lowest-cost silver self-only plan where the employee lives, minus the monthly allowance.

**Does a new marketing name change the ICHRA rules?**

Branding does not replace the governing individual coverage HRA regulations. Ask for the formal plan document and the applicable legal requirements, including enrollment substantiation, classes, notice, opt-out rights and the effect on premium tax credits.

**Can we offer both a group plan and an ICHRA?**

Yes, to different classes of employees, such as full-time vs part-time or different rating areas, subject to minimum class sizes. You can't offer both to the same class.

**Can we give older employees a bigger ICHRA allowance?**

Yes. The allowance can rise with age as long as the oldest employees get no more than 3 times what the youngest get.

**How much notice do employees need before an ICHRA starts?**

At least 90 days before the plan year starts, with limited exceptions for new employers and newly eligible employees.

**Can employees on an ICHRA still get premium tax credits?**

Only if the ICHRA is unaffordable for them and they opt out. An employee who accepts the ICHRA can't also take a credit.

## Sources

- [Thatch, Standard pricing checked October 15, 2026 (1–49 eligible employees; 50+ custom)](https://thatch.com/pricing)
- [Federal Register, 2019 final HRA integration rules](https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans)
- [DOL, Individual coverage HRA model notice](https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/completed-rulemaking/1210-AB87/individual-coverage-model-notice.pdf)
- [IRS, Questions and answers on the premium tax credit](https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Revenue Procedure 2025-26, 2026 employer payments](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [HHS ASPE, 2025 poverty guideline computations](https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2025-poverty-guidelines-computations)

# Thatch alternatives: seven ways to do this, and what each one costs

Source: https://www.getprescience.com/guides/thatch-alternatives
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-26
Updated: 2026-10-28
Cite as: Rishab Jain. "Thatch alternatives: seven ways to do this, and what each one costs." Prescience, October 28, 2026. https://www.getprescience.com/guides/thatch-alternatives

Thatch is the best-known way to run an ICHRA, and it is not the cheapest or the only one. At $45 per enrolled employee per month plus a $50 monthly platform fee, a 15-person team pays $8,700 a year before a single allowance dollar. The alternatives fall into three groups: cheaper ICHRA administrators, group plans that skip the reimbursement model entirely, and PEOs that bundle the whole thing. Here is what each costs and who each one actually fits.

- **Thatch listed price:** $45 PEPM + $50/month
- **Prescience Choice:** $20 PEPM, no setup or platform fee
- **Individual market trend:** About 26% premium increase estimated for 2026
- **When to skip ICHRA:** Older teams and families, on the census math

## What Thatch actually charges, so the comparisons are honest

Thatch publishes its prices, which I give it credit for. The Standard plan is $45 per enrolled employee per month plus a $50 monthly platform fee, for employers with 1 to 49 eligible employees. The fee is charged only on employees who enroll, which is fairer than charging on every head on the payroll.

The number people forget is the allowance. On a $600 monthly allowance for ten employees, the allowances are $72,000 a year and the platform fees are $6,000. The software is roughly 7% of the total, and the other 93% is money going to individual-market carriers. Any comparison that focuses on the $45 is arguing about the small number.

So an alternative to Thatch can compete in two places: the per-employee fee, and the underlying cost of the insurance the allowance buys. The first is easy to compare. The second is the one that decides whether an ICHRA was the right structure at all.

**Thatch pricing as published, October 2026**

| Item | Listed price |
| --- | --- |
| Platform fee | $45 per enrolled employee per month |
| Monthly base | $50 |
| Eligible employer size | 1–49 employees |
| Allowance | Set by the employer, on top of the fee |
| Setup fee | None listed |

## 1 to 3: cheaper ICHRA administrators

The ICHRA administration market is competitive and the fees have been falling. PeopleKeep lists ICHRA administration from $25 per employee per month plus a base fee, with a three-seat minimum. Take Command's public page lists $25 or more per employee per month for employers with 1 to 49 employees and $100 or more at 50 and above, with a platform fee of $40 or more a month, while its 2025 consultant guide quotes $30 to $40 per employee plus a $100 monthly platform fee. Justworks resells Thatch's product as a CHOICE add-on at $25 per enrolled employee per month.

Prescience Choice runs the same structure at $20 per employee per month with no setup fee and no platform fee. On the 15-person team above, that is $3,600 a year instead of $8,700, a difference of $5,100 for the same administrative job: collect the allowance decision, let employees shop, reimburse premiums and substantiate the claims.

I want to be precise about what the fee difference does and does not buy. All of these platforms do roughly the same compliance work, because the rules are the rules and an ICHRA has to be documented, affordable and administered consistently. What differs is the shopping experience, the card, the support queue and the fee. Paying $45 instead of $20 buys you a nicer product. It does not buy a better insurance policy, because the policy comes from the individual market in every case.

**The same ICHRA at four different fees**

Illustrative. 15 enrolled employees, a $600 monthly allowance, compared across four administrators on the same design.

- Allowances, annual: $108,000
- At $45 PEPM plus $50 monthly: $8,700 in fees
- At $25 PEPM plus $40 monthly: $4,980 in fees
- At $20 PEPM, no platform fee: $3,600 in fees
- Difference between highest and lowest: $5,100 a year

The $108,000 in allowances happens regardless of vendor. The $5,100 is pure administration margin, and it is the easiest money in this decision to keep. Ask every administrator for the same quote on the same census and the differences land in one column.

One caveat about fee comparisons: check what is included. A cheap fee with an extra charge for the card, for year-end substantiation or for adding an employee mid-year is not cheap. Ask for the total annual cost at your headcount, including every module, in writing.

## 4 to 5: a group plan instead of an ICHRA

The strongest alternative to Thatch is not another ICHRA administrator. It is not running an ICHRA at all. A group plan pools your employees into one risk pool with negotiated network rates, and for a team with parents or employees over 50 it is usually cheaper in total, because the individual market prices those people sharply.

This is the argument the ICHRA industry does not lead with. KFF estimated individual-market premiums rose about 26% on average in 2026, and most individual plans sold on the marketplace are HMOs or EPOs with narrower networks than a typical employer PPO. An allowance that looked generous in 2024 buys noticeably less in 2026, and the employer absorbs that by raising the allowance or by letting employees pay the difference.

A group plan also fixes the deductible question in a way an allowance cannot. With an allowance, the employee picks a plan and the deductible comes with it, often several thousand dollars. With a well-designed group plan the deductible can be structured down, and a broad national PPO network means the specialist an employee already sees is likely in network.

**ICHRA versus a group plan on the same census**

| Question | Thatch-style ICHRA | Group plan |
| --- | --- | --- |
| Who holds the policy | Each employee, individually | The company, as one group |
| How risk is pooled | Not pooled. Priced per person | Pooled across the group |
| Network | Whichever individual plan is chosen | A negotiated group network |
| Older employees and families | Expensive. The allowance must stretch | Spread into the group rate |
| Administration | Reimbursement platform, per employee | One monthly cost |
| Employee choice | Wide, within the individual market | The plans the group offers |

The ICHRA case is real and worth stating. It wins for a distributed team of mostly young, single employees where a hard per-person budget is the point, and where the alternative is a thin group plan at a bad rate. It loses for a team with several parents, several employees over 50, or anyone who needs a specific specialist.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond is a company group plan with an effective $0 deductible and a broad national PPO network, for one monthly cost fixed in your quote, with no admin fees and no reimbursement platform to run.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## 6 to 7: a PEO or a broker

A PEO is the bundling option. Rippling PEO, Justworks and the rest put payroll, workers' comp, HR support and access to large-group health plans into one invoice, with a service fee per employee per month. Justworks publishes PEO Basic at $79 and PEO Plus at $124 per employee per month with premiums on top. That is more than Thatch's $45, and it buys co-employment, compliance help and insurance access rather than a reimbursement platform.

The PEO comparison is not fee against fee. A company that needs workers' comp in four states, HR advice and a payroll system is buying four things, and the PEO fee covers all of them. A company that already has payroll and one state should compare the PEO fee against the cost of a group plan alone, because that is what it is actually paying for.

A broker is the seventh route, and the most common. A good broker will present an ICHRA, a group plan and a PEO option on the same page and tell you which one fits. Ask for its compensation in dollars, and ask whether any of it is contingent on placing a particular product. A broker that will show all three routes is earning its commission; one that only shows its own carriers is not.

There is a fourth route worth mentioning for completeness: keeping Thatch but changing the design. If you are on it and the census math works, a premium-only design or a narrower reimbursement rule reduces the allowance without changing the vendor. That is a cheaper fix than switching platforms, and it is worth a look before you migrate anything.

## How to choose, in the order that matters

First, run the census. Take your oldest employee, your largest family and your lowest-paid employee, and price the individual plans available at each address at your proposed allowance. If the oldest employee and the family are paying a large gap out of pocket, an ICHRA is the wrong structure and no administrator will fix it.

Second, if ICHRA is right, compare administrators on total annual cost at your headcount, in dollars. The range is roughly $20 to $45 per employee per month plus platform and setup fees, and the job is the same. Ask what is included in the fee and what is charged separately.

Third, check the affordability test before you set a single allowance for everyone. An ICHRA that is affordable for an employee blocks their premium tax credit, and for lower-paid staff that can leave them worse off than no offer at all. Our [ICHRA affordability calculator](https://www.getprescience.com/tools/ichra-affordability-calculator) does the arithmetic for each employee.

Fourth, ask what happens when you leave. An ICHRA has no plan to port and no renewal to negotiate, so the exit is mostly administrative, and unspent card funds and final reimbursements still need a written answer. Get that answer before you sign, not after.

**Compare the alternatives using your employees' details**

Keep the administration charge, allowance or premium, and employee costs on separate lines. Use the same census to review a Prescience proposal alongside the alternatives you shortlisted.

[Compare options for my team](https://www.getprescience.com/quote)

[Check the allowance affordability side](https://www.getprescience.com/tools/ichra-affordability-calculator)

## What to ask any Thatch alternative

- What is the total annual cost at my census, including every fee, in dollars?
- What is charged separately: the card, substantiation, setup, mid-year changes?
- What does the employee see, and how long does a reimbursement take?
- How is the affordability test calculated, and for which employees?
- What happens to unspent funds and final claims if we switch to a group plan?
- Who supports an employee whose claim is denied, and on what hours?
- Can I see a group plan quote for the same census before I commit?

## Who should stay on Thatch, and who should move

**My take by situation**

| Your company | The right move |
| --- | --- |
| Young, single, distributed team wanting a hard budget | ICHRA is fine. Use the cheapest administrator |
| Several parents or employees over 50 | Price a group plan before you sign |
| Already on Thatch, paying $45 a head | Compare $20. The job is identical |
| Needs workers' comp and HR support | A PEO may be the better bundle |
| Already has payroll and one state | A group plan, priced on the census |

Thatch is a good product and it has done more than anyone to make this model legible. It is also the most expensive of the administrators listed here, and the insurance it administers is the individual market, which is getting more expensive. Compare the fee, then compare the structure.

If the census math favours a group plan, [is Thatch ICHRA worth it?](https://www.getprescience.com/guides/is-thatch-ichra-worth-it) walks the numbers employee by employee. If you are already on Thatch and considering a move, [how to leave a PEO](https://www.getprescience.com/guides/how-to-leave-a-peo) covers the sequencing even though an ICHRA is not a PEO.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Choice is an ICHRA administered at $20 per employee per month, with no setup fee and no platform fee, and the same allowance design Thatch runs.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**What are the cheapest Thatch alternatives?**

For ICHRA administration, Prescience Choice lists $20 per employee per month with no setup or platform fee, PeopleKeep and Take Command start around $25 plus a base fee, and Justworks resells Thatch at $25 per enrolled employee. Thatch's own Standard plan is $45 plus $50 a month.

**Is there a free alternative to Thatch?**

Not really. An ICHRA has to be documented, affordable and substantiated, which requires software. The cheapest credible administrators are in the $20 to $25 per employee per month range. A group plan can come out cheaper in total even with a higher-looking fee.

**What is better than an ICHRA?**

For a team with parents or employees over 50, a group plan is usually better because risk is pooled and the individual market prices those employees sharply. For a young, distributed team that wants a fixed per-person budget, an ICHRA administered cheaply is a reasonable choice.

**How much does Thatch charge per employee?**

Thatch lists $45 per enrolled employee per month plus a $50 monthly platform fee on its Standard plan, for employers with 1 to 49 eligible employees. The allowance you fund is charged on top of that and is usually the far larger number.

**Can I switch from Thatch to another administrator?**

Yes. ICHRA administration is portable, and the main work is re-documenting the plan and migrating employees. Ask both vendors in writing what happens to unspent card funds and pending reimbursements at the switch, and do it outside an open enrollment window.

**Is a PEO a good alternative to Thatch?**

Only if you need what a PEO bundles. PEO fees are higher, for example Justworks PEO Basic at $79 per employee per month, and they buy co-employment, workers' comp, HR support and large-group insurance access. If you only need benefits administration, a PEO is overkill.

**Does an ICHRA replace a group health plan?**

It replaces the group plan with individual policies and a tax-advantaged reimbursement. Employees each own their own policy, so there is no pooled risk and no negotiated group network. That is the trade, and the census math decides whether it is a good one for you.

## Sources

- [Thatch, Pricing (Standard at $45 PEPM plus $50 a month; checked October 2026)](https://www.thatch.com/pricing)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, Health Reimbursement Arrangements (ICHRA) overview](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/individual-coverage-hra)
- [Justworks, Pricing (PEO Basic $79 and PEO Plus $124 per employee per month; checked October 2026)](https://www.justworks.com/pricing)

# TriNet review: the PEO that will not tell you the price

Source: https://www.getprescience.com/guides/trinet-review
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-28
Updated: 2026-10-28
Cite as: Rishab Jain. "TriNet review: the PEO that will not tell you the price." Prescience, October 28, 2026. https://www.getprescience.com/guides/trinet-review

TriNet is one of the three biggest professional employer organizations in the country, and it is a perfectly competent administrator. It is also a company that will not publish a price. You cannot find out what TriNet costs until a salesperson sizes your payroll, and by then you have sat through two meetings. That is not an accident. TriNet's fee is a percentage of the money you already spend on people, so the more you grow, the more the same work costs you.

- **Public pricing:** None. Every quote is bespoke
- **Fee structure:** Percentage of payroll, plus per-employee charges
- **What you give up:** Your plan, your carrier relationship, your tax IDs
- **Prescience Diamond:** One monthly cost fixed in your quote, no admin fees

## What you are actually buying from TriNet

A PEO is not an insurance company and not a broker. It becomes a co-employer of your staff for HR purposes, then buys workers' compensation, health coverage and payroll services at its own scale and resells them to you as a bundle. The U.S. Chamber of Commerce describes the arrangement plainly: the PEO becomes a co-employer and charges for the service.

That bundle is the product. You are not buying health insurance from TriNet. You are buying into TriNet's master health plan, alongside hundreds of other companies, administered on a fee that scales with your payroll. The health plan is real and often decent. The question is whether the wrapper is worth what it costs, and TriNet works hard to keep you from answering that question before you sign.

- **Co-employment:** TriNet shares employer responsibilities for your staff. Your employees keep working for you, but on paper there are two employers.
- **Master plans:** health coverage comes through TriNet's own arrangements, not a plan you select and own.
- **Bundled payroll and HR:** payroll processing, the HR portal, compliance support and benefits administration arrive together.
- **Workers' compensation:** usually part of the package, which is why leaving a PEO is messier than leaving a broker.

> **Here is the part nobody says out loud:** Under co-employment, your employees' tax identifiers and your group health plan belong to the arrangement, not to you. When you leave, you are not switching vendors. You are rebuilding an employer from scratch, in one open-enrollment window.

## TriNet will not publish a price. That is the point.

I have read every TriNet marketing page I can find, twice. There is no pricing table. There is no per-employee-per-month figure. There is a page that explains what factors go into a quote: the number of employees, the states you operate in, the benefits you choose, your workers' compensation risk class. Then it asks you to talk to sales.

Compare that with the PEO market as a whole. The U.S. Chamber of Commerce puts PEO fees at 2% to 12% of monthly payroll, or roughly $50 to $250 per employee per month. That is a spread of six times, top to bottom. A fee that varies by 6x is not a price. It is a negotiation, and the party with the spreadsheet wins. TriNet has the spreadsheet.

**What TriNet publishes about pricing, October 2026**

| Question | What you get |
| --- | --- |
| Can I see a price before a call? | No |
| Is there a rate card by employee count? | No |
| What is stated publicly? | That cost depends on headcount, states, benefits and workers' compensation class |
| How is the fee billed? | Bundled into a service fee, invoiced monthly |
| Can I separate the insurance cost? | Ask. The answer is usually an all-in figure |

Instead of prices, TriNet publishes outcomes. The company states that clients see an average of $234,000 in HR-related time savings over three years, a 66% return on their investment, and payback in under six months. Those numbers may well be true. They are also a sales argument, and an argument is not a bill.

**What a hidden percentage fee looks like at 40 employees**

Illustrative. 40 employees, average salary $95,000, monthly payroll $316,700. A PEO fee at the low and high end of the U.S. Chamber's 2% to 12% range.

- Monthly payroll: $316,700
- PEO fee at 2% of payroll: $6,334 per month
- PEO fee at 12% of payroll: $38,004 per month
- Annual difference: $380,040

The same named service can cost you $76,000 or $456,000 a year. When a supplier will not put a number on a page, that gap is what you are negotiating over, and you only get one shot at it.

## Three things you stop owning

I am not against bundling in principle. Small teams genuinely benefit from someone else handling payroll filings and COBRA notices. But a TriNet contract takes three forms of control away from you, and founders usually discover this in year two, not month one.

- **Plan design.** You choose from TriNet's menu, not from the whole market. If your engineers want a specific network, or your team has a specialist in another city, the answer is whatever TriNet offers that year.
- **The carrier relationship.** The group policy is TriNet's, not yours. You cannot call the carrier and change a contribution level, and you cannot shop a renewal without TriNet's help.
- **Your own employer identity.** Your payroll tax registrations sit inside the arrangement. Leaving means registering as an employer again in every state where you have staff.

None of this is dishonest. It is simply the trade. The problem is that TriNet sells the bundle on HR convenience and lets you assume the insurance is handled just as well as it would be if you ran it yourself. It usually is not. It is handled the way a large administrator handles a thousand other companies at once.

## The renewal is where the relationship changes

Year one is friendly. Year two arrives as a renewal letter with a percentage on it and very little detail about what moved. This is the standard PEO experience, and there is a reason for it: once your payroll tax registrations, workers' compensation and health plan all sit inside one vendor, switching costs real work. Your negotiating position weakens every month you stay.

Ask a TriNet client what their health plan costs separately from the service fee and you will usually get a pause. It is one number. A single invoice looks tidy and hides the fact that you cannot tell whether the health coverage went up 4% or the administration fee went up 15%.

**Why a single invoice hides a bad renewal**

Illustrative. Two years of an all-in PEO invoice at a 40-person company. Health costs rise 6%; the PEO raises its service fee from 4% to 7% of payroll.

- Year 1 health cost: $480,000
- Year 1 service fee at 4%: $152,016
- Year 2 health cost: $508,800
- Year 2 service fee at 7%: $266,028
- Total increase: $142,812 (22.6%)

On the invoice it reads as one renewal. In fact the administration fee rose 75% while the medical cost rose 6%. If you cannot see the split, you cannot argue with it.

## What leaving TriNet costs you

Leaving a PEO is the part of the brochure that does not exist. It takes a written notice period, usually 30 to 90 days, timed to the end of your plan year or a 30-day window. Your health plan must be replaced without a gap, or your employees lose coverage and everyone with a claim in progress has a problem. Your tax registrations have to be reactivated in every state.

1. **Read the notice clause now, not later** Find the exact window in your TriNet agreement. It is usually tied to your renewal date, and missing it by a week can cost you a year.
2. **Get a real group quote first** You need a plan with a start date before you tell TriNet anything. Ask for a full rate table on your actual census, not a range.
3. **Check workers' compensation** If TriNet carries your workers' compensation, confirm your new policy is bound before the PEO end date. A lapse here is expensive.
4. **Re-register as an employer** Confirm new unemployment and withholding accounts in each state before the first payroll outside the PEO.

## What to ask on a TriNet call

A PEO demo is a well-rehearsed hour about service. These questions turn it into a pricing conversation, which is the one you actually need.

- Give me the service fee as dollars per employee per month, not a percentage, and show the payroll figure it is applied to.
- What is the health plan's total cost on its own, separate from the service fee, for my census at my current contribution level?
- What did you charge an equivalent client at renewal last year, in percent?
- Which carrier and network would my team actually be on, and can I see the rate table?
- What is the notice period, and what date does it attach to?
- If we hire in a new state, what changes and what does it cost?
- When we leave, what happens to our claims history, our tax IDs and any prepaid balance?

## Who TriNet fits, and who should walk away

I will give TriNet its due. If you are 20 people with staff in six states, no HR function, and a founder who would rather do anything than read a state unemployment notice, a PEO genuinely removes work from your week. The bundle is not a trick. It is an expensive convenience for people who need the convenience.

**My take by situation**

| Your company | Does TriNet make sense? |
| --- | --- |
| Under 15 people, one state, healthy team | Rarely. You will pay bundle pricing for services you barely use |
| 25 to 80 people with staff in many states | Sometimes. Multi-state compliance is the strongest part of the offer |
| 100+ people with an HR lead | Usually not. At that size you can buy each piece better separately |
| Anyone with a specific doctor or hospital need | Only if you check the network before signing |
| Anyone planning an exit or a fundraise | Get out before diligence. Buyers dislike inherited co-employment |

If you are in the middle band and the only thing keeping you at TriNet is fear of the exit, that is worth naming. The exit is one open-enrollment cycle of work, once. The fee is every month, forever.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Prescience runs a company health plan with an effective $0 deductible and a broad national PPO network, for one monthly cost fixed in your quote, and you keep your own payroll provider.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## How I would compare TriNet with a real quote

Do not compare marketing. Compare one number: total annual cost of health coverage plus administration, for the same census and the same contribution level. Ask TriNet for it in writing, split into insurance and service fee. Then ask anyone else for the same thing.

The average employer plan cost KFF reported for 2025 was $9,325 for single coverage and $26,993 for family coverage, and that is before any PEO fee. If the all-in figure you are quoted lands more than 10% to 20% above comparable fully insured coverage, the bundle is costing you money you could be putting into the plan itself.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If your team is small or spread across many states and a single group plan does not fit, Choice is an ICHRA at $20 per enrolled employee per month with no setup or platform fee.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Put a census-based proposal next to the TriNet offer**

Keep the medical premium and employee contributions separate from replacement HR and payroll costs. Use the same family tiers and coverage date before deciding whether to stay or leave.

[Compare my TriNet proposal](https://www.getprescience.com/quote)

[Review the PEO exit checklist](https://www.getprescience.com/guides/how-to-leave-a-peo)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Frequently asked questions

**How much does TriNet cost?**

TriNet does not publish prices. Its fee is quoted per client and is generally built on a percentage of payroll plus per-employee charges. The U.S. Chamber of Commerce puts PEO fees across the market at 2% to 12% of monthly payroll, or about $50 to $250 per employee per month.

**Is TriNet an insurance company?**

No. TriNet is a professional employer organization. It becomes a co-employer of your staff and provides health coverage, workers' compensation and payroll services through its own arrangements and carrier relationships.

**Is TriNet cheaper than running payroll and benefits myself?**

Sometimes, for a small company with staff in several states and no HR team. Above roughly 100 employees, or for a single-state team, buying the pieces separately is usually cheaper and gives you more control over the health plan.

**What happens to my employees if I leave TriNet?**

They stay employed by you and keep their jobs. Their coverage has to move to a new plan with no gap, and your company re-registers as an employer for payroll taxes in each state where you operate. Plan the transition to end on your plan year boundary.

**Does TriNet own my group health plan?**

In practice, yes. Your employees are covered through TriNet's master arrangements, so the plan design, the carrier relationship and the renewal negotiation sit with TriNet rather than with you.

**What is a better alternative to TriNet?**

If you want the health plan without the co-employment, Prescience provides a company group plan with an effective $0 deductible and a broad national PPO network, usually 10–20% below comparable fully insured coverage, with no admin fees, and you keep your payroll provider.

**How long does it take to leave a PEO?**

Expect 30 to 90 days of notice, tied to your plan year or a set window in the agreement. Start the notice clock and the new quote at the same time so the coverage dates line up.

## Sources

- [U.S. Chamber of Commerce, PEOs vs. insurance brokers (PEO fees of 2% to 12% of monthly payroll or $50 to $250 per employee)](https://www.uschamber.com/co/run/human-resources/peos-vs-insurance-brokers)
- [NAPEO, What is a PEO (502 PEOs, 233,000 businesses, 5.4 million people)](https://www.napeo.org/what-is-a-peo)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [TriNet, Benefits and HR services (checked October 2026)](https://www.trinet.com/)
- [PEO Marketplace, How to leave your PEO](https://peo-marketplace.com/how-to-leave-your-peo-without-getting-burned-2/)

# Insperity review: good HR, bad math

Source: https://www.getprescience.com/guides/insperity-review
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-29
Updated: 2026-10-29
Cite as: Rishab Jain. "Insperity review: good HR, bad math." Prescience, October 29, 2026. https://www.getprescience.com/guides/insperity-review

Insperity is the largest pure-play PEO in the country and the most polished sales organization in the category. Its HR support is genuinely better than most. The problem is what you pay for it: a fee built on your own payroll, no published rate, and a co-employment contract that makes leaving expensive at exactly the moment you have grown enough to negotiate. Insperity sells the HR. You should be buying the health plan.

- **Public pricing:** None on any of the three plans
- **Plans it markets:** HRCore, HR360, HRScale
- **Contract shape:** Co-employment, with the plan and tax IDs inside it
- **Prescience Diamond:** Group plan, no co-employment, no admin fees

## What Insperity is selling, and what it is not

Insperity markets three tiers. HRCore is the lighter package, HR360 adds a broader HR technology and full-service PEO offering, and HRScale is aimed at larger companies. Every tier is a PEO arrangement: Insperity becomes a co-employer, provides payroll, workers' compensation and health coverage through its own arrangements, and charges a fee that is not published anywhere.

I want to be precise about what that means, because "PEO" gets used loosely. The U.S. Chamber of Commerce describes a PEO as a co-employer. Insperity's contract is the real thing: your employees appear under Insperity's employer identification numbers for payroll tax purposes, and health coverage runs through Insperity's master plans rather than a plan you own.

- **You get** payroll administration, HR consulting, compliance support, workers' compensation and access to Insperity's health plans.
- **You give up** ownership of the group health plan, the direct carrier relationship, and the simplicity of one vendor per function.
- **You keep** the employees, the culture and the operational decisions. Insperity is not going to run your company.

> **The tell is in the pricing page:** Insperity's own pricing page explains the factors that go into a quote: employee count, locations, benefits, workers' compensation class. Three tiers, zero numbers. Any vendor that confident in its value would put a range on a page.

## What Insperity costs, as far as anyone can tell

There is no published price. The U.S. Chamber of Commerce puts PEO fees generally at 2% to 12% of monthly payroll, or roughly $50 to $250 per employee per month. Insperity sits inside that market and does not narrow it. What you get is a bespoke proposal with an all-in service fee, a health plan cost rolled into it, and a workers' compensation component priced on your risk class.

This is where the incentives go wrong. A percentage-of-payroll fee means Insperity earns more every time you give someone a raise, and more when you hire senior people. Nothing about the work changes. The invoice does.

**Insperity's published plan tiers, October 2026**

| Tier | Who it is aimed at | Published price |
| --- | --- | --- |
| HRCore | Smaller employers wanting payroll, benefits and HR support | Not published |
| HR360 | Employers wanting full-service PEO plus HR technology | Not published |
| HRScale | Larger employers with more complex HR needs | Not published |
| Health coverage | Through Insperity's arrangements | Bundled into the fee |

**The raise that raises your PEO bill**

Illustrative. 60 employees, monthly payroll $570,000. You give the whole team a 5% raise in January, and the PEO charges 5% of payroll.

- Monthly payroll before the raise: $570,000
- Monthly PEO fee at 5%: $28,500
- Monthly payroll after a 5% raise: $598,500
- Monthly PEO fee after the raise: $29,925
- Extra fee for the year: $17,100

You paid your team more, which was the point. You also paid the administrator $17,100 more for the same headcount and the same work. That is not a service fee. That is a tax on your own generosity.

## The health plan is the part you cannot inspect

Here is my real objection, and it is not about Insperity specifically. In a PEO, the health plan is not yours. You cannot request the full plan document and compare it line by line with three alternatives, because you are not the plan sponsor in the way you would be outside the arrangement. You get a rate sheet and a summary.

That matters at renewal, and it matters more as your team ages. KFF's 2025 survey put average annual employer plan premiums at $9,325 for single coverage and $26,993 for family coverage. Those are market averages. A PEO plan is one plan, in one risk pool with every other client in your state. If your team's claims are light, you do not capture that. If they are heavy, you find out at renewal.

- **Ask for the plan document.** Not the summary. The document, with the network, formulary and rate methodology.
- **Ask how the renewal is set.** Is it a loss-ratio calculation on your group, or a book-wide rate increase? The answer tells you whose performance you are paying for.
- **Ask what happens if you have a bad year.** A single large claim in a 40-person group can move next year's rate by double digits inside a PEO pool.

**Two 40-person teams, one PEO pool**

Illustrative. Both teams are 40 people at a $9,325 single-coverage average. Team A has a light claims year; Team B has one $400,000 claim. Both sit in the same PEO book.

- Team A annual premium: $373,000
- Team A renewal: Rises with the pool, not with its own claims
- Team B annual premium: $373,000
- Team B renewal: Also rises with the pool

Inside a PEO, a healthy team subsidizes a sick one across the book. That is not wrong, and it is not unfair. It is also not the deal you think you signed, and nobody explains it on the demo.

## The HR pitch is real, and it is the only honest reason to buy

I will defend Insperity on one point: for a company with no HR function, a multi-state footprint and 40 people who need handbooks, leave policies and a place to call, the HR support is worth real money. Insperity staffs that function well. Founders who buy purely for the insurance are overpaying. Founders who buy because they are drowning in HR paperwork are buying something real.

So the question to ask is not "is Insperity good?" It is "what am I buying the co-employment wrappers for?" If the answer is payroll and paperwork, fine. If the answer is health insurance, you are paying for a warehouse when you wanted one product.

The trap is that the sales process blends the two so thoroughly that founders cannot separate them afterward. You are shown an HR portal, a compliance calendar, a payroll dashboard and a benefits page in the same hour, all under one price. By the end you believe the price is for the whole thing, and you cannot ask for the part you wanted. Ask anyway. Ask what the health coverage costs on its own, with the service fee removed, and watch how quickly the conversation returns to the portal.

- **What you actually need from a PEO:** payroll filings, multi-state registration, workers' compensation, and someone to call when a leave law changes.
- **What you are being sold:** all of that, plus an insurance program you did not shop.
- **What the fee hides:** which of the two got more expensive at renewal.

## Leaving Insperity, in practice

Every PEO exit has the same shape and the same traps. Insperity's notice period is written into the service agreement and tied to your plan year. Miss the window and you are in for another year.

1. **Find the notice date** Read the service agreement for the cancellation window and the effective date. Put both in a calendar with a 30-day warning.
2. **Get the replacement plan quoted first** A group plan needs a start date that matches the day after coverage ends. Ask for a full rate table on your census.
3. **Confirm who carries workers' compensation** If it is inside the PEO, bind a new policy before the end date. Never let coverage lapse while you shop.
4. **Re-register in every state** Unemployment and withholding accounts outside the PEO. This takes weeks, not days, in slow states.
5. **Move payroll on the same date** One clean cutover. Running two payroll systems for a month creates reconciliation work nobody has time for.

The exit is a project, not a catastrophe. What makes people stay is that the exit happens to coincide with the moment the fee starts to hurt, so it feels like a bad deal either way. It is not. One is a one-time project. The other is a permanent percentage.

**Price replacement coverage before leaving Insperity**

Use the current employee census and contribution policy for the proposal. Keep notice dates, payroll transitions and confirmed replacement coverage on the same timeline before ending the PEO arrangement.

[Compare my Insperity alternative](https://www.getprescience.com/quote)

[Check the PEO transition steps](https://www.getprescience.com/guides/how-to-leave-a-peo)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## What to ask on an Insperity call

- Give me the service fee in dollars, per employee per month, and separately as a percent of payroll. I want both.
- What is the health plan's cost if I strip out the service fee, per tier of coverage?
- What is the renewal methodology, and what was the average increase for clients my size last year?
- Which carriers and networks are available, and can I see the rate table for my counties?
- What is the cancellation window, and what date does it attach to?
- If we outgrow HRCore, what changes in price and service?
- Who pays the transition costs if we leave?

## Who Insperity fits, and who should not sign

**My take by situation**

| Your company | Does Insperity make sense? |
| --- | --- |
| 15 people, one state, needs payroll and a health plan | Overkill. Buy the two things you need |
| 40 to 120 people with no HR lead and staff in five states | Yes, if the HR support is the reason |
| A team with families and older employees | Only if you can see the full plan documents first |
| A team that wants one specific network | Check first. The PEO plan decides, not you |
| Anyone who wants to switch plans each year | Poor fit. You are inside one book |

If you want the health plan handled by someone who runs health plans, and you want to keep your payroll system, that is what we do. No co-employment, no percentage of payroll, one monthly cost in a quote.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond is a company group plan with an effective $0 deductible and a broad national PPO network, usually 10–20% below comparable fully insured coverage, with no admin fees.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**How much does Insperity cost?**

Insperity does not publish prices for HRCore, HR360 or HRScale. The fee is quoted per client and generally runs as a percentage of payroll plus per-employee charges. Across the PEO market, the U.S. Chamber of Commerce puts fees at 2% to 12% of monthly payroll, or about $50 to $250 per employee per month.

**Is Insperity a health insurance company?**

No. Insperity is a professional employer organization. It becomes a co-employer and provides health coverage through its own plan arrangements along with payroll, HR support and workers' compensation.

**What is the difference between HRCore and HR360?**

HRCore is the smaller-employer package and HR360 is marketed as a broader full-service PEO offering with more HR technology. Neither has a published price, so the difference is only meaningful once you have both quotes in writing on your own census.

**Can I keep my own payroll provider with Insperity?**

No. Payroll is part of the PEO bundle, which is most of the reason to use one. If you want to keep your payroll system, you are paying for services you will not use.

**Why do PEO fees go up when we give raises?**

Because the fee is usually a percentage of payroll. A 5% raise raises the fee 5% for the same headcount and the same administrative work. Ask for the fee in dollars per employee per month to see what the work actually costs.

**What happens to our health plan if we leave Insperity?**

You need a new group plan effective the day after Insperity coverage ends, with no gap. Your company also re-registers for payroll taxes in every state where you have employees, and needs its own workers' compensation policy if that sat inside the PEO.

**What is a better alternative to Insperity?**

If the health plan is what you want and the HR bundle is not, Prescience provides a company group plan with an effective $0 deductible and a broad national PPO network, with no admin fees and no co-employment. You keep your own payroll provider.

## Sources

- [U.S. Chamber of Commerce, PEOs vs. insurance brokers (PEO fees of 2% to 12% of monthly payroll or $50 to $250 per employee)](https://www.uschamber.com/co/run/human-resources/peos-vs-insurance-brokers)
- [NAPEO, What is a PEO (502 PEOs, 233,000 businesses, 5.4 million people)](https://www.napeo.org/what-is-a-peo)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [Insperity, Plans and pricing (checked October 2026; no published prices)](https://www.insperity.com/)
- [PEO Marketplace, How to leave your PEO](https://peo-marketplace.com/how-to-leave-your-peo-without-getting-burned-2/)

# Justworks alternatives: what to use instead, and what it costs on a 25-person team

Source: https://www.getprescience.com/guides/justworks-alternatives
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-30
Updated: 2026-10-30
Cite as: Rishab Jain. "Justworks alternatives: what to use instead, and what it costs on a 25-person team." Prescience, October 30, 2026. https://www.getprescience.com/guides/justworks-alternatives

Justworks is the only major PEO that publishes its prices, and the published price is the problem. PEO Plus is $124 per employee per month before anyone's medical premium, which on a 25-person team is $37,200 a year for the service alone. The alternatives are not all cheaper. Some are better in other ways, and one of them removes the co-employment layer entirely. Here is the honest comparison.

- **Justworks PEO Plus:** $124 per employee per month, premiums extra
- **Justworks PEO Basic:** $79 per employee per month, no medical admin
- **Justworks payroll only:** $8 per employee per month plus a $50 base
- **Prescience Diamond:** A group plan with no co-employment fee

## Start with the number you are actually comparing

A PEO invoice contains wages, payroll taxes, workers' comp, a service fee and premiums. When people compare PEOs they compare service fees, and the service fee is almost never the largest number. On a 25-person team buying single coverage at the 2025 average premium of $777 a month, the premium bill alone is $233,100 a year, and the $37,200 fee sits on top of it. The fee is 16% of the premium, not the other way round.

That framing matters because it points at the right question. The alternative to a PEO is not always a cheaper fee. Sometimes it is a better plan rate, a simpler structure, or keeping the PEO for HR support and moving only the health plan. All three are worth costing before you renew.

**Justworks published prices, October 2026**

| Product | Listed price | Health benefits |
| --- | --- | --- |
| Payroll | $8 per employee per month plus $50 base | Add-on |
| PEO Basic | $79 per employee per month, premiums extra | No medical administration |
| PEO Plus | $124 per employee per month, premiums extra | Medical, dental and vision administration |
| Reimbursement add-on | $25 per enrolled employee per month | ICHRA through Thatch |

**What the fee buys and what it does not**

Illustrative. 25 employees, PEO Plus at $124 per employee per month, compared with Justworks' own payroll product at $8 plus a $50 base.

- PEO Plus service fee, annual: $37,200
- Payroll-only fee, annual: $3,000
- Difference: $34,200 a year
- That 34,200 buys: Co-employment, workers' comp access, HR support
- It does not buy: Lower premiums on its own

Thirty-four thousand dollars a year is the price of the bundle. Whether it is worth it depends on what you would otherwise pay for workers' comp, HR advice and the tax registrations the PEO handles. A company that has already solved those is paying for them twice.

## 1 to 3: cheaper PEOs and unbundled payroll

The first alternative is a PEO with a lower service fee. Rippling PEO quotes individually and does not publish a rate, which makes it hard to compare, and in the quotes I see it lands in a similar range to Justworks. TriNet and Insperity quote individually too. The cheaper end of the market exists, and it is mostly regional PEOs and payroll providers selling insurance access without much HR depth.

The second is unbundling. Keep payroll software at a few dollars per employee, buy workers' comp directly, and buy the health plan separately. On the 25-person example that is roughly $3,000 for payroll plus the cost of workers' comp and the plan, against $37,200 for the PEO service fee. The gap is real, and the work it transfers back to you is real too: tax registrations in new states, annual workers' comp audits, and somebody to answer an HR question.

The third is a payroll-plus-broker combination, which is what most companies eventually land on. A payroll platform handles pay, a broker places coverage, and the company buys advice by the hour or as part of the commission. It is less polished than a PEO and it costs less, and for a company with an operations lead it is usually the better trade.

One thing to check in any PEO comparison: state unemployment insurance. In some states a PEO bills SUI at its own experience rate rather than yours, which can be better or worse than what you would pay alone. It never appears in the headline fee, and it can move the answer.

## 4: a group plan on its own, without co-employment

The alternative that changes the structure rather than the vendor is buying a group health plan directly. No PEO, no co-employment, no service fee per head. The company holds the policy, the insurer holds the risk, and the cost is one monthly premium in a quote.

The saving is straightforward to model. On the same 25-person team, the PEO fee of $37,200 disappears and the premium is priced on its own. If the standalone plan comes in at a similar rate to the PEO's plans, the entire service fee is the saving, minus whatever workers' comp and HR support you now buy separately. In my experience the standalone plan is usually not more expensive, because PEO plans are pooled and the pooling does not always beat a well-priced group plan.

What you give up is the bundle: the compliance help, the workers' comp access, the employment practices liability cover and somebody to call when a manager has a problem. For a company with 25 employees and an operations person, that is often worth less than $37,200 a year. For a company hiring in four states with no HR function, it can be worth more.

There is a middle version of this that a lot of companies miss. Keep Justworks for payroll, which is $8 per employee per month, and move only the health plan off the PEO. You keep the software and the tax filings, you lose the co-employment, and you keep most of the fee. It is the sequencing I would recommend to anyone who is happy with the product and unhappy with the invoice.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond is a company group plan with an effective $0 deductible and a broad national PPO network, for one monthly cost fixed in your quote, with no admin fees and no PEO service fee.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## 5 to 7: ICHRA, a broker, and doing nothing

An ICHRA is the fifth route and the one that fits a distributed, young team best. Instead of a group plan, the company funds a monthly allowance that employees use to buy individual coverage. Administration runs from about $20 to $45 per employee per month, and Justworks itself resells Thatch's ICHRA at $25 per enrolled employee. For a team of 25 spread across many states, this can be the cheapest structure available, and for a team with parents it usually is not.

A broker is the sixth. A good one will put a PEO quote, a group plan quote and an ICHRA quote on the same page for the same census, which is exactly the comparison you want and rarely the one you get. Ask for its compensation in dollars and for any carrier-contingent component.

The seventh is staying. Justworks is a genuinely good product: the software works, the support is real, and the published pricing is a mark of confidence most PEOs do not have. If the bundle is earning its fee, leave it alone. The mistake is renewing without costing the alternative, not renewing.

## The comparison to run before your renewal

Ask for the renewal terms 120 days before the date. Then build three columns: the PEO renewal as quoted, Justworks payroll plus a standalone group plan, and a standalone group plan with your own payroll. Put the premiums, the fees, workers' comp and expected SUI in each column. The column that wins is the one you should take, and the exercise takes an afternoon.

Include the exit cost. Leaving a PEO means registering state tax accounts, buying your own workers' comp and moving a 401(k) if the PEO holds it. It is a project, not a click, and it is the reason most companies stay a year longer than they should.

And check the plans before the fee. A cheap fee on top of a plan with a $4,000 deductible is worse than a higher fee on a plan employees can use. Our guide to [Justworks pricing](https://www.getprescience.com/guides/justworks-pricing) walks the worked totals by headcount, and [is Justworks PEO worth it?](https://www.getprescience.com/guides/is-justworks-peo-worth-it) covers the crossover point.

**Compare a standalone plan with the full Justworks renewal**

Use the same census and effective date. Add the services you would need to replace, then compare the written medical benefits, employer cost and employee contributions.

[Compare my Justworks alternative](https://www.getprescience.com/quote)

[Export the Justworks employee census](https://www.getprescience.com/integrations/justworks)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## What to ask any Justworks alternative

- What is the total annual cost, including fees, premiums, workers' comp and SUI, in dollars?
- What is the service fee per employee per month, and does it apply to employees who waive coverage?
- Which state tax accounts do you handle, and which do I keep?
- Is workers' comp at your experience rate or mine?
- What is the notice period, and what does an exit cost in time?
- Can I keep your software and move only the health plan?
- What are the plan deductibles, out-of-pocket maximums and networks by tier?

## Who should stay on Justworks, and who should leave

**My take by situation**

| Your company | The right move |
| --- | --- |
| Five people, first hires, no HR | Stay. The bundle is worth the fee at that size |
| 25 people with an operations lead | Cost payroll plus a group plan |
| Hiring in four states with no HR function | Stay, or move to a national PEO |
| A team that already has payroll elsewhere | A group plan without the PEO fee |
| A distributed, young, single team | Price an ICHRA before deciding |

Justworks is a good company selling a real product at a published price. That last part is unusual and it deserves credit. But $124 per employee per month is a lot to pay for a bundle a 25-person company can assemble for less, and the only way to know which side of that line you are on is to run the three columns.

## Frequently asked questions

**What is the cheapest alternative to Justworks?**

For a small team that needs everything, a cheaper regional PEO or unbundled payroll plus a broker. For a company that already handles its own HR, the cheapest route is Justworks payroll at $8 per employee per month plus a standalone group plan, which removes the $79 to $124 co-employment fee entirely.

**Is Justworks PEO worth the fee?**

At five to ten employees, often yes, because the bundle replaces work a founder would otherwise do. At 25 or more with an operations person, the fee is $37,000 a year or more and the work it saves is much smaller. Run the comparison at your headcount.

**Can I use Justworks without the PEO?**

Yes. Justworks sells payroll at $8 per employee per month plus a $50 base, without co-employment. You can keep payroll and buy health coverage separately, which is the most common way companies reduce the fee without changing software.

**What is the difference between Justworks PEO Basic and PEO Plus?**

Basic is $79 per employee per month and Plus is $124, with premiums billed on top of both. The difference that matters is medical, dental and vision administration, which comes with Plus and not with Basic. Basic is co-employment, compliance, HR support and workers' comp access. If you want Justworks to run the health plan, the tier to price is Plus.

**How much does a PEO cost per employee?**

Published PEO fees generally run from about $79 to $180 per employee per month, and the U.S. Chamber of Commerce puts the market range at 2% to 12% of monthly payroll or $50 to $250 per employee. Premiums are separate and usually several times larger.

**Do I lose my health plan if I leave a PEO?**

The PEO's plan ends and you buy coverage in your own name. That is the main project in an exit. Start 120 days before renewal, get a standalone quote on your census first, and line up the new plan's effective date before you give notice.

**What is a better alternative to Justworks for health insurance?**

If the reason you are on the PEO is the health plan, a company group plan removes the co-employment fee. Prescience provides one with an effective $0 deductible and a broad national PPO network, usually 10–20% below comparable fully insured coverage, with no admin fees.

## Sources

- [Justworks, Pricing (Payroll $8 PEPM plus $50; PEO Basic $79; PEO Plus $124; checked October 2026)](https://www.justworks.com/pricing)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [U.S. Chamber of Commerce, PEOs vs. insurance brokers](https://www.uschamber.com/co/run/human-resources/peos-vs-insurance-brokers)
- [NAPEOS, PEO industry statistics (502 PEOs, 233,000 client businesses)](https://www.napeo.org/)

# Gusto review: great payroll, and a broker that is not on your side of the renewal

Source: https://www.getprescience.com/guides/gusto-review
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-27
Updated: 2026-10-28
Cite as: Rishab Jain. "Gusto review: great payroll, and a broker that is not on your side of the renewal." Prescience, October 28, 2026. https://www.getprescience.com/guides/gusto-review

Gusto is one of the best payroll products ever built and it is worth saying that first. The health insurance part is a different business. Gusto is not an insurer. It is a licensed broker that sells carrier plans inside its dashboard, and its revenue on that line is the commission the carrier pays it. That is a completely normal arrangement and it is why the fee looks like zero. It also means that when your renewal arrives at 14 percent, Gusto's advisors can move you to a different carrier, and no one in the exchange can change the number itself.

- **What it is:** A payroll platform that also acts as a licensed insurance broker
- **Their health fee:** $0 with Gusto as broker, $6 per employee to keep your own
- **Who carries the claims risk:** The carrier. Gusto never underwrites a plan
- **Prescience Diamond:** Health plan only, you keep your payroll

## Gusto is a broker, and the word broker is doing a lot of work here

The health page is explicit about the offer: "From group plans to health allowances across 9,000+ plans and 30+ carriers, Gusto helps you find the right coverage for your team and your budget, with no broker fees or hidden costs." Every number there is accurate. 9,000 plans is a large menu, 30+ carriers is a real footprint, and nobody sends you an invoice for brokerage.

The fee is not hidden, it is embedded. A licensed broker is compensated by the carrier out of the premium you pay, and Gusto is that broker when you buy through it. So the premium you see already contains Gusto's commission, the same way it contained your previous broker's. Moving to Gusto does not lower the premium. It changes who collects the commission inside it and which dashboard you enrol through.

That matters because of what a broker is paid to do. A broker's job is to place the plan and run the enrolment, and the carrier's commission schedule rewards placing the plan. It does not reward controlling the renewal, because the renewal belongs to the carrier's underwriter. Gusto can shop your group between carriers each year. It cannot make the underlying cost trend stop.

> **The first question to a benefits broker, Gusto included:** How is my proposal compensated, and by whom? Ask for the commission schedule in writing against the specific plan codes quoted. It is a one-line answer and it is the only way to compare two brokers who both describe themselves as free.

## The $6 is a toll on keeping the broker you already have

Gusto's own footnote states the arrangement plainly: "Benefits broker integration comes included at no extra cost with the Premium plan and is available at $6 per employee per month on the Plus plan." The health page repeats it: "Want to keep your broker? For only $6 per eligible employee per month, they can manage your plans right in Gusto."

Read that twice. The platform charges you six dollars per employee per month to let somebody else, someone you chose, administer your plan inside it. A 40-person company pays $2,880 a year for the privilege of keeping its own advisor. On Gusto's plus tier that is on top of the payroll subscription, and the payroll subscription is priced per person anyway.

There is a defensible reason for it. The integration costs money to run and Gusto would otherwise earn nothing on a plan it did not place. The commercial effect is less defensible. The free path is the one where Gusto is your broker and earns the commission. The paid path is the one where it does not. Both options are fine, and a founder should notice which one the pricing nudges toward.

**What the health side costs, by arrangement**

| Arrangement | Fee to Gusto | Who earns on the plan |
| --- | --- | --- |
| Gusto as broker of record | $0 | Gusto, through carrier commission |
| Your own broker, Plus tier | $6 per eligible employee/month | Your broker, through carrier commission |
| Your own broker, Premium tier | Included | Your broker, through carrier commission |
| Gusto health allowance route | Platform fee applies | The administrator of the allowance, and the carrier |

## The health allowance is an ICHRA, and Gusto does not run it

The third line on the product page is the one most founders actually want: pick-your-cost health reimbursement options. That is a health reimbursement arrangement, which for most small employers means an individual coverage HRA, and Gusto delivers it through partners rather than administering it itself. The allowance, the plan shopping and the reimbursement checking sit with the partner while Gusto keeps running payroll.

That is a sensible division and it is not a criticism. It does mean the interesting economics of the model sit outside the platform: the per-employee administrator fee, the affordability rules that decide whether your employees can use the exchange tax credit, and the verification work when a receipt arrives. On an allowance plan those are the parts that decide whether the arrangement works, and none of them are Gusto's product.

The other thing to be clear about is what a health allowance does to the employer's cost. It caps it. You set a monthly number per employee and the employees shop above or below it. That is a genuine solution to an unbounded renewal, and it moves the growth in health costs onto your staff, which is a decision worth making deliberately rather than by default.

- **Group plan through Gusto:** a carrier's small group policy, priced and repriced on the carrier's book.
- **Health allowance:** an ICHRA run by a partner. The employer cost is capped and the employee carries the rest.
- **Keeping your broker:** $6 per eligible employee per month on Plus, included on Premium.
- **HSA, FSA, dependent care, commuter:** administration add-ons with their own fees and rules.

## The renewal is a carrier's decision, and Gusto cannot vote

A fully insured small group plan is priced on the carrier's filed rates for age, location, family size and tobacco, and it is repriced at renewal. In the ACA small group market your own claims history cannot be a rating factor, which is the one mercy in the structure. Everything in that sentence is the carrier's business. Gusto's contribution is the enrolment plumbing and the shopping, and both are useful and neither is the price.

This is not a knock on the company, it is the boundary of the model. When a founder asks why the plan went up 14 percent, no broker can answer it with anything other than the carrier's filed trend and the movement in your census. The only structural answers are a different funding structure, a different risk pool, or a plan whose price is fixed in the quote before it starts, rather than set from a carrier's filings each year.

Gusto does make the comparison across those options easy, which is a real benefit and one reason the product is popular. It publishes a broad menu, it integrates deductions with payroll, and it tells you which of your employees are eligible. That is a better experience than a spreadsheet and a phone broker. It is still a shopping experience inside a market that is repricing every twelve months.

**A 40-person company, Gusto as broker, renewal year**

Illustrative. A 40-person company on Gusto Plus pays $950 per employee per month on a fully insured carrier plan, or $456,000 a year. Gusto is the broker of record, so there is no $6 integration fee. The renewal adds 12 percent.

- Current annual premium: $456,000
- Renewal at plus 12 percent: $510,720
- Broker fee to Gusto: $0. The cost is the carrier commission inside the premium
- The change in one year: $54,720, on an unchanged census
- What Gusto can change at renewal: The carrier. Not the trend

The brokerage line is small and the premium line is the whole budget. Shopping the plan is worth doing every year and it is not the same as changing the structure that produced the price.

**Compare a plan while keeping Gusto payroll**

Use the employee census and contribution sheet to compare the actual written benefits and renewal cost. Keep any payroll or broker charges separate from the medical premium.

[Compare my Gusto plan renewal](https://www.getprescience.com/quote)

[Export my employee census from Gusto](https://www.getprescience.com/integrations/gusto)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Who Gusto fits, and who should look elsewhere

For a company that runs payroll on Gusto and wants benefits administered in the same place, connecting health insurance there is the obvious and usually correct choice. The deductions sync, the enrolment is genuinely good, and at 10 to 50 people the administrative saving is real. Paying a broker $6 per employee to keep them inside the same dashboard is a small price for that.

Where it fits less well is the company whose problem is the price rather than the paperwork. Gusto will show you 9,000 plans, and every one of them is a fully insured carrier product priced on a pool and repriced annually. If your renewal has run in double digits for three years, a wider menu and a prettier enrolment flow are not the fix, and no broker fee of any size changes that.

**My take by situation**

| Your company | Does Gusto make sense? |
| --- | --- |
| A 10 to 50 person team already on Gusto payroll | Strong fit. Benefits administration in the same place is a real saving |
| A company with a broker it trusts | Fine, at $6 per employee on Plus, or included on Premium |
| A founder tired of annual carrier shopping | A wider menu is not a fix. Every plan in it is repriced the same way |
| A team spread across several states | Check the carriers in each state. The menu is 30+ carriers, not 30+ everywhere |
| A company that wants its cost capped | The health allowance route does that, and it moves the rest to employees |
| An employer whose premium is the problem | The dashboard is not where that is solved. The funding structure is |

The honest summary is that Gusto sells convenience and it sells it well. The insurance underneath is whatever a carrier will write for a small group in your state, priced the way every fully insured plan is priced, and Gusto is paid by that carrier to bring you to it. None of that is a trick. It is simply not the same thing as owning the cost.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond is a company group plan with an effective $0 deductible and a broad national PPO network, for one monthly cost fixed in your quote, usually 10–20% below comparable fully insured coverage, with no admin fees and no need to change payroll.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Is Gusto a health insurance company?**

No. Gusto runs payroll and acts as a licensed insurance broker. Plans are issued and underwritten by carriers, and Gusto handles enrolment, payroll deductions and administration inside its platform. Gusto does not carry the claims risk on any plan it sells.

**Does Gusto charge a fee for health insurance?**

Gusto says health insurance administration is free when Gusto is your broker, paid through the carrier's commission. If you keep your own broker, integration costs $6 per eligible employee per month on the Plus plan and is included on Premium. Payroll subscription fees apply in both cases.

**Can I keep my own broker and still use Gusto?**

Yes. Gusto's broker integration lets an outside broker manage your plans inside the platform. It costs $6 per eligible employee per month on Plus and is included on Premium, and Gusto says it works directly with your carrier to move an existing plan across.

**How many carriers and plans can I choose from through Gusto?**

Gusto advertises more than 9,000 plans from 30+ carriers. Availability varies by state and county, because small group plans are filed and priced state by state, so confirm the carriers quoting your company's location.

**What is a Gusto health allowance?**

It is a health reimbursement arrangement, usually an individual coverage HRA, delivered through a partner platform rather than administered by Gusto. The employer sets an allowance, employees buy their own coverage, and the partner verifies and reimburses. The employer cost is capped.

**Does Gusto make health insurance cheaper?**

Not by itself. Gusto is the broker, so the premium is the carrier's small group rate, which already includes broker commission. What Gusto changes is the administration experience, and the comparison across carriers. The funding structure and the renewal behave exactly as they would with any other broker.

**What is a better alternative to Gusto for health insurance?**

If the premium is the problem rather than the admin, Prescience Diamond is a company group plan with an effective $0 deductible and a broad national PPO network, for one monthly cost fixed in your quote, usually 10–20% below comparable fully insured coverage, with no admin fees and no need to change payroll.

## Sources

- [Gusto, employee health insurance benefits (checked October 2026)](https://gusto.com/product/benefits/health)
- [Gusto, broker integration and its fees (checked October 2026)](https://gusto.com/product/benefits/health/broker-integration)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, Medical Loss Ratio](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)

# Employer health insurance glossary

Source: https://www.getprescience.com/guides/health-insurance-glossary
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-14
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Employer health insurance glossary." Prescience, October 28, 2026. https://www.getprescience.com/guides/health-insurance-glossary

Health insurance has its own vocabulary, and most of it is never explained to the people who buy it. These are the terms you'll meet when choosing, funding and running a company health plan, each in a sentence or two, with a link to the guide that goes deeper.

- **Read next:** Linked guides explain each decision
- **Terms defined:** 66
- **Topics:** Funding, networks, costs, rules
- **Written for:** Founders, finance and HR

## Plan types and funding

- **Fully insured plan:** A plan where the employer pays a fixed premium to an insurance carrier, which takes on the risk of paying claims. Rates for small groups come from the carrier's filed rates. See [fully insured plans compared](https://www.getprescience.com/compare/fully-insured-alternative).
- **Self-funded plan:** A plan where the employer pays employees' claims directly, usually through a third-party administrator, and typically buys stop-loss insurance to cap large claims. Also called self-insured. See [what self-funded health insurance is](https://www.getprescience.com/guides/what-is-self-funded-health-insurance).
- **Level-funded plan:** A self-funded plan packaged for small employers: a fixed monthly payment covers expected claims, administration and stop-loss, with a possible refund if claims come in low. See [level-funded plans compared](https://www.getprescience.com/compare/level-funded-alternative).
- **Stop-loss insurance:** Insurance that reimburses an employer for qualifying claims under a self-funded plan after specified attachment points. Specific protection applies to a person and aggregate protection to total eligible claims. Exclusions, reimbursement timing and policy periods can leave additional employer liabilities. The policy does not replace the employer's obligation to provide promised plan benefits.
- **Attachment point:** The claims amount at which stop-loss insurance starts paying, for one person (specific) or the whole group (aggregate).
- **Third-party administrator (TPA):** A company that processes claims, provides member services and handles plan paperwork for a self-funded plan, without taking on the claims risk itself.
- **PEO (professional employer organization):** A company that becomes the co-employer of your team for payroll, HR and benefits, so small companies can join its large group health plan. See [PEO alternatives](https://www.getprescience.com/compare/peo-alternative).
- **ICHRA (individual coverage HRA):** An individual coverage HRA reimburses eligible expenses for employees enrolled in qualifying individual coverage, or eligible Medicare coverage, under the arrangement's terms. An employee cannot choose between an ICHRA and a traditional group plan from the same employer. Permitted classes, substantiation, notice and premium-tax-credit rules apply. An affordable offer can block credits even if declined. See [ICHRA comparisons](https://www.getprescience.com/compare/ichra-alternative).
- **QSEHRA:** A qualified small employer HRA is available to an eligible employer that is not an ALE and offers no group health plan. It reimburses substantiated eligible expenses under written terms. The 2026 maximum is $6,450 self-only or $13,100 family, prorated for partial-year eligibility. Tax-free reimbursement requires minimum essential coverage. Permitted employee exclusions and premium-tax-credit coordination need review. See [QSEHRA rules](https://www.getprescience.com/guides/what-is-a-qsehra).
- **HRA (health reimbursement arrangement):** An employer-funded account that pays employees back tax-free for eligible medical costs. Only the employer contributes, and the plan decides whether unused amounts roll over.
- **Small group market:** The state-regulated insurance market for small employers, generally up to 50 employees, with a higher boundary in some states. Verify the current state definition and eligibility rules, including owner-only groups. ACA-compliant non-grandfathered small-group coverage is subject to market rating and essential-health-benefit requirements; do not assume every historical policy follows identical rules.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** In plain terms: Diamond is a company health plan with an effective $0 deductible, simple copays, a broad national PPO network and one monthly cost set in your quote.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Plan designs and networks

- **Network:** The doctors, hospitals and other providers that have agreed prices with a plan. In-network care costs members less; out-of-network care may cost more or not be covered.
- **PPO (preferred provider organization):** A plan that covers in- and out-of-network care, with lower costs in network, and doesn't require referrals to see specialists. See [HMO vs PPO vs EPO](https://www.getprescience.com/guides/hmo-vs-ppo-vs-epo).
- **HMO (health maintenance organization):** A plan that covers only in-network care, except emergencies, and usually requires a primary care doctor and referrals to see specialists.
- **EPO (exclusive provider organization):** A plan that covers only in-network care, except emergencies, but usually without referrals.
- **POS (point of service) plan:** A hybrid of an HMO and a PPO: members choose a primary care doctor and need referrals, but have some out-of-network coverage.
- **HDHP (high-deductible health plan):** Under the standard 2026 HSA rules, a high-deductible health plan has a deductible of at least $1,700 self-only or $3,400 family and an out-of-pocket limit no higher than $8,500 or $17,000, excluding premiums. Other coverage rules also matter. Beginning in 2026, qualifying individual bronze and catastrophic plans are treated as HSA-compatible even if they do not meet these usual thresholds. Do not infer HSA eligibility from the deductible alone.
- **Metal tiers:** Bronze, silver, gold and platinum: the ACA's labels for how much of average costs a plan pays, about 60%, 70%, 80% and 90%.
- **Actuarial value:** The percentage of expected allowed costs a plan pays for a standard population. It does not predict the percentage of one person's bills the plan will pay. A member with little care may pay most of their costs, while another reaches the out-of-pocket limit. Premiums are outside this measure.
- **Carve-out:** A benefit run separately from the main medical plan, such as pharmacy, behavioral health or dental, often by a specialist vendor.

## Costs and pricing

- **Premium:** The monthly price of coverage, usually split between employer and employee. See [how much employers pay](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance).
- **Deductible:** What a member pays for covered care each year before the plan starts sharing costs, except for services covered before the deductible, such as preventive care. See [deductibles, copays and coinsurance](https://www.getprescience.com/guides/deductible-copay-coinsurance-explained).
- **Copay:** A fixed amount a member pays for a service, such as $30 for a doctor visit.
- **Coinsurance:** A member's percentage of the allowed amount for a covered service, commonly after the applicable deductible. For example, 20% coinsurance on an illustrative $500 allowed amount is $100, before considering the out-of-pocket limit. It is not ordinarily 20% of any amount a provider chooses to bill.
- **Out-of-pocket maximum:** The most a member pays in the plan year for the covered services counted toward the limit, generally in-network essential health benefits. Deductibles, copays and coinsurance count as specified by the plan. Premiums, excluded care and many out-of-network or balance-billed charges do not. A family can have both individual and family limits, so read both before modeling a high-use year.
- **PEPM (per employee per month):** A way of quoting costs, such as premiums or admin fees, as a monthly amount for each enrolled employee.
- **Employer contribution:** The share of the premium the employer pays. Carrier contribution requirements vary. Confirm the minimum in the actual proposal; it is separate from the ACA affordability calculation.
- **Renewal:** The yearly repricing of a group plan, when the carrier sets next year's rates. See [why renewals go up](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up).
- **Community rating:** Pricing a group by the carrier's whole pool rather than the group's own claims. In the ACA small group market, premiums can vary only by age, tobacco use, location and family size.
- **Composite vs age-banded rates:** Two ways to bill a group premium: composite rates charge one price per coverage tier for everyone, while age-banded (list-billed) rates price each person by age.
- **Medical loss ratio (MLR):** The share of premiums an insurer spends on care and quality improvement. The federal standards are generally 80% in individual and small-group markets and 85% in large-group markets, with regulatory adjustments and a multiyear calculation. They are not a profit cap for each employer policy.
- **Underwriting:** How an insurer assesses a group's risk to set its price. ACA small group plans can't be priced on health status; self-funded and stop-loss coverage can be.

## Accounts and pre-tax benefits

- **HSA (health savings account):** An individually owned health savings account with federal tax advantages for qualified medical expenses. Contribution eligibility requires qualifying coverage and satisfaction of other rules, including no disqualifying other coverage and no Medicare enrollment. The combined employer and employee 2026 contribution limits are $4,400 self-only and $8,750 family; eligible people age 55 or older can contribute an additional $1,000. Existing balances remain yours after eligibility ends. See [HSAs](https://www.getprescience.com/guides/what-is-an-hsa).
- **FSA (flexible spending account):** A health flexible spending arrangement is an employer-sponsored benefit that can receive employee pre-tax salary reductions and employer contributions. The plan specifies eligible expenses and deadlines. Unused funds are generally forfeited unless the plan permits a limited carryover or grace period. A general-purpose health FSA can disqualify HSA contributions, including when a spouse's FSA can reimburse your expenses.
- **Section 125 plan:** A cafeteria plan that lets employees pay their share of premiums, and fund FSAs, with pre-tax pay. See [Section 125 explained](https://www.getprescience.com/guides/section-125-pre-tax-health-insurance).
- **Eligible medical expenses:** The costs HSAs, FSAs and HRAs can pay tax-free, defined by the IRS. See [HSA and HRA eligible expenses](https://www.getprescience.com/guides/hsa-hra-eligible-expenses).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** And Choice is our ICHRA: a tax-free monthly allowance employees use for their own individual health insurance, at $20 per enrolled employee per month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Claims and care

- **Allowed amount:** The amount the plan recognizes for a covered service under its contract and benefit rules. Member coinsurance is generally calculated from this amount, not the provider's unrestricted list charge. In-network providers generally accept contracted amounts plus member cost-sharing. Out-of-network billing and surprise-billing protections need separate review.
- **Explanation of benefits (EOB):** A statement from the plan after a claim, showing what the provider billed, the allowed amount, what the plan paid and what the member owes. It isn't a bill.
- **Balance billing:** A provider bill for the difference between its charge and the plan's allowed amount, separate from ordinary member cost-sharing. Federal surprise-billing protections cover most emergency services, certain out-of-network services at participating hospitals and ambulatory surgical centers, and air ambulance services. Exceptions apply; ground ambulances generally are not covered by the federal protections. State law may add rights.
- **Prior authorization:** A required plan review before certain services or medicines. Approval is not an unconditional guarantee of payment: eligibility, coverage terms and claim details still matter. Ask whether an authorization remains valid after a plan change and how to appeal a denial. An emergency situation may follow different rules.
- **Formulary:** A plan's list of covered prescription drugs, usually sorted into tiers with different copays.
- **PBM (pharmacy benefit manager):** A company that runs a plan's prescription drug benefit: building the formulary, negotiating with drugmakers and pharmacies, and processing pharmacy claims.
- **Preventive care:** Specified preventive services, including recommended screenings and immunizations, that non-grandfathered plans generally cover in network with no deductible, copay or coinsurance when applicable eligibility and service criteria are met. Not every checkup, laboratory test or diagnostic follow-up is covered without cost-sharing. See [preventive services](https://www.getprescience.com/guides/preventive-care-covered-free).
- **Care navigation:** A service that helps members find the right provider, book appointments and understand costs before care.

## Rules and compliance

- **Affordable Care Act (ACA):** The 2010 law that set today's rules for health insurance, including essential health benefits, ACA rating rules, the marketplaces and the employer mandate.
- **Applicable large employer (ALE):** An employer that averaged 50 or more full-time employees, including full-time equivalents, in the prior year, and so is subject to the employer mandate. Check with the [ALE calculator](https://www.getprescience.com/tools/ale-calculator).
- **Full-time equivalent (FTE):** For ACA employer-size counting, combine hours of non-full-time employees, capped at 120 hours for each person per month, and divide by 120. Add that result to full-time headcount for each month, then average the year. This is different from deciding which particular employees must receive offers to avoid employer penalties.
- **Employer mandate:** The ACA employer shared responsibility rules can impose monthly payments on ALEs when a full-time employee receives a Marketplace premium tax credit and the statutory offer conditions are not met. The annual 2026 amounts are $3,340 under section 4980H(a), after the applicable 30-person reduction, and $5,010 per subsidized full-time employee under (b), subject to its cap. The 2027 amounts are $3,780 and $5,670. These are different formulas, not two automatic charges on every employee.
- **Affordability:** Under the ACA, coverage is affordable if the employee's cost for the cheapest self-only, minimum-value plan is no more than 9.96% of household income in 2026, or 10.22% in 2027. Check with the [ACA affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator).
- **Minimum value:** A plan provides minimum value if it covers at least 60% of expected allowed costs for a standard population and substantially covers inpatient hospital and physician services. This is not a guarantee to pay 60% of each member's bill.
- **Minimum essential coverage (MEC):** Coverage that counts under the ACA, including employer group plans, marketplace plans, Medicare and Medicaid.
- **Essential health benefits:** Ten categories of care ACA-compliant non-grandfathered small-group and individual coverage generally must cover, including hospital care, prescription drugs, maternity and mental health. See [the essential health benefits](https://www.getprescience.com/guides/what-are-essential-health-benefits).
- **COBRA:** Federal continuation rights for qualified beneficiaries after an event causes loss of group coverage. The usual maximum is 18 months for termination or reduced hours, with specified extensions or dependent events allowing longer periods. The normal premium cap is 102%; disability rules can permit 150%. The employer-size test generally uses at least 20 employees on more than half of typical prior-year business days, with fractional part-time counting and statutory exceptions. See the [COBRA calculator](https://www.getprescience.com/tools/cobra-cost-calculator).
- **Mini-COBRA:** State continuation laws that extend COBRA-like rights to employees of smaller employers, often those under 20. See [COBRA for small employers](https://www.getprescience.com/guides/cobra-for-small-employers).
- **ERISA:** The federal law governing most private employer benefit plans, requiring a written plan document, disclosures to members, claims procedures and fiduciary duties.
- **Summary of Benefits and Coverage (SBC):** A standardized Summary of Benefits and Coverage for applicable health coverage. It describes cost-sharing, limitations and illustrative coverage scenarios. It is not the complete contract and generally does not show the employer's payroll contribution policy. Use the contribution sheet, network and formulary alongside it.
- **Form 5500:** An annual report ERISA plans file with the Department of Labor. Health plans with fewer than 100 participants that are fully insured or unfunded are generally exempt.
- **Forms 1094-C and 1095-C:** The annual IRS forms applicable large employers file to report the coverage they offered each full-time employee.
- **PCORI fee:** A small annual per-member fee that funds patient-centered outcomes research, paid by the insurer for fully insured plans and by the employer for self-funded plans, on IRS Form 720 by July 31.

## Enrollment

- **Open enrollment:** The yearly window when employees can join, leave or change plans. See [how to run open enrollment](https://www.getprescience.com/guides/how-to-run-open-enrollment).
- **Qualifying life event:** An event that may create enrollment rights outside open enrollment, subject to the applicable rule and deadline. Employer-plan special enrollment commonly requires a request within 30 days for marriage, birth or certain coverage losses; Medicaid and CHIP events can have a 60-day period. Marketplace rules differ. A life change does not automatically authorize every pre-tax election change.
- **Waiting period:** The time before coverage begins after an employee is otherwise eligible. Applicable group plans generally cannot impose a waiting period exceeding 90 calendar days, including weekends and holidays. Other eligibility conditions and variable-hour measurement rules require separate review. A first-of-month rule must still comply with the applicable limit.
- **Participation requirement:** A carrier's minimum share of eligible employees who must enroll for a group to get or keep a plan, after excluding employees who waive for other coverage.
- **Waiver:** An employee's decision to decline the employer's plan, often because they're covered elsewhere. See [can employees opt out](https://www.getprescience.com/guides/can-employees-opt-out-of-health-insurance).
- **Dependent:** A person eligible under the plan, such as a spouse or child. Applicable medical plans offering dependent-child coverage generally must make it available until age 26. Tax-dependent status and the ACA employer-penalty definition of dependent are separate questions. Do not assume that a spouse must be offered coverage under the federal employer mandate.
- **Coverage tier:** The group of people a member enrolls: employee only, employee plus spouse, employee plus children, or family. Premiums are set per tier.

**Choosing a plan for employees? Use these terms on a real proposal**

Start with the company details and employee census, then compare written premiums, contributions, networks and cost-sharing. Keep the same definitions and effective date across the proposals.

[Start my employee plan comparison](https://www.getprescience.com/quote)

## Frequently asked questions

**What's the difference between a deductible and an out-of-pocket maximum?**

The deductible applies before cost-sharing for specified services; some services are covered earlier. The out-of-pocket maximum caps the covered spending counted under the plan. It generally excludes premiums, excluded services and many out-of-network charges.

**What's the difference between fully insured and self-funded?**

With a fully insured plan, the employer pays a fixed premium and the carrier pays the claims. With a self-funded plan, the employer pays the claims, usually with stop-loss insurance capping large ones.

**What's the difference between an HSA, an FSA and an HRA?**

An HSA belongs to the individual and has contribution-eligibility rules. A health FSA may receive employee and employer funds and generally has forfeiture rules with permitted exceptions. An HRA receives only employer contributions and follows its written reimbursement terms.

**What's the difference between a PPO, an HMO and an EPO?**

A PPO covers in-network and out-of-network care without referrals, at a higher price. An HMO covers in-network care only and usually needs a primary care referral to see a specialist. An EPO is in between: in-network only, but usually no referrals.

**Does the ACA require my company to offer health insurance?**

ALEs can owe employer shared responsibility payments if the statutory conditions are met. Status generally depends on the prior-year average of full-time employees and equivalents, with related-employer and other exceptions. Non-ALEs have no federal payment under that provision, but other benefit, state and local rules may apply.

**Does COBRA apply to a small company?**

The federal test generally requires at least 20 employees on more than half of typical prior-year business days, with fractional part-time counting. Statutory exceptions apply, including church plans. State continuation rules may cover smaller insured groups.

**What's the difference between an ICHRA and a QSEHRA?**

A QSEHRA is for eligible non-ALE employers with no group health plan and has indexed annual caps. An ICHRA can be offered by employers of any size and has no federal annual contribution cap. Both have coverage, substantiation and tax-credit rules; ICHRAs also have class and notice requirements.

**What does PEPM mean on a quote?**

Per employee per month. Admin fees, PEO fees and benefits platform fees are often quoted this way, so multiply by headcount and by 12 to see the annual cost, and check whether the fee counts every employee or only those who enroll.

## Sources

- [IRS Publication 15-B (2026), employer health benefits and QSEHRA limits](https://www.irs.gov/publications/p15b)
- [IRS Publication 969, HSA, FSA and HRA rules](https://www.irs.gov/publications/p969)
- [IRS Revenue Procedure 2025-19, 2026 HSA limits](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS, new HSA eligibility rules effective in 2026](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-on-new-tax-benefits-for-health-savings-account-participants-under-the-one-big-beautiful-bill)
- [26 CFR 54.9802-4, ICHRA integration, classes and notices](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.9802-4)
- [IRS, Employer shared responsibility questions and answers](https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act)
- [IRS Revenue Procedure 2025-26, 2026 employer penalties](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [IRS Revenue Procedure 2026-22, 2027 employer penalties](https://www.irs.gov/pub/irs-drop/rp-26-22.pdf)
- [IRS Revenue Procedure 2025-25, 2026 affordability](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Revenue Procedure 2026-26, 2027 affordability](https://www.irs.gov/pub/irs-drop/rp-26-26.pdf)
- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [HealthCare.gov, Summary of Benefits and Coverage](https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/)
- [CMS, medical bill rights when using insurance](https://www.cms.gov/initiatives/your-patient-rights/medical-bill-rights/know-your-rights/insurance)
- [HealthCare.gov, preventive services](https://www.healthcare.gov/coverage/preventive-care-benefits/)
- [29 CFR 2520.104-20, small welfare plan reporting exemption](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104-20)
- [IRS, PCORI fee questions and answers](https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers)
- [CMS, ACA market rating rules](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)
- [DOL, ERISA scope and exemptions](https://www.dol.gov/general/topic/health-plans/erisa?lang=en)
- [HealthCare.gov, plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)
- [HealthCare.gov, special enrollment and loss of coverage](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)

# Small business health insurance in California

Source: https://www.getprescience.com/small-business-health-insurance/california
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in California." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/california

California’s small group market reaches 100 employees, and residents must consider the state coverage mandate. Cal-COBRA and San Francisco’s health spending ordinance add separate obligations. I would compare the actual provider network and employee costs, then check the local spending, continuation and coverage rules that apply to the business.

- **Regional rates:** 19 rating regions
- **Small group market:** Up to 100 full-time equivalents for CCSB
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Small group eligibility and the resident mandate are separate

Covered California for Small Business generally serves employers with 100 or fewer full-time-equivalent employees, at least one qualifying W-2 employee and a majority of eligible employees living in California. Confirm all application conditions with the marketplace. A company between 51 and 100 employees should not assume a national broker’s default 50-employee market boundary applies in California.

California’s resident coverage mandate applies to individuals, with exemptions and household-specific calculations. For tax year 2025, the Franchise Tax Board identifies the flat amounts as $950 per adult and $475 per child, compared with the income-based calculation of 2.5% of gross income above the filing threshold, subject to the applicable rules and cap. These are 2025 tax figures, not a statement of the 2026 penalty.

I would not tell a new hire that every short gap necessarily produces a penalty. Have the worker review FTB’s exemptions and calculation. The employer should communicate the exact coverage effective date and any waiting period, so the person can evaluate coverage between jobs. Avoid assuming that a first-of-the-month start always leaves everyone continuously insured.

Use [Covered California’s application guidance](https://www.coveredca.com/small-business/apply) to confirm eligibility and documents. If the team includes out-of-state residents, verify both marketplace eligibility and the actual network available to those residents. A California policy classification does not prove that a remote employee has routine local access.

## San Francisco health spending reaches some workers outside the group plan

The city’s official 2026 HCSO poster states expenditure rates of $2.74 per hour for covered businesses with 20–99 workers worldwide and nonprofits with 50–99, and $4.11 for employers with 100 or more workers worldwide. Covered-worker conditions include at least eight hours of work per week in San Francisco and completion of 90 calendar days of employment. Exemptions and expenditure rules require separate review.

For illustration, 120 payable hours at the medium-employer rate produces $328.80 of required spending before considering any applicable exemptions or adjustments. That is 120 × $2.74, not a health insurance premium quote. Have payroll apply the ordinance’s hours rules and the city’s accepted expenditure methodology to the actual worker. Do not compare an annual company-wide benefits total with an individual hourly requirement.

An employee who declines your insurance may still need attention under HCSO. Ask whether a valid exemption or city-compliant waiver applies and what qualifying expenditure will be made otherwise. A standard insurance declination is not enough to establish the city result. Keep the worker-level spending records, required notices and reporting responsibilities together so the benefits administrator and payroll are using the same facts.

For a business hiring its first San Francisco-based remote employee, check where the person actually works and the employer’s worldwide size. Do not use the number of people enrolled in insurance as the city’s employer count. The [official 2026 poster](https://media.api.sf.gov/documents/2026_HCSO_Poster_Dec2025.pdf) is a useful starting point, followed by OLSE guidance for the detailed calculation.

## Cal-COBRA is an insured-coverage rule with eligibility conditions

California DMHC describes Cal-COBRA for eligible coverage at employers with 2–19 employees, for up to 36 months. Eligible people exhausting an 18-month federal COBRA period may obtain another 18 months through Cal-COBRA, reaching 36 months in total. Do not promise that extension for every employer arrangement: self-funded plans and other excluded coverage need separate treatment.

Ask the insurer to identify the applicable qualifying event, notice and election requirements, premium and early-ending conditions. The continuation premium is not the employee’s old payroll deduction. When replacing coverage, confirm how continuing beneficiaries transfer and what notice they receive. A departing employee should compare continuation with individual coverage while the loss-of-coverage enrollment opportunity is still available.

## The 2026 fertility rule distinguishes required coverage from required offers

DMHC’s implementation letter, revised February 23, 2026, explains SB 729 as amended. For covered contracts issued, amended or renewed on or after January 1, 2026, large group coverage must include the specified infertility and fertility benefits, while small group plans must offer the coverage. A small employer should ask whether it actually purchased that benefit. The law contains exceptions, including treatment of religious employers and a later date for CalPERS contracts, and does not impose its insurance mandate on every self-funded plan.

Get the benefit provision and authorization rules before telling employees that IVF is included. Ask which services, providers, medications and cost sharing apply. The legal duty to offer a benefit and an employee’s entitlement under the purchased policy are different questions. An employee planning treatment needs the written policy answer, not a general statement that California passed a fertility law.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits your team, Choice handles plan comparison for every employee's home address, in California and in any other state.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative San Francisco benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative California planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

**Get a proposal for your actual California employee group**

Use employee home ZIP codes and family tiers, including teammates outside California. Compare the written network, employer contribution and employee costs rather than treating a regional benchmark as your quote.

[Quote my California team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Check care access where your California team lives

A San Francisco office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## California: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**California public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Imaging Healthcare Specialists, San Diego County](https://www.imaginghealthcare.com/pricing/) | MRI without contrast | $400 cash | Single procedure; excludes breast and prostate MRI. Reading-fee inclusion is not clearly itemized. | Undated; no effective date stated. |

Pay in full at the appointment; the provider does not bill insurance for self-pay services. Personal-injury liens are ineligible. Confirm the exact scanner location and ordered study; the group price is not tied to a named site.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Published October 2026 small-group premiums: one Silver PPO plan, age 40

Blue Shield of California Silver Full PPO 1800/65 OffEx, Silver tier, Full PPO Network; age 40, employee-only small-group off-exchange coverage. Common effective date: October 1, 2026. Amounts are gross monthly premiums before employer contributions.

**Pending regulatory approval:** all four selected rate-book pages carry this caveat. These published figures are not confirmed final approved rates.

**October 1, 2026 monthly premiums, pending regulatory approval**

| Region | Rating region | County | Monthly premium | Carrier source |
| --- | --- | --- | --- | --- |
| San Francisco | 4 | San Francisco | $883.50 | [Rate book p. 47](https://www.blueshieldca.com/content/dam/bsca/en/broker/docs/2026/small-business/A46124GRP-2026Q4-SmallBusinessRateBook.pdf#page=47) |
| Los Angeles East | 15 | Los Angeles | $665.91 | [Rate book p. 153](https://www.blueshieldca.com/content/dam/bsca/en/broker/docs/2026/small-business/A46124GRP-2026Q4-SmallBusinessRateBook.pdf#page=153) |
| Los Angeles West | 16 | Los Angeles | $741.59 | [Rate book p. 163](https://www.blueshieldca.com/content/dam/bsca/en/broker/docs/2026/small-business/A46124GRP-2026Q4-SmallBusinessRateBook.pdf#page=163) |
| San Diego | 19 | San Diego | $735.58 | [Rate book p. 193](https://www.blueshieldca.com/content/dam/bsca/en/broker/docs/2026/small-business/A46124GRP-2026Q4-SmallBusinessRateBook.pdf#page=193) |

Employer ZIP code determines the region; check the detailed ZIP list on [rate-book page 4](https://www.blueshieldca.com/content/dam/bsca/en/broker/docs/2026/small-business/A46124GRP-2026Q4-SmallBusinessRateBook.pdf#page=4). Los Angeles spans two regions. The [carrier rate index](https://www.blueshieldca.com/en/employer/resources/rates) identifies the October–December 2026 rating period. Optional assisted-reproduction supplements are excluded. This same-plan illustration is not a market average, cheapest-plan claim or year-round rate. Payroll deductions depend on employer contributions; employee-only covers one adult without dependents.

## Where Prescience fits for a California employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For California teams: one monthly cost set in your quote, you keep your payroll provider, and the plan can start in any month, including mid-year.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**What is the flat California coverage penalty for tax year 2025?**

FTB lists $950 per adult and $475 per child. The income-based calculation, exemptions, coverage months and cap also matter. These figures should not be relabeled as the 2026 penalty.

**Does every California small group policy automatically include IVF?**

No. The applicable 2026 law requires small group plans to offer the specified coverage. Confirm that the employer purchased it and check the policy’s benefits, authorization rules and applicable exceptions.

**Does declining the company plan remove San Francisco HCSO obligations?**

Not automatically. Check the city’s covered-worker rules, exemptions, valid waiver requirements and qualifying expenditures. An ordinary insurance declination does not establish an HCSO exemption.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Covered California, Small business application and eligibility](https://www.coveredca.com/small-business/apply)
- [California FTB, 2025 resident mandate penalty and exemptions](https://www.ftb.ca.gov/file/personal/filing-situations/health-care-mandate/personal.html)
- [San Francisco OLSE, Official 2026 HCSO poster](https://media.api.sf.gov/documents/2026_HCSO_Poster_Dec2025.pdf)
- [California DMHC, COBRA and Cal-COBRA](https://www.dmhc.ca.gov/HealthCareinCalifornia/TypesofPlans/KeepYourHealthCoverage(COBRA).aspx)
- [California DMHC, APL 25-021 implementation of SB 729](https://www.dmhc.ca.gov/Portals/0/Docs/OPL/APL25-021-ImplementationofSenateBill729%282024%29-REVISED%282_23_2026%29.pdf?ver=eQMnRO7gOZ4xMKqr0Onmdg%3D%3D)
- [San Francisco OLSE, HCSO implementing rules and waivers](https://media.api.sf.gov/documents/HCSO_Rules_Final_nrGhvZq.pdf)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Imaging Healthcare Specialists, San Diego County, public pricing / estimate information](https://www.imaginghealthcare.com/pricing/)
- [Blue Shield of California, Q4 2026 small-business rate book (pending regulatory approval)](https://www.blueshieldca.com/content/dam/bsca/en/broker/docs/2026/small-business/A46124GRP-2026Q4-SmallBusinessRateBook.pdf)
- [Blue Shield of California, employer rate index and region definitions](https://www.blueshieldca.com/en/employer/resources/rates)

# Small business health insurance in New York

Source: https://www.getprescience.com/small-business-health-insurance/new-york
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in New York." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/new-york

New York’s small group market extends to 100 employees and uses community rating. Its stop-loss restriction and insured continuation rights also affect the comparison. I would start with the employer count, the policy’s legal market and the actual network, then compare the full cost to both company and employees.

- **Small group rating:** Community rating
- **Small group market:** 1–100 employees under DFS counting rules
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## New York’s 100-employee boundary changes the comparison

New York DFS requires the full-time-equivalent counting method for small group classification, including part-time employees and employees who waive coverage. Related entities can need aggregation. Group size is generally determined at issuance and renewal using the preceding calendar year; it is not reclassified every time someone joins or leaves midyear. A business with 60 full-time employees can be in the small group insurance market while also subject to federal employer shared responsibility rules.

Under Insurance Law § 3231, community rating does not vary premiums by an individual’s age, sex, health status or occupation. That does not mean every New Yorker pays the same premium. Compare the same plan, region and coverage tier. A change in network, benefits or family enrollment can still change the cost. A national age-based pricing example should not be used as a New York small group quote.

DFS also explains that Insurance Law §§ 3231(h) and 4317(e) prohibit selling stop-loss insurance to groups subject to community rating, including groups with 51–100 employees. That is a restriction on the insurance product, not a statement that federal law bans an employer from paying its own claims. If an alternative proposal depends on stop-loss for a New York small group, obtain its legal eligibility explanation before evaluating the price.

The [DFS small group FAQ](https://www.dfs.ny.gov/apps_and_licensing/health_insurers/small_group_expansion_to_1_100_employees_faqs) also distinguishes common-law employees from sole owners and spouses. Give the carrier the actual ownership and employment information. Do not rely solely on whether a worker receives a particular tax form to decide that group coverage is available.

## Continuation can reach 36 months in an eligible insured plan

DFS describes state continuation for eligible small-employer insured coverage for up to 36 months, at up to 102% of the group premium. Eligible people exhausting federal COBRA can receive a state extension to a combined total of 36 months. This is not 36 additional months after federal COBRA, and it does not extend state insurance requirements to every self-funded employer plan.

Under the state rule, the person requests continuation in writing within 60 days after the later of termination or notice. Nonpayment, other group coverage, Medicare eligibility after election and termination of the group contract can affect continuation. If the employer replaces the group policy with similar coverage, DFS describes rights to continue under the replacement for the remaining period. The administrator should evaluate the actual event and beneficiary.

I would make the continuation roster part of a carrier change. Identify who receives renewal information, how premiums are collected and who confirms enrollment on the replacement plan. Former employees can be easy to omit from a census built only from the active payroll list. Ask for confirmation for each beneficiary rather than assuming the prior carrier transfers everything automatically.

## Plan for paid leave and commuters

New York Paid Family Leave protects health coverage on the same terms as if the employee were working. Employees who normally contribute can still be required to pay their share. Arrange the payment process before leave starts, especially if ordinary payroll deductions will stop. Do not classify a protected leave as a coverage-ending termination simply because the employee has no wages in a particular pay period.

For New York City employers, a worker living in New Jersey or Connecticut needs a network review at the home address. For an upstate hire, check local hospitals and specialists rather than extending a Manhattan provider list. The legal group classification and the ability to receive routine care are separate decisions; both belong in the written comparison.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice compares New York's individual plans for each employee's home address, and works the same way for teammates in other states.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative New York City benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative New York planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

**Compare a proposal for your New York team**

Include employees' home locations, including cross-border commuters, in the census. Keep the effective date, exact network and contribution policy consistent across the written proposals.

[Quote my New York team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Check care access where your New York team lives

A New York City office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## New York: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**New York public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Mosaic Diagnostic Imaging, NYC / Long Island](https://mosaicdiagnostics.com/patients/cash-pay-offers/) | Lumbar spine MRI without contrast | Amount omitted pending eligibility and site confirmation | Offer describes scan plus interpretation; professional-services-only sites cannot be assumed to include the scan. | Undated; no effective date stated. |

The supplied research had indexed-only evidence; the public page opened during this edit. Its restrictive notice limits discounted cash pricing to patients without active insurance who were not involved in an accident, despite broader marketing text elsewhere. Suffolk is described as professional-services-only, and the footer also names Mineola, Ronkonkoma and Deer Park as professional-services-only. Confirm the exact site, eligibility and both charges in writing; do not apply the bundled offer to those sites. A physician order and full payment at the appointment are required.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a New York employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For New York teams, including people commuting from New Jersey and Connecticut: one broad national PPO network and one monthly cost set in your quote.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Can a 60-employee New York company be small group and an ALE?**

Yes. New York small group coverage extends to 100 employees under its counting rules, while federal applicable large employer status generally begins at 50 full-time employees including equivalents.

**Does New York add 36 months after federal COBRA?**

No. Eligible insured continuation can reach a combined total of 36 months. The state extension is not another 36 months, and policy scope and termination conditions matter.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [New York DFS, Small group classification and stop-loss](https://www.dfs.ny.gov/apps_and_licensing/health_insurers/small_group_expansion_to_1_100_employees_faqs)
- [New York Senate, Insurance Law § 3231](https://www.nysenate.gov/legislation/laws/ISC/3231)
- [New York DFS, Continuation FAQs](https://www.dfs.ny.gov/consumers/health_insurance/cobra_faqs)
- [New York DFS, 36-month extension](https://www.dfs.ny.gov/consumers/health_insurance/cobra_coverage_extension_36_Months)
- [New York Paid Family Leave, Rights and protections](https://paidfamilyleave.ny.gov/protections)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Mosaic Diagnostic Imaging, NYC / Long Island, public pricing / estimate information](https://mosaicdiagnostics.com/patients/cash-pay-offers/)

# Small business health insurance in Texas

Source: https://www.getprescience.com/small-business-health-insurance/texas
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Texas." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/texas

Texas describes its small employer insurance market as businesses with 2–50 employees. If you offer coverage, eligibility, notices and continuation still matter. I would compare the actual Austin, Dallas or Houston network and the full contribution budget, then establish who handles enrollment and departures.

- **Local price example:** Cash MRI price excludes insurance billing
- **Small group market:** 2–50 employees under Texas guidance
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Texas eligibility is more than an enrolled headcount

**Texas Department of Insurance small employer guidance**

| Topic | Practical rule |
| --- | --- |
| Employer size | TDI describes small employers as businesses with two to 50 employees, regardless of hours worked. |
| Offer of coverage | If a plan is offered, offer coverage to employees working 30 or more hours weekly and their dependents. |
| Owners | TDI says owners can enroll when at least one employee also enrolls. |
| New-hire enrollment | Give new employees at least 31 days from their start date to enroll. |
| Rates | TDI explains that employee health does not determine small employer premiums; compare the actual product, age and location inputs. |

Use [TDI’s small employer guide](https://www.tdi.texas.gov/pubs/consumer/cb040.html) to check the carrier’s proposal. Ask how waived coverage affects participation and whether the quote assumes a particular employer contribution. Do not turn an insurer’s underwriting checklist into a claim that Texas law requires every business to contribute the same percentage.

For a founder-owned business, send the actual employee and ownership facts to the carrier. Do not assume that a federal SHOP exclusion answers every Texas group eligibility question. TDI has separate guidance for carriers, including questions involving married employees. Resolve the group’s eligibility before presenting a benefits package as available to a new hire.

## Nine months without COBRA, or a state extension after it

TDI describes up to nine months of state continuation when federal COBRA is unavailable, and up to six additional months after federal COBRA is exhausted. The policy must be subject to Texas insurance law; these state rights do not apply to an employer’s self-funded plan. Prior coverage and termination conditions matter. TDI specifies three months of prior coverage and cautions that an employee who was fired usually cannot obtain state continuation.

Do not describe the state law as limited to employers below 20 employees. An insured larger employer can have an obligation when federal COBRA ends. Nor should the business add nine months to federal COBRA as a default. The two routes have different durations. Have the insurer identify the route, notice, election and payment requirements for the actual event.

An illustrative departure budget shows why the full premium belongs in the notice. If employee-only insurance costs $700 monthly and the employer previously paid $560, the employee’s old $140 payroll deduction is not the amount needed to maintain coverage. Obtain the actual continuation charge from the administrator rather than reusing the payroll record. This example is arithmetic only and is not a Texas carrier price.

## Do not buy a single-city network for a statewide hiring plan

A company hiring in Austin, Dallas, Houston and a smaller Texas community should request an address-by-address network check. A plan that works for the founder’s physician may not work for the next hire. Ask how the insurer handles employees outside the principal service area and whether the proposal assumes that everyone lives close to the office.

For a worker relocating from another state, check both the move date and the insurance effective date. Ask whether ongoing authorizations and deductible accumulation transfer. For a proposed PEO exit, run those same checks before ending the services contract. A benefits transition and a payroll transition can share a date while still needing separate confirmations and separate responsible people.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits a distributed Texas team, Choice helps each employee compare the individual plans offered where they live.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Austin benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Texas planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

## Check care access where your Texas team lives

A Austin office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

**Price coverage for the places your Texas team lives**

Use home ZIP codes and family tiers instead of the office address alone. Compare written access and employee costs across those locations before choosing a proposal.

[Quote my Texas team](https://www.getprescience.com/quote)

[Prepare the distributed-team census](https://www.getprescience.com/integrations)

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Texas: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Texas public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Pineywoods Imaging, Nacogdoches](https://pineywoodsimaging.com/pricing/) | MRI without contrast | $600 cash | Reading-fee inclusion and other separate charges are not stated. | Undated; no effective date stated. |

The published terms require full payment at service without insurance billing. Confirm the ordered study and all fees at the Nacogdoches facility.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Texas employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Texas teams spread between Austin, Dallas, Houston and smaller towns: a broad national PPO network, so one plan works statewide and for out-of-state hires.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Is Texas state continuation only for companies below 20 employees?**

No. It can also extend eligible insured coverage after federal COBRA. TDI describes nine months without COBRA and six additional months after COBRA is exhausted, subject to eligibility.

**Does Texas state continuation cover self-funded employer plans?**

No. TDI states that these continuation provisions apply to policies subject to Texas insurance law, not employer self-funded plans.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Texas Department of Insurance, Small employer guide](https://www.tdi.texas.gov/pubs/consumer/cb040.html)
- [Texas Department of Insurance, Health care coverage and continuation](https://www.tdi.texas.gov/pubs/consumer/cb005.html)
- [Texas Department of Insurance, Carrier eligibility FAQs](https://www.tdi.texas.gov/health/faq.html)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Pineywoods Imaging, Nacogdoches, public pricing / estimate information](https://pineywoodsimaging.com/pricing/)

# Small business health insurance in Washington State

Source: https://www.getprescience.com/small-business-health-insurance/washington
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Washington State." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/washington

Washington employers should review the policy’s continuation option and the state’s expanded 2026 paid-leave protections alongside price and network. The insurance regulator approved a 12.8% average small group rate increase for 2026, but your renewal depends on the specific policy and enrolled team.

- **2026 approved increase:** 12.8% market average; quotes vary
- **Small group market:** 1–50 employees
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## A statewide approved increase is not your renewal quote

Washington’s Office of the Insurance Commissioner announced nine insurer entities approved for the 2026 small group market. It reported a 9.5% average requested increase and a 12.8% average approved increase, with new rates applying as plans renew after January 1, 2026. Those are market-level filing results, not a guaranteed increase for each employer or a premium per employee.

**Selected 2026 small group approvals from OIC**

| Insurer entity | Approved change |
| --- | --- |
| Kaiser Foundation Health Plan of Washington | 5.3% |
| Premera HMO | 19.2% |
| Regence BlueShield | 15.4% |
| UnitedHealthcare Insurance Company | 15.8% |

Insurer approvals differ, so a selected group of carriers should not be treated as a bound on every renewal. For your own offer, ask the broker to separate rate changes from employee ages, dependents, plan design and contribution changes. Do not apply a small group market increase to a prior survey average covering a different population and present the result as an observed 2026 price.

A Seattle headquarters and an employee near Vancouver or Spokane may need different provider checks. Ask which counties the exact product serves and confirm nonemergency access for Oregon or Idaho residents. The OIC approval of a carrier does not establish that every product from that carrier is available or suitable at every address.

## The insurer offers an option; read what your policy includes

RCW 48.21.250 requires insurers issuing covered group medical policies to offer the policyholder an option for continuing benefits after eligibility ends, for an agreed period and rate. It does not establish one automatic statewide continuation duration for all former employees. The policyholder’s selection and contract language matter, particularly when federal COBRA does not apply.

Before buying a policy, request the continuation endorsement and election process. Record the duration, premium, eligible events and what happens if the employer replaces or ends coverage. If an employee leaves, consult that document rather than promising 18 months because it sounds like COBRA. The statute also addresses conversion after the continuation period; ask the insurer how that provision works alongside current individual coverage options.

I would treat this as a buying decision, not a detail to discover at the first termination. Ask whether the quoted policy includes the offered provision. If a broker compares multiple plans, put their continuation terms in the comparison. A low premium does not tell a future departing worker whether they can keep the group coverage.

## The 2026 leave rule is no longer limited to federal FMLA

Beginning January 1, 2026, Washington generally requires job protection from employers with 25 or more employees for workers who have been employed for at least 180 calendar days before leave. The state also requires maintenance of existing health benefits for employees using Paid Leave benefits who qualify for job protection. Employees may be required to continue paying their normal share. Review the program’s employer-count and exception rules before applying that summary to a particular leave.

The state obligation can apply even when federal FMLA does not require coverage maintenance. A 30-person employer can have a state obligation even if the federal FMLA employer threshold is not met. Payroll should identify how employee contributions will be collected, who keeps coverage active and how return-to-work enrollment is checked. The [state job-protection guidance](https://paidleave.wa.gov/job-protection-requirements-for-employers/) explains the phased employer thresholds and other requirements.

Keep leave protection separate from continuation after employment ends. Paid benefits, job restoration and ongoing health coverage are related but distinct questions. An employee’s approval for wage-replacement benefits is not enough by itself to tell the administrator whether the worker satisfies every job-protection condition.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice compares Washington individual plans, including Cascade Care options, for each employee's home address.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Seattle benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Washington planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

**Compare coverage for your Washington employee group**

Use the actual census, contribution policy and proposed coverage date. Check the written network and employee costs alongside the Washington planning points above.

[Quote my Washington team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Check care access where your Washington team lives

A Seattle office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Washington: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Washington public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Mt. Baker Imaging, northwest Washington](https://mtbakerimaging.com/billing-2/) | Diagnostic MRI; exact scan and location needed | No exact diagnostic MRI cash rate verified | Ask whether the estimate includes both imaging and Northwest Radiologists’ reading charges; the page lists separate billing contacts. | Undated estimate instructions; no cash-rate effective date verified. |

Mt. Baker asks callers to contact 360-733-0430 with the procedure name and whether they are self-pay or insured; insured callers need insurance details. Request a written self-pay total for the selected location. No numeric rate is inferred from this process, and a whole-body screening package would be a different service.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Washington employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Washington teams: one monthly cost set in your quote, so a statewide rate filing doesn't decide next year's budget mid-plan-year.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Must a Washington business with 30 employees maintain health coverage during Paid Leave?**

It can be required beginning in 2026 when the employee qualifies for state job protection. Review the 25-employee employer threshold, 180-day employment condition and applicable exceptions.

**Does Washington guarantee a fixed state continuation period?**

RCW 48.21.250 requires the insurer to offer a continuation option to the policyholder. Check whether the policy includes it and the agreed duration and price. Federal COBRA is a separate requirement.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Washington OIC, 2026 small group approvals](https://www.insurance.wa.gov/about-us/news/2025/nine-insurers-approved-sell-health-insurance-small-businesses-2026)
- [Washington Legislature, RCW 48.21.250 continuation option](https://app.leg.wa.gov/rcw/default.aspx?cite=48.21.250)
- [Washington Paid Leave, Job protection and health benefits](https://paidleave.wa.gov/job-protection-requirements-for-employers/)
- [Washington Paid Leave, How the program works](https://paidleave.wa.gov/how-paid-leave-works/)
- [Washington Legislature, RCW 48.43.005 definitions](https://app.leg.wa.gov/rcw/default.aspx?cite=48.43.005)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Mt. Baker Imaging, northwest Washington, public pricing / estimate information](https://mtbakerimaging.com/billing-2/)

# Small business health insurance in Massachusetts

Source: https://www.getprescience.com/small-business-health-insurance/massachusetts
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Massachusetts." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/massachusetts

Massachusetts combines individual and small group coverage in a merged market and has its own resident coverage standard. Employers also need to check HIRD reporting, continuation and paid-leave responsibilities. I would start with a compliance calendar and the actual Boston or regional provider network, then compare contributions and benefits.

- **Coverage standard:** Check Minimum Creditable Coverage
- **Small group market:** Small group: up to 50 employees
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## A merged market does not make every offer identical

Massachusetts DOI describes a merged market for individual insurance and employers with 50 or fewer employees. Sharing that market does not mean every product, coverage tier and employer contribution has the same price. Obtain comparable proposals for the same roster and effective date. Do not substitute a statewide premium average for a quote to a small Boston company.

The resident individual mandate uses Minimum Creditable Coverage, or MCC. The Department of Revenue explains that most adult residents who can afford coverage must have insurance meeting that standard or face a tax penalty, subject to exemptions. MCC is a Massachusetts standard, not simply another name for federal minimum essential coverage. Ask the insurer or administrator to confirm MCC status for the actual plan.

That check matters for a Massachusetts resident covered through an employer based elsewhere. A benefits brochure saying ACA-compliant does not by itself answer the state MCC question. Give employees the administrator contact and establish who supplies the appropriate tax-coverage documentation. Do not promise that one federal information form replaces every Massachusetts reporting obligation.

I would avoid estimating an employee’s state penalty during enrollment. Affordability, exemptions, household circumstances and months of coverage affect the result. Direct the employee to DOR’s current guidance and their tax preparer. The employer’s practical job is to communicate coverage dates and MCC status accurately, including any gap between old and replacement policies.

## HIRD uses a Massachusetts workforce test

DOR requires an annual HIRD filing from in-state or out-of-state employers that had six or more Massachusetts employees during the preceding 12 months under its reporting test. It includes employment categories beyond full-time benefits enrollees. The filing window opens November 15 and ends December 15. The report collects employer-level coverage information through MassTaxConnect; it is not a substitute for individual coverage documentation.

For a company with four enrolled employees and three other Massachusetts workers, do not assume HIRD is irrelevant because only four people use the plan. Ask payroll to review the applicable wage reports and the full state workforce. Appoint a filing owner and retain confirmation of submission. The [DOR HIRD instructions](https://www.mass.gov/info-details/health-insurance-responsibility-disclosure-hird) explain the employee test and online process.

If a payroll vendor offers to file, confirm the data it needs and who approves the answers. A vendor login does not prove a completed filing. Reconcile the reported benefit offer with plan documents, contributions and eligibility. If the business has stopped offering coverage or has changed insurers, make sure the person preparing the report knows.

## Mini-COBRA and PFML need different workflows

Massachusetts DOI describes mini-COBRA for small group carriers covering employers with 2–19 employees. It provides continuation similar to federal COBRA, with duration dependent on the qualifying event and applicable extensions. The state guidance explicitly says that this mini-COBRA law does not require dental and vision continuation. Do not promise identical treatment for every benefit on a payroll deduction list.

**Massachusetts mini-COBRA event examples**

| Event | Ordinary maximum |
| --- | --- |
| Termination other than gross misconduct or reduction in hours | 18 months for eligible beneficiaries. |
| Employee death, divorce or loss of dependent status | 36 months for eligible affected dependents. |
| Qualifying disability extension | Up to 29 months with the required Social Security determination and timely notice. |

Separately, Massachusetts PFML requires health insurance maintenance at the same level as before leave. Plan how the employee’s contribution is collected while ordinary pay is reduced or absent. A protected leave should not be processed as an ordinary departure without reviewing the leave rules. Have payroll and the benefits administrator agree on the coverage status and the payment process before the first unpaid payroll cycle.

For a Boston team with an employee in western Massachusetts or a dependent in another state, confirm the exact network and routine-care access. The merged-market label does not establish that every hospital or specialist participates. Ask about the specific location and service, especially when care is already scheduled around the plan change.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare the individual plans available to them in Massachusetts or wherever they live.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Boston benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Massachusetts planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

## Check care access where your Massachusetts team lives

A Boston office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

**Build the proposal around your Massachusetts workforce**

Include the employees and family tiers you intend to cover. Compare written benefits and costs, and keep state coverage and reporting questions separate from the price proposal.

[Quote my Massachusetts team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Massachusetts: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Massachusetts public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Shields Health, Massachusetts locations](https://go.shields.com/price/) | Diagnostic MRI; exact scan and location needed | No exact facility-specific cash rate verified | Scan and reading may be billed together; some locations bill the radiologist separately. Confirm both. | Undated estimate instructions; no cash-rate effective date verified. |

Call Shields patient financial services at 800-258-4674 for a self-pay estimate for the chosen Massachusetts site and ordered scan. Its online calculator uses insurance and scan information to estimate insured responsibility; it is not a published cash rate. Have the scan type or CPT and contrast requirement ready. The broad marketing range is not used as an exact cash quote.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Massachusetts employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Massachusetts employers: an effective $0 deductible, simple copays and 24/7 care navigation, with setup, enrollment and COBRA run for you.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Does a company outside Massachusetts ever file HIRD?**

Yes. DOR applies the requirement to qualifying out-of-state employers with Massachusetts employees as well as in-state employers. Review the six-employee test and the preceding 12 months.

**Does Massachusetts mini-COBRA require dental and vision continuation?**

The DOI guide says the state mini-COBRA law does not require it. Federal COBRA and the contracts may create separate rights, so evaluate each benefit.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Massachusetts DOR, HIRD reporting](https://www.mass.gov/info-details/health-insurance-responsibility-disclosure-hird)
- [Massachusetts DOR, Resident mandate and MCC](https://www.mass.gov/info-details/health-care-reform-for-individuals)
- [Massachusetts DOI, Mini-COBRA guide](https://www.mass.gov/info-details/minicobra-continuation-of-coverage-benefits-guide)
- [Massachusetts, PFML and FMLA health insurance](https://www.mass.gov/info-details/how-pfml-is-different-than-fmla)
- [Massachusetts DOI, Merged market scope](https://www.mass.gov/news/health-insurers-file-2025-rate-requests-for-individual-and-small-group-markets)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Shields Health, Massachusetts locations, public pricing / estimate information](https://go.shields.com/price/)

# Small business health insurance in Colorado

Source: https://www.getprescience.com/small-business-health-insurance/colorado
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-03
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Colorado." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/colorado

Colorado changed its small employer definition to 1–50 employees for 2026. Some existing 51–100 employee groups have a limited transition option. I would confirm the policy’s market classification, compare Colorado Option benefits and networks, and review state continuation before signing a Denver or Boulder renewal.

- **2026 small group rule:** 1–50, with limited transition rules
- **Small group market:** 1–50 employees from 2026
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## The 51–100 employee transition is not five automatic extra renewals

The Colorado Division of Insurance confirmed the change from 1–100 to 1–50 employees for 2026. Under SB24-073, an employer with qualifying small group coverage before January 1, 2026 can elect to retain it for five years after the date of issuance. That wording matters: the statute does not simply grant every affected employer five additional years starting in 2026.

**Questions for an existing 51–100 employee group**

| Decision | Evidence to obtain |
| --- | --- |
| Keep the existing small group arrangement | The qualifying policy’s issuance date and the carrier’s written transition end date. |
| Change small group products | Confirmation that the change stays with the carrier and within the permitted one-metal-level movement above or below the existing plan. |
| Enter the large group market | Acknowledgment that an employer electing this route cannot return to the small group market within the transition period. |

I would have a 65-person employer obtain a side-by-side explanation of its current renewal and any replacement policy. Hold the census and contribution policy constant, then compare benefits, networks and contract obligations. A change in legal market category is not proof that premiums must fall or rise for that particular company. The [enacted bill summary](https://leg.colorado.gov/bills/sb24-073) explains the election restrictions.

## Standardized benefits still require a network review

The Colorado Option uses standardized benefit designs offered by insurance companies. Colorado DOI publishes a 2026 standardized-plan overview and information for small employers. The program helps compare benefit designs; it does not create one universal provider network. Request the exact insurer, product, metal level and Summary of Benefits and Coverage for each proposal.

For an employee living in a mountain community, test the nearest appropriate facility and the route to a specialist before focusing on a Denver office-visit copay. Ask what happens when a referral takes the employee outside the local service area. For a Denver or Boulder team hiring across the state, the right comparison includes practical travel and appointment access, not just a standardized list of benefits.

Do not infer that every service associated with a visit has the same cost sharing as the office visit itself. Have the plan distinguish the visit, laboratory work, imaging and prescriptions. If a benefit summary advertises a waived visit copay, read the conditions and confirm which services are included. That avoids promising a free course of treatment based on one line of the summary.

## Check prior coverage before offering state continuation

Colorado’s continuation statute, C.R.S. § 10-16-108, provides continuation rights under covered employer policies and includes a six-month continuous prior-coverage condition. The employer plan must remain in force for active employees, and the statute addresses Medicare and Medicaid coverage exclusions. Up to 18 months may be available, with early termination conditions. Ask the administrator to coordinate these provisions with federal COBRA rather than treating the state rule as a universal benefit only for a particular headcount.

Keep evidence of prior coverage when changing carriers. A departing employee may have spent part of the qualifying period under the policy that the current contract replaced. Ask the carrier to confirm the election, payment and notice process in writing. A replacement carrier and a new administrative portal should not erase the business’s coverage history.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare Colorado individual plans, including Colorado Option plans, for their home address.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Denver benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Colorado planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

## Check care access where your Colorado team lives

A Denver office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

**Compare coverage across your Colorado employee locations**

Use the actual home ZIP codes and family tiers when requesting the proposal. Review the precise network and access in the places employees live rather than assuming every Colorado plan works the same way.

[Quote my Colorado team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Colorado: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Colorado public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Compass Peak Imaging, Glenwood Springs](https://compasspeakimaging.com/wp-content/uploads/2024/03/Compass-Peak-Imaging-Pricing-Guide-v19.pdf) | MRI without contrast | $900 self-pay | Exam and radiologist reading included; other extras are not itemized. | Undated; no effective date stated. |

The guide specifies self-pay at time of service. Its separate insurance maximum is not a verified negotiated rate and is not used here. The upload path does not establish an effective date.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Colorado employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Colorado teams: one monthly cost set in your quote and a broad national PPO network for Denver, the mountains and remote hires.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Can every 51–100 employee company stay in Colorado small group for five more years?**

No. The election applies to qualifying existing coverage and runs five years after issuance, with restrictions on carrier/product changes and reentry after choosing large group coverage.

**Does the Colorado Option have one network?**

No. Compare the exact insurer and network as well as standardized benefits. Use the current benefit summary to establish which services have which cost sharing.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Colorado General Assembly, SB24-073](https://leg.colorado.gov/bills/sb24-073)
- [Colorado DOI, 2026 small employer definition](https://doi.colorado.gov/news-releases-consumer-advisories/average-premium-increases-of-136-requested-for-small-group-market)
- [Colorado DOI, Colorado Option small group plans](https://doi.colorado.gov/types-of-insurance/health-insurance/health-insurance-initiatives/colorado-option/colorado-option)
- [Colorado General Assembly, Title 10, § 10-16-108](https://olls.info/crs/crs2026-title-10.pdf)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Compass Peak Imaging, Glenwood Springs, public pricing / estimate information](https://compasspeakimaging.com/wp-content/uploads/2024/03/Compass-Peak-Imaging-Pricing-Guide-v19.pdf)

# Small business health insurance in Florida

Source: https://www.getprescience.com/small-business-health-insurance/florida
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-08
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Florida." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/florida

Florida small group coverage generally serves employers with 1–50 employees, but the state’s eligibility and continuation rules deserve a separate review. For a Miami, Orlando or Tampa business, I would check local providers, employee contributions and the mini-COBRA notice process before committing to a plan.

- **Care-price example:** Published cash MRI, not a plan copay
- **Small group market:** 1–50 employees for nongrandfathered coverage
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Check Florida’s employee definition and enrollment rules

Florida Statutes § 627.6699 defines a small employer for nongrandfathered coverage using an average of at least one and no more than 50 employees in the preceding calendar year, with at least one employee on the first day of the plan year and the principal place of business in Florida. The law’s eligible-employee definition uses a normal workweek of 25 or more hours. That is a different question from the federal employer responsibility calculation.

I would ask a business with workers scheduled between 25 and 29 hours to get eligibility confirmed before distributing enrollment materials. Do not import a generic 30-hour rule into every Florida eligibility decision. Give the carrier the real schedule, employment status and ownership facts. The statute also contains legacy provisions, so use the requirements applicable to the current ACA-compliant product rather than treating every older clause as a rule for a new policy.

Ask the insurer to show its participation calculation, treatment of other coverage, contribution requirements and employee enrollment period. Record which employees received an offer, who elected and who waived. An incomplete census can change both the quoted cost and the accepted membership. For seasonal hiring, review the employee’s actual status and coverage dates instead of assuming every seasonal worker falls into the same category.

## Florida mini-COBRA has a beneficiary notice step

**Florida § 627.6692 continuation workflow**

| Step | What the statute requires |
| --- | --- |
| Scope | Qualifying small employer coverage below 20 employees when federal continuation benefits are unavailable. |
| Notify the insurer | The qualified beneficiary gives written notice within 63 days after the qualifying event. |
| Carrier response | The carrier has 14 days after receiving notice to send the required election information by certified mail. |
| Election and initial payment | The beneficiary has 30 days after receipt of the election form to elect and pay the initial premium. |
| Ordinary cost and duration | Up to 18 months, at no more than 115% of the applicable premium, subject to early-ending conditions. |

A qualifying Social Security disability can support an additional 11 months, with its own determination and notice conditions and a premium ceiling of 150% during that extension. Gross misconduct and Medicare or other group coverage can affect eligibility or duration. Use the [Florida statute](https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0627/Sections/0627.6692.html), not a federal notice template, to establish the process.

HR should give the employee the insurer’s address, the coverage end date and a clear explanation that the employee has an action to take. Retain proof of the information supplied. The existence of an administrator does not tell you that the carrier received the beneficiary’s notice. Build a handoff that identifies who follows up when someone reports not receiving an election form.

## Test local and out-of-state access separately

A Florida team may have staff in different metropolitan areas or employees who spend extended periods elsewhere. Ask whether routine care is available in every location. Verify a hospital and the individual physicians involved, then check referrals, outpatient facilities and prescription access. An emergency benefit should not be used to promise ongoing routine care outside a service area.

For an individual coverage allowance, have employees compare actual policies available at their home addresses. A state average, a proposed insurer rate filing and an employer group quote measure different things. None establishes the employee’s net premium after an allowance and any applicable subsidy rules. I would present a completed employee example using confirmed inputs rather than a statewide forecast.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare the individual plans offered in their Florida county or wherever they live.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Miami benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Florida planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

**Get a proposal for your actual Florida employee group**

Use the employee census, family tiers and intended effective date. Compare the written local network and employee contributions rather than choosing from statewide premium benchmarks alone.

[Quote my Florida team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Check care access where your Florida team lives

A Miami office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Florida: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Florida public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Advanced Medical Imaging, Seminole / St. Petersburg](https://www.advancedimg.com/mri-cost-florida) | MRI without contrast | $295 cash | Radiologist report included; special-study applicability and other extras are not itemized. | Undated; no effective date stated. |

Confirm which local facility will honor the published price for the ordered study. The group page does not bind this row to a particular scanner location.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Florida employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Florida teams: a broad national PPO network for Miami, Tampa, Orlando and employees' family members out of state.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Is Florida mini-COBRA capped at the same premium as federal COBRA?**

No. Florida’s ordinary ceiling is 115% of the applicable premium. A qualifying disability extension has a separate 150% ceiling.

**Who initiates Florida mini-COBRA with the carrier?**

The qualified beneficiary must give the carrier written notice within 63 days after the qualifying event. The carrier then supplies election information under the statutory process.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Florida Legislature, § 627.6692 continuation](https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0627/Sections/0627.6692.html)
- [Florida Legislature, § 627.6699 eligibility](https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0627/Sections/0627.6699.html)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Advanced Medical Imaging, Seminole / St. Petersburg, public pricing / estimate information](https://www.advancedimg.com/mri-cost-florida)

# Small business health insurance in Georgia

Source: https://www.getprescience.com/small-business-health-insurance/georgia
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-21
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Georgia." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/georgia

Georgia employers can compare group policies with individual coverage arrangements, but SHOP eligibility and continuation require separate attention. Georgia Access identifies Kaiser Permanente as its only SHOP insurer for plan year 2026, while other insurers offer off-Exchange small group plans. I would check local networks and the full employee budget before choosing.

- **Local price example:** Lithia Springs MRI cash price
- **Small group market:** SHOP: up to 50 full-time equivalents
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Separate Georgia SHOP from the wider group market

Georgia Access lists SHOP eligibility requirements including a valid EIN, up to 50 full-time equivalents, an office or employee worksite in Georgia and the required offer and participation standards. For plan year 2026, it identifies Kaiser Permanente as the only SHOP insurer. That is a statement about SHOP, not a statement that every Georgia group employer has only one insurer to consider.

If you intend to claim the federal small business health care tax credit, Georgia Access directs you to submit a SHOP eligibility application and obtain a determination. It also calls for another application when seeking a second credit year. Confirm the plan’s SHOP status and the tax adviser’s eligibility calculation before treating a projected credit as available cash.

An Atlanta office should not assume a SHOP product fits employees throughout Georgia. Ask whether every employee’s address is eligible and whether routine providers are available near home. An off-Exchange policy might be worth comparing if it addresses an access problem, even if the tax-credit analysis changes. Put the access tradeoff and the employer’s net cost on the same comparison sheet.

The [Georgia Access SHOP page](https://georgiaaccess.gov/small-business-health-options-program/) supplies the current enrollment route. Work with an agent or insurer on the actual effective date and required documents. A marketplace eligibility determination does not replace the insurer’s confirmation that coverage has started for each employee and dependent.

## A short continuation period still needs a deliberate handoff

Georgia OCI explains state continuation under O.C.G.A. § 33-24-21.1 as a short bridge after loss of employment coverage. Its guidance describes the remainder of the paid termination month followed by continued coverage paid in advance at the full employer-and-employee premium, without federal COBRA’s extra 2% charge. Do not describe this as costing only the employee’s old payroll deduction.

Before promising a duration, have the insurer check prior coverage, the reason coverage ended, replacement coverage and any special statutory rights. The general state bridge is commonly described as three additional months, but eligibility must be established from the policy and governing law. OCI’s business insurance guide also discusses conversion rights; conversion to an individual policy is distinct from continuing group coverage. The older OCI continuation bulletin is useful for that explanation; its temporary pandemic cancellation relief is not a current benefit promise.

A short bridge makes it especially important to review the individual market promptly. Give the worker the coverage end date, insurer contact and special-enrollment information in the same departure packet. Keep proof that any requested state continuation was received and that payment instructions were supplied. Do not assume that an employee’s final payroll deduction pays the following month’s full premium.

## Test Atlanta, Savannah and remote-worker scenarios

For a business with an Atlanta headquarters and an employee in Savannah, ask the insurer to confirm both eligibility and routine-care access at the second address. The same check belongs in a hiring process for a worker in a neighboring state. A national brand can sell different networks, so compare the actual plan identifier rather than the logo.

I would ask employees to test an important physician, a hospital and a recurring prescription privately. For a worker already in treatment, obtain the transition-of-care procedure before changing policies. For an individual allowance, compare available individual policies at each address and document the remaining employee premium. Neither a statewide average nor the founder’s own quote establishes the cost for another household.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare Georgia Access plans and other individual coverage for their home address.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Atlanta benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Georgia planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

## Check care access where your Georgia team lives

A Atlanta office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

**Compare a proposal for your Georgia employee locations**

Use the actual employee home ZIP codes and family tiers. Keep the contribution policy and coverage date constant when comparing the written benefits and employer cost.

[Quote my Georgia team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Georgia: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Georgia public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [ImageLink, Lithia Springs](https://imagelinkmri.com/book-at-lithia-springs/) | Single-body-part MRI without contrast | $399 cash | Radiologist reading report included; contrast and additional body parts are outside this offer. | Undated; no effective date stated. |

The Lithia Springs offer requires payment at time of service. Ask for a new written total if the order involves contrast, more than one body part or another service.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Georgia employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Georgia teams in Atlanta, Savannah and beyond: one monthly cost set in your quote and a broad national PPO network.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Is Kaiser Permanente the only Georgia small group insurer?**

Georgia Access identifies it as the only SHOP insurer for plan year 2026. The same page says other insurers offer off-Exchange small group plans. Availability depends on the actual product and location.

**Is Georgia continuation charged at my former payroll deduction?**

No. OCI describes payment of the full employer-and-employee premium in advance, without an extra 2% state-continuation charge. Ask the insurer to confirm eligibility and the amount due.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Georgia Access, SHOP eligibility and 2026 insurer](https://georgiaaccess.gov/small-business-health-options-program/)
- [Georgia OCI, State continuation explanation in Bulletin 20-EX-5](https://oci.georgia.gov/document/bulletin/bulletin-20-ex-5-loss-health-insurance-due-covid-19/download)
- [Georgia OCI, Business insurance guide](https://oci.georgia.gov/document/document/guide-business-insurance/download)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [ImageLink, Lithia Springs, public pricing / estimate information](https://imagelinkmri.com/book-at-lithia-springs/)

# Small business health insurance in Illinois

Source: https://www.getprescience.com/small-business-health-insurance/illinois
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-16
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Illinois." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/illinois

Illinois employers should compare small group benefits alongside state continuation and current coverage mandates. The state continuation statute can apply to covered insured group policies regardless of employer size. I would check the exact Chicago or downstate network, the employee contribution and the policy’s renewal date before selecting coverage.

- **Price-sheet date:** January 1, 2026; confirm current terms
- **Small group market:** Generally 1–50 employees
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Illinois continuation is not just federal COBRA for smaller groups

Under 215 ILCS 5/367e, qualifying employees losing covered group insurance through termination or reduced hours can continue hospital, surgical and major medical coverage for themselves and eligible dependents. The ordinary prior-coverage requirement is three continuous months, including qualifying replacement coverage. The ordinary maximum is 12 months, subject to statutory termination conditions, and the premium cannot exceed the applicable group rate.

The employer must provide written notice within 10 days of the event, with a copy to the insurer. The employee requests continuation within 30 days after the later of the event or the notice, subject to the statute’s 60-day outside limit after the event. The law also prevents an insurer from denying continuation solely because the employer failed to notify the employee. Missing an employer deadline is not a sound basis for HR to declare that the person has no rights.

Medicare, other group coverage and specified employment-related felony or theft circumstances can affect eligibility. Separate spousal-continuation provisions may apply after divorce, death or qualifying retirement. Have the insurer evaluate those events separately; the 12-month employment-termination rule is not a complete description of every Illinois dependent’s rights.

For a business approaching 20 employees, ask the administrator to coordinate federal COBRA and state continuation. Do not simply add the periods together or assume one notice satisfies both laws. For a self-funded proposal, establish whether state insurance continuation applies at all. The plan’s legal structure and governing policy matter more than the administrator’s brand name.

## Read the 2026 infertility provision using the policy date

Illinois changed the employee-count language in its infertility coverage law. Section 356m(a-5) applies to group accident and health policies providing pregnancy-related benefits that are issued, amended, delivered or renewed in Illinois on or after January 1, 2026. It does not retain the old more-than-25-employees threshold. The earlier version and the new provision appear together in the [Illinois Insurance Code](https://ilga.gov/legislation/ILCS/details?ActID=1249&ActName=Illinois+Insurance+Code.&ChapAct=215+ILCS+5%2F&Chapter=&ChapterID=22&MajorTopic=&Print=True&SeqEnd=121900000&SeqStart=101300000).

I would ask the carrier to identify the governing policy, renewal date and applicable benefit provision. Employees need the covered services, authorization process, network facilities and cost sharing, not an assurance that every fertility expense is paid. Do not carry forward a retrieval limit from an old benefits presentation without checking the current contract and law. State insurance mandates also should not be presented as automatically governing every employer plan nationwide.

## Compare Chicago and downstate needs without using statewide price shortcuts

A Chicago company hiring downstate or across the Indiana or Wisconsin border should verify the employee’s actual home area. Ask whether a network is available for routine appointments and which hospitals participate. For an employee using an academic medical center, confirm the facility, physician group and proposed service rather than relying on the center’s name alone.

Get Covered Illinois is the state’s official ACA Marketplace. Employees considering individual coverage should use the current state enrollment route and compare plans for their own address. The Illinois Department of Insurance’s Uninsured Ombudsman Program can help people who lack coverage or are about to lose it explore options. Give departing staff that resource alongside continuation information, without promising that they qualify for financial assistance.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare the individual plans available where they live in Illinois or another state.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Chicago benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Illinois planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

**Price coverage for your Illinois employee group**

Use the census for Chicago-area and other employee locations alike. Compare the written network, contribution policy and family costs for the people being covered.

[Quote my Illinois team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Check care access where your Illinois team lives

A Chicago office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Illinois: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Illinois public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Bright Light Medical Imaging, Chicago-area centers](https://brightlightimaging.com/assets/uploads/2025/11/Temproary2026SELF_PAY_PRICING_2026.pdf) | MRI without contrast | $345 self-pay | Professional fee is not separately defined; specialized MRI studies have separate rows. | Effective January 1, 2026, for appointments on or after that date. |

Confirm the exact center and study before booking. The group sheet does not identify a scanner location for this row or establish that every specialized noncontrast study costs the same.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for an Illinois employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Illinois teams in Chicago and downstate: one broad national PPO network, simple copays and 24/7 care navigation.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Does Illinois continuation always last 12 months?**

Twelve months is the ordinary employment-termination maximum under § 367e, with eligibility and early termination conditions. Separate spousal rules and federal COBRA may apply.

**Does the old Illinois infertility threshold still apply to every 2026 policy?**

No. Section 356m(a-5) removes the more-than-25-employees wording for covered policies issued, amended, delivered or renewed on or after January 1, 2026. Confirm the policy’s scope and date.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Illinois General Assembly, §§ 367e, 367.2 and 356m](https://ilga.gov/legislation/ILCS/details?ActID=1249&ActName=Illinois+Insurance+Code.&ChapAct=215+ILCS+5%2F&Chapter=&ChapterID=22&MajorTopic=&Print=True&SeqEnd=121900000&SeqStart=101300000)
- [Illinois DOI, Uninsured Ombudsman Program and Get Covered Illinois](https://idoi.illinois.gov/consumers/consumerinsurance/health/uninsured-ombudsman-program.html)
- [CMS, Small group market rules](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/state-rating)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Bright Light Medical Imaging, Chicago-area centers, public pricing / estimate information](https://brightlightimaging.com/assets/uploads/2025/11/Temproary2026SELF_PAY_PRICING_2026.pdf)

# Small business health insurance in Arizona

Source: https://www.getprescience.com/small-business-health-insurance/arizona
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-26
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "Small business health insurance in Arizona." Prescience, October 28, 2026. https://www.getprescience.com/small-business-health-insurance/arizona

Arizona small employers need to check both group eligibility and state continuation coverage. Mini-COBRA generally reaches qualifying insured groups below 20 employees, but prior coverage, notices and exceptions matter. I would compare the written premium, Phoenix or Tucson provider access and the departure process before choosing a plan.

- **Price-sheet limitation:** Radiologist professional fees excluded
- **Small group market:** Federal 1–50; confirm Arizona eligibility
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Arizona continuation needs its own checklist

Federal ACA small group rules generally use 1–50 employees, while Arizona’s A.R.S. § 20-2301 contains a two-to-50 eligible-employee definition. Ask the carrier which definition and eligibility requirements govern the proposed coverage. Neither shorthand establishes that a founder-only business can enroll. The continuation statute has its own separate one-to-fewer-than-20 definition.

**Arizona mini-COBRA under A.R.S. § 20-2330**

| Question | Rule to check |
| --- | --- |
| Which employers? | An average of at least one but fewer than 20 eligible employees in the preceding calendar year; covered plans issued or renewed after December 31, 2018. |
| Prior coverage | The employee must have been covered for at least three months before the qualifying event. |
| Ordinary duration and cost | Up to 18 months; full premium plus an employer administrative fee of no more than 5%. |
| Election and initial payment | Written election within 60 days after the notice; first premium within 45 days after election. |
| Important exclusions | The statute does not apply when federal continuation is available or the person seeking continuation is Medicare-eligible. |

The statute also addresses dependent disability extensions, second qualifying events and military service. Those are not an unconditional promise of 29 or 36 months to every former employee. Have the administrator apply the relevant subsection to the beneficiary and event. Nonpayment, other coverage and the employer ending its plan can affect continuation. Read [Arizona’s continuation statute](https://www.azleg.gov/ars/20/02330.htm) alongside the insurer’s notice.

I would set an internal deadline as soon as HR learns coverage will end. Record the event, coverage history, address, notice date, election and payment. The state law contains specific notice timing and a remedy for defective notice; copying a federal COBRA template without checking those provisions is a poor substitute for a compliant Arizona workflow. If the business is approaching the federal COBRA threshold, ask which program applies before telling employees what they can elect.

## Compare a Phoenix office with a Tucson or rural hire

Suppose a Phoenix business hires an employee in Tucson while keeping its existing policy. Do not assume that a familiar insurer name means the same specialists and facilities are available in both places. Ask the insurer whether the home address is eligible, which network applies and how referrals work. Then let the employee check current providers privately. This is an enrollment scenario, not a claim about any particular carrier’s network.

A second useful test is a worker who spends part of the year outside Arizona. Ask separately about routine appointments, urgent care, emergency care and prescription refills. Check whether virtual visits can be used from the employee’s location and whether the plan has a route to in-person follow-up. A telehealth feature does not answer the entire access question.

Arizona DIFI provides mental-health coverage and appeal resources. When a plan denies a behavioral-health service, collect the denial, the benefit provision cited and the appeal instructions. Ask the plan to explain the reason rather than assuming every denial reflects a benefit exclusion. The employer can help the employee find the right contact without asking them to disclose sensitive treatment details to a manager.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare the individual plans offered in their Arizona county or wherever they live.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Phoenix benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Arizona planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

## Check care access where your Arizona team lives

A Phoenix office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

**Compare coverage for your Arizona employee locations**

Use actual home ZIP codes and family tiers in the census. Keep the exact network and employee contribution visible when comparing proposals across Phoenix, Tucson and other locations.

[Quote my Arizona team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Arizona: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Arizona public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [HonorHealth outpatient imaging centers, Phoenix](https://www.honorhealth.com/sites/default/files/documents/patient-and-visitors/honorhealth-average-pricing-mri.pdf) | Lumbar spine MRI without contrast, CPT 72148 | $664 provider-published average prompt-pay price | Radiologist professional fees excluded; this is not an all-in total. | Undated older sheet; current validity unconfirmed. |

HonorHealth defines prompt-pay as full payment in advance. This is the provider’s own average self-pay figure, not an Arizona market average or an exact facility quote. Not all services are available at every location. Obtain a current facility estimate plus the separate radiologist fee.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for an Arizona employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Arizona teams in Phoenix, Tucson and rural areas: a broad national PPO network plus 24/7 navigation that finds providers near each employee.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Does Arizona mini-COBRA always last 18 months?**

Eighteen months is the ordinary maximum, subject to early termination. Extensions have their own conditions. Federal continuation availability and Medicare eligibility can exclude a person from this state program.

**Is Arizona continuation priced at the old payroll deduction?**

No. The ordinary charge can include the entire group premium, including the former employer contribution, plus an employer administrative fee of up to 5%.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Arizona Legislature, Continuation of small group coverage](https://www.azleg.gov/ars/20/02330.htm)
- [CMS, State small group market rating rules](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/state-rating)
- [Arizona DIFI, Mental health parity and appeals](https://difi.az.gov/mental-health-parity)
- [Arizona Legislature, § 20-2301 definitions](https://www.azleg.gov/ars/20/02301.htm)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [HonorHealth outpatient imaging centers, Phoenix, public pricing / estimate information](https://www.honorhealth.com/sites/default/files/documents/patient-and-visitors/honorhealth-average-pricing-mri.pdf)

# Small business health insurance in Michigan

Source: https://www.getprescience.com/small-business-health-insurance/michigan
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-30
Updated: 2026-10-30
Cite as: Aditya Jain, MD. "Small business health insurance in Michigan." Prescience, October 30, 2026. https://www.getprescience.com/small-business-health-insurance/michigan

Michigan small employers should compare the exact group policy, provider network and coverage-ending process. Do not assume a business below the federal COBRA threshold provides a guaranteed continuation period. I would give employees clear effective dates and replacement-coverage information alongside the plan comparison.

- **Local estimate:** Request current imaging and reading fees
- **Small group market:** Small group: up to 50 employees
- **Budget examples:** Illustrative assumptions, not quotes
- **Compare before enrolling:** Network, payroll cost and continuation

## Start with the policy and the regulator’s role

Michigan DIFS describes small group rate review as applying to employer groups of up to 50 employees. Small employers can buy group health and dental coverage through a licensed agent or directly from an insurer. A state rate filing is a regulatory review of the product’s rates; it does not tell a particular employer the contribution it should choose or the cost of its final enrolled roster.

DIFS also distinguishes insured coverage from employer self-funded plans. It generally does not regulate the employer’s self-funded plan, although it may have authority over the administrator. For many private employer plans, the federal Department of Labor is the relevant benefits regulator. Identify the actual coverage and administrator before deciding where an enrollment or claim complaint belongs.

I would request the policy or plan document, Summary of Benefits and Coverage, network identifier and an explanation of the claims appeal process for each finalist. A company logo on an identification card can identify an administrator without establishing who is legally responsible for the plan’s benefits. That distinction matters when the employer is comparing arrangements with different payment obligations.

Avoid ranking Michigan plans by an unverified state average. Compare the same census, coverage tiers and effective date. Then ask the insurer how a future hire in another part of the state would be enrolled. A proposal can satisfy the current office roster but need additional work as the company recruits outside its original service area.

## Below the COBRA threshold, confirm the contract before promising continuation

DIFS’s consumer guidance points workers losing employer coverage toward federal COBRA when applicable, individual insurance, another employer’s plan and public coverage for those eligible. For a Michigan employer below the federal COBRA threshold, do not promise a fixed mini-COBRA period based on another state’s rules. Ask the insurer whether the contract includes continuation or conversion and obtain the terms in writing.

A 12-person Ann Arbor company should make that check before a departure occurs. Confirm the active coverage end date, any contractual option and the employee’s route to replacement insurance. The employee should investigate Marketplace enrollment promptly after an anticipated loss of coverage. The fact that a company would like to keep paying premiums does not establish that the insurer permits the former employee to remain enrolled indefinitely.

For a reduction in hours, first review the policy’s eligibility terms and any applicable leave protection. If coverage ends, document the reason and date. If it remains active, confirm how contributions will be collected. Do not use a payroll system’s default termination setting as the decision-maker for insurance eligibility.

DIFS’s [employer group coverage guidance](https://www.michigan.gov/difs/consumers/insurance/health-insurance/individual/employer-group) provides a starting point for employees seeking help. Include that resource in the departure packet along with the administrator’s contact. Avoid assuring a worker that a public program or subsidy will accept them before their eligibility has been assessed.

## Test Detroit, Ann Arbor and northern Michigan needs

A Detroit or Ann Arbor team can have remote staff who use care elsewhere in Michigan. Ask employees to check the providers and hospitals near their homes, and verify that those providers participate in the exact offered network. An insurer’s statewide presence does not establish access under every product. For a worker who crosses state lines for appointments, ask how routine out-of-state care is handled.

If an employee uses a specialist at a large health system, verify the physician’s location and the facility separately. Ask whether a referral or authorization must be renewed after a plan change. Have employees check recurring prescriptions against the precise formulary. These are practical access checks, not assumptions that one Michigan network is inherently broader or better than another.

I would resolve those questions before presenting a lower premium as a better benefit. Ask the insurer to show where a worker can receive care when the preferred provider is unavailable. Then let employees see both their payroll contribution and the remaining care costs. The quality of that explanation often determines whether enrollment is understandable.

## Count employees before comparing quotes

I separate three questions: whether the business can buy a small group policy, who is eligible to enroll, and whether federal employer responsibility applies. Those questions can use different counting rules. Send the broker a workforce census and the prior year’s payroll totals, including part-time staff and related businesses. Ask for a written explanation of the market classification. The number of people who accept insurance is not a substitute for the employer count.

Under the IRS rules, an applicable large employer generally averaged at least 50 full-time employees, including full-time equivalents, in the preceding calendar year. Related employers may need to aggregate their workforces, and a seasonal-worker exception can apply. This determines whether the employer shared responsibility provisions apply; it does not mean every business with 50 names on one payroll must immediately buy a particular policy. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) as a starting point and have payroll review the underlying hours.

For SHOP, HealthCare.gov requires at least one qualifying employee other than owners and specified family members. A company consisting only of founders should resolve eligibility before asking for prices. Do not label a contractor an employee merely to create a group. Give the carrier the actual ownership and employment facts, and ask which documents it needs. Participation and contribution requirements also need written confirmation for the specific product and enrollment date.

## Choose the arrangement around the work you need done

**A practical benefits decision table**

| Option | When I would consider it | What to resolve first |
| --- | --- | --- |
| Fully insured group coverage | A common employer benefit with a defined insurer contract. | Exact network, covered services, contribution policy and renewal terms. |
| Individual coverage HRA (ICHRA) | A defined employer allowance toward qualifying individual coverage. | Plans at every home address, subsidy effects, employee classes and administration. |
| PEO benefits offer | The business also wants the employment services in the PEO contract. | All service fees, benefits eligibility, cancellation terms and the replacement plan if you leave. |
| Other group proposals | The written terms address an identified problem with the current offer. | Who owes payments, maximum employer obligations, exclusions and obligations after termination. |

I would not choose an arrangement from its headline monthly price. Request the full agreement and a benefits summary. For a PEO, separate the insurance charge from the services contract and establish what happens to coverage when the relationship ends. For any proposal with employer claims obligations, ask for a maximum-cost illustration, renewal provisions and treatment of claims submitted after the contract ends. These are due-diligence questions, not a prediction that one approach will save money.

An ICHRA requires qualifying individual coverage or Medicare and has rules for employee classes and notices. An employee offered an affordable ICHRA generally cannot receive a Marketplace premium tax credit. If the offer is unaffordable, opting out may allow a credit if the employee otherwise qualifies. Do not add a projected subsidy to the allowance as though both were automatically available. Compare the employee’s remaining premium and care costs using the actual individual policy and household circumstances.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If the ICHRA row fits, Choice helps each employee compare the individual plans available where they live in Michigan or another state.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

Ask the tax adviser to screen the small business health care tax credit before budgeting it. It generally requires fewer than 25 full-time equivalents, wages below the applicable tax-year limit and a qualifying employer contribution. The maximum is generally 50% of eligible premiums for taxable employers or 35% for eligible tax-exempt employers, over a two-consecutive-tax-year credit period. SHOP is generally required, but the IRS instructions contain limited exceptions where SHOP coverage is unavailable. A credit is not automatic just because a plan is called small business coverage.

## An illustrative Ann Arbor benefits budget

**Twelve employees with two coverage tiers**

This is an illustrative Michigan planning exercise, not a carrier quote, survey average or forecast. Assume eight employees choose employee-only coverage at $700 monthly and four choose family coverage at $1,900. The employer pays 80% of both tiers. Fees, tax effects and medical spending are excluded.

- Employee-only premiums: 8 × $700 = $5,600 monthly
- Family premiums: 4 × $1,900 = $7,600 monthly
- Total premiums: $13,200 monthly; $158,400 annually
- Employer contribution, 80%: $10,560 monthly; $126,720 annually
- Employees collectively pay, 20%: $2,640 monthly; $31,680 annually
- Individual monthly payroll contribution: $140 employee-only; $380 family

The employer budget and employee contributions reconcile to the total premium. Replace every premium input with the written quote and rerun the calculation when the enrolled roster changes.

Now test an assumed 10% premium increase with the same people and benefits. Total premiums become $14,520 monthly. Maintaining the 80% contribution raises the employer cost to $11,616 and the combined employee cost to $2,904. Freezing the employer contribution at $10,560 instead leaves employees paying $3,960, a 50% increase in their combined contribution. Neither scenario is a prediction. It shows why a renewal percentage alone does not explain the impact on paychecks.

Build a second worksheet for each household’s care exposure. Record annual payroll contributions, the deductible, visit copays, prescription costs and the in-network out-of-pocket maximum. Premiums are separate from that maximum, and out-of-network or excluded services may add costs outside it. Have the insurer explain which expenses count. Compare the same services under each offer; a lower deductible alone does not establish that the entire plan is less expensive.

**Get a proposal for your Michigan employee group**

Use the current census and intended coverage date. Review the actual network and employee costs for the locations where the team lives rather than relying on a statewide plan label.

[Quote my Michigan team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Check care access where your Michigan team lives

A Ann Arbor office address does not tell you where the team receives care. Map home ZIP codes, regular work locations and out-of-state dependents before choosing a network. Give employees a private way to identify important doctors and prescriptions. The employer needs enough information to compare access without collecting diagnoses in a shared enrollment spreadsheet. A carrier logo alone is not a network confirmation.

- Verify the exact product and network name with both the insurer and the provider. Include the physician’s location, medical group and facility, because a directory entry for one location may not answer the question for another.
- Ask how routine care works away from home. Emergency coverage does not establish access to an ordinary follow-up appointment for a remote employee or a child at college.
- Check the precise drug, dose and formulation on the formulary. Record the tier, required pharmacy, prior authorization and any step-therapy requirements before comparing prescription copays.
- For ongoing treatment, ask whether transition-of-care arrangements are available, how to request them and whether existing authorizations transfer. Do not promise that every current provider will remain covered.
- Save dated answers and reference numbers. Give employees an escalation contact for conflicting directory information and a process for reporting an enrollment problem.

I would test a routine appointment, a specialist visit and a prescription refill against each finalist. Ask what happens if no participating provider can offer an appointment within a reasonable distance or time. Get the plan’s process for arranging access rather than assuming the employee can use any doctor at in-network rates. Those checks make a comparison useful for employees whose needs differ from the person selecting the plan.

## Launch the plan with a calendar and an accepted roster

1. **Prepare the quote request** Use one census and effective date for all proposals. Include coverage tiers, locations and waivers. Have the broker identify missing eligibility evidence before employees start making elections.
2. **Set the contribution policy** Show employer and employee costs for every tier. Ask the administrator to review eligibility and contribution rules, including any proposed differences between employee groups. Identify payroll deductions and any separate service charges.
3. **Distribute the enrollment packet** Give employees the Summary of Benefits and Coverage, network details, payroll costs, enrollment deadline and a private contact for questions. Explain how they can decline coverage and document their election.
4. **Confirm the start date** Get written acceptance, the effective date, payment instructions and the accepted enrollment roster. Reconcile missing spouses, children and new hires before ending existing coverage. Do not equate an application submission with confirmed insurance.
5. **Audit the first invoice** Match insurer billing to accepted elections and payroll deductions. Track corrections until the insurer confirms them. Keep a record of who owns enrollment, notices, billing and employee support after launch.

Start several weeks before the proposed effective date as a planning choice, then work backward from the carrier’s actual deadlines. Federal waiting-period rules generally prohibit a wait exceeding 90 days after someone is otherwise eligible. A rule that starts coverage on the first of the month after 90 days can exceed that limit. Ask the administrator to test real hire dates, including month-end hires, rather than relying on a short handbook phrase.

At renewal, keep the census constant for the first comparison so you can distinguish a rate change from hiring, dependent additions or a new contribution policy. Ask whether accumulated deductibles receive credit when switching midyear and obtain the answer in writing. Send employees a clear explanation of the effective date and any new identification cards, pharmacies or referral procedures. Reconcile the old policy’s final invoice as carefully as the new policy’s first one.

## Handle departures, Medicare and family changes separately

Federal COBRA generally covers private-sector group health plans of employers with at least 20 employees on more than half of the prior year’s typical business days. Part-time workers count fractionally. Termination other than gross misconduct or a reduction in hours generally supports up to 18 months; other events and extensions can change the period. The usual premium ceiling is 102% of total plan cost, not 102% of the employee’s former payroll deduction. Government and church arrangements require separate scope review.

Give a departing employee the actual coverage end date, the continuation administrator’s contact and the complete premium. Loss of qualifying job-based coverage generally creates a Marketplace special enrollment opportunity during the 60 days before or after the loss. The employee should compare effective dates, networks and accumulated deductibles promptly. Voluntarily dropping continuation later generally does not create another special enrollment period by itself. Do not tell someone to wait for the continuation packet before investigating replacement coverage.

Medicare coordination depends on why the person qualifies for Medicare, current employment, employer size and sometimes multiemployer-plan rules. For age-based Medicare with current-employment coverage, Medicare generally pays first below 20 employees and the group plan generally pays first at 20 or more. Disability and end-stage renal disease use different rules. Have the employee confirm enrollment timing and payment order with Medicare and the plan; a blanket instruction to delay Part B can create a costly gap.

Marriage, birth, adoption, reduced hours and a dependent moving away can require different enrollment actions. Tell employees where to report a change and ask the administrator for the applicable deadlines. A payroll update alone does not update an insurer’s membership file. For leave, determine whether federal or state protections require continued benefits before processing the worker as a termination. State continuation also depends on the policy’s jurisdiction and funding, so the headquarters address cannot answer every case.

## Michigan: a local procedure price and estimate checklist

Public self-pay examples help identify questions for a provider. They are not negotiated insurance rates, state market averages, comparable prices across states or estimates of insured out-of-pocket spending. Confirm a current written total before booking; a published amount is not a guarantee.

**Michigan public local MRI pricing evidence (USD); limitations apply**

| Provider / primary source | Procedure | Published cash price / availability | Includes, excludes and unknowns | Effective date / status |
| --- | --- | --- | --- | --- |
| [Novello Imaging, Traverse City](https://www.novelloimaging.org/about/pricing) | Lumbar spine MRI without contrast, CPT 72148 | No confirmed current cash amount shown | Reported provider terms include radiologist reading and payment in full at service; reconfirm current scope. | Historical sheet effective January 1, 2025; current validity unconfirmed. |

The supplied research found only indexed primary text for the historical 2025 sheet; direct retrieval failed. The pricing page also could not be retrieved during this edit. Do not use that historical amount as a current rate. Request a current written estimate identifying the procedure, facility, reading fee and payment terms.

The [January 2025 historical pricing sheet](https://www.novelloimaging.org/application/files/8217/3559/2808/NovelloImagingPricingJan12025v6.pdf) is an indexed-only research reference, not confirmation of a current offer.

What to ask for an all-in written estimate:

- Which exact facility, procedure or CPT, body part and contrast protocol does the estimate cover?
- Does the total include the scan, facility charge and radiologist interpretation? Itemize contrast, sedation, labs and any other separate bills.
- Am I eligible for this self-pay offer, when is payment due, and how long is the written price valid? What changes could increase the total?
- If using insurance instead, ask the plan about network status, authorization and a separate benefit-based estimate. Ask whether a self-pay purchase receives any deductible credit; do not assume it does.

## Where Prescience fits for a Michigan employer

At Prescience, we design and run your company’s health plan, from setup and enrollment to claims, compliance and COBRA. The plan offers an effective $0 deductible, simple copays shown before a visit, a low out-of-pocket maximum, a broad national PPO network plus providers we contract with directly, and 24/7 physician-led care navigation. The care team helps find providers, book appointments and explain costs up front.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For Michigan teams from Detroit and Ann Arbor to the north: one broad national PPO network, simple copays and 24/7 care navigation.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

I would compare the written Prescience offer with the same census, contribution policy and provider checklist used for other options. Your company can keep its payroll provider, and the plan can start midyear. A local group policy may be the better fit if it meets the team’s provider needs and budget. An individual coverage allowance may fit employees who prefer individual policies and understand the enrollment work. Make the decision from the actual benefits and terms available to your company.

## Frequently asked questions

**Can a Michigan employer below 20 employees promise federal COBRA?**

First determine whether federal COBRA applies using its counting rules. If it does not, ask the insurer about contractual continuation or conversion; do not assume another state’s mini-COBRA rules apply.

**Does DIFS regulate every employer health plan?**

No. DIFS distinguishes insured products from employer self-funded plans and explains that it may regulate an administrator without regulating the underlying employer plan.

**Are the budget examples actual insurance prices?**

No. The premiums and renewal percentage are illustrative assumptions, not observed state averages, vendor prices or quotes. Replace them with written offers for the same enrolled population and start date.

**Does the small group definition determine whether the ACA employer rules apply?**

No. Market eligibility and federal applicable large employer status need separate review. The IRS generally uses the preceding year’s average of full-time employees plus full-time equivalents and aggregates certain related employers.

**Can I compare plans using only the monthly premium?**

Include payroll deductions, cost sharing, networks, prescription coverage and any separate fees. A low premium can leave more cost with employees when they receive care.

**Can an ICHRA employee also receive a Marketplace subsidy?**

An affordable ICHRA offer generally prevents a premium tax credit. An employee with an unaffordable offer may qualify after opting out, if otherwise eligible. Have the Marketplace assess the employee’s circumstances.

**How should a remote employee check the network?**

Confirm the exact plan, provider location, facility and routine-care access near the home address. A national insurance brand or emergency benefit does not by itself establish a local network.

**Can we start coverage in the middle of the year?**

Group coverage may start midyear subject to the insurer’s enrollment requirements. Confirm the effective date, accepted roster and any deductible credit before cancelling existing coverage.

**What should employees do when job-based coverage ends?**

Review continuation and replacement coverage at the same time. Loss of qualifying coverage generally supports a Marketplace special enrollment period, but election and payment deadlines differ between programs.

**What should an employee approaching Medicare eligibility do?**

Confirm Medicare enrollment timing and which coverage pays first. Age-based coverage, disability, end-stage renal disease and multiemployer coverage can produce different answers.

## Sources

- [Michigan DIFS, Employer group coverage](https://www.michigan.gov/difs/consumers/insurance/health-insurance/individual/employer-group)
- [Michigan DIFS, Switching health plans](https://www.michigan.gov/difs/consumers/Insurance/health-insurance/individual/switching)
- [Michigan DIFS, Small group rate review](https://www.michigan.gov/difs/news-and-outreach/faq/insurance/health-coverage-rate)
- [IRS, Determining applicable large employer status](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [HealthCare.gov, SHOP eligibility](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [Department of Labor, A worker’s guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/workers-guide-health-benefits-cobra)
- [HealthCare.gov, Individual coverage HRAs](https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/)
- [IRS, Form 8941 instructions and SHOP exceptions](https://www.irs.gov/instructions/i8941)
- [HealthCare.gov, Special enrollment periods](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)
- [Medicare, Who pays first](https://www.medicare.gov/health-drug-plans/coordination/who-pays-first)
- [Department of Labor, Waiting-period eligibility guidance](https://www.dol.gov/node/63757)
- [HealthCare.gov, Out-of-pocket maximum definition](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)
- [Novello Imaging, historical January 2025 price sheet (indexed-only; current rate unconfirmed)](https://www.novelloimaging.org/application/files/8217/3559/2808/NovelloImagingPricingJan12025v6.pdf)
- [Novello Imaging, Traverse City, public pricing / estimate information](https://www.novelloimaging.org/about/pricing)

# Small business health insurance in Connecticut: full guide for 2027

Source: https://www.getprescience.com/small-business-health-insurance/connecticut
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-29
Updated: 2026-10-29
Cite as: Aditya Jain, MD. "Small business health insurance in Connecticut: full guide for 2027." Prescience, October 29, 2026. https://www.getprescience.com/small-business-health-insurance/connecticut

Connecticut employers should compare group coverage and individual reimbursement options while checking the state’s new small-business incentive and continuation requirements.

- **Planning year:** 2027
- **Local focus:** Connecticut employer coverage
- **Rates in examples:** Hypothetical, not market quotes
- **Before choosing:** Confirm policy and network eligibility

## Evaluate the new Connecticut incentive without assuming eligibility

Connecticut announced a small-business ICHRA tax credit in September 2026. The announcement describes eligible businesses with 50 or fewer employees, up to $1,000 per employee per year, and the first two consecutive years of offering an ICHRA through Access Health CT’s BusinessPlus platform. I would have the accountant and platform confirm all applicable conditions before including any credit in a 2027 budget.

The maximum described in an announcement is not an automatic payment to every small business. Verify the required enrollment route, contribution and filing requirements, qualifying employees and timing. Keep the gross employer contribution budget separate from the expected tax benefit. If the company cannot afford the benefit without an immediate credit, resolve the cash timing before making the employee offer.

## Compare the incentive with the employee’s actual options

An incentive can improve the employer’s economics without making every individual policy a good fit for every employee. Compare the local network, prescriptions and remaining premium for representative households. Ask how employees receive the offer information needed to evaluate marketplace assistance. A tax credit to the company should not be presented as a guarantee of a particular household’s net insurance cost.

Obtain a conventional group proposal too. Compare its employer contribution, employee tiers, administration and renewal terms with the reimbursement route. If a PEO is involved, read the employment and benefit responsibilities carefully. Connecticut publishes a PEO disclosure explaining that the co-employment relationship can change how the health coverage is provided. Review the actual contract rather than assuming it is simply the same small-group plan through another website.

**Compare coverage for your Connecticut team and commuters**

Use employee home ZIP codes and family tiers, including people living across state lines. Keep the contribution policy and effective date the same across the written proposals.

[Quote my Connecticut team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Account for Connecticut’s longer insured continuation period

The Connecticut Insurance Department explains that state law expanded continuation to a maximum of 30 months for qualifying Connecticut fully insured employer plans of all sizes. Federal COBRA and state continuation have different applicability rules, so ask the administrator which requirements govern the actual policy and event. Do not copy an 18-month-only summary into every Connecticut departure packet.

Confirm the beneficiary’s eligibility, the notice, payment obligations and conditions that can end coverage earlier. The former employee may need to pay the full premium rather than the old payroll deduction. Keep the election and payment process documented. If the employer changes its active plan during continuation, obtain a clear explanation of how that change affects the continuing members.

## Check New York and Massachusetts care needs

A hypothetical Stamford employer may have staff who receive care in New York, while a Hartford team may have different regional patterns. Test the actual network for those locations. A policy’s Connecticut availability does not establish routine access at every neighboring hospital. Include dependent care and employees who relocate during the year in the review.

I would retain the network checks and the incentive eligibility analysis with the 2027 proposal. Those are separate reasons for the decision and can change at different times. At renewal, confirm both again instead of assuming that a prior-year tax result or provider directory remains valid. Give employees a clear explanation of any changed network or contribution before they elect coverage.

## Connecticut employer budget example

**Connecticut employer budget example**

Illustrative only: A hypothetical employer models six employee-only enrollments without assuming any state tax credit. Assume 6 enrolled employees, a $790 monthly employee-only premium and a $600 monthly employer contribution per employee.

- Monthly total premium: 6 × $790 = $4,740
- Monthly employer contribution: 6 × $600 = $3,600
- Monthly employee contribution per person: $190
- Annual employer contribution: $3,600 × 12 = $43,200

This is a planning example, not a Connecticut market average or insurer quote. Add family tiers, fees and any other employer contributions before using the budget. Obtain current rates for the actual census and effective date.

## Separate state insurance rules from federal employer duties

I would ask the broker to identify the market the policy belongs to and the state in which it is issued. A small group policy, an individual policy used with a reimbursement arrangement and a self-funded employer plan are not subject to identical rules. The employer’s mailing address alone does not answer every jurisdiction question. Confirm how the actual workforce, policy and arrangement are classified before applying a rule from a state consumer guide.

Keep three counts separate: the employees used to classify the employer, the people eligible under the benefit policy and the people who actually enroll. An owner may appear on the insurance roster without counting as a qualifying SHOP employee. Part-time work and related businesses can also matter differently for different rules. Send the underlying workforce facts to the adviser and request the reasoning behind the classification. A quote generated from an incomplete census is not a reliable eligibility determination.

When a proposal involves self-funding or stop-loss coverage, request a separate legal and financial review. Do not apply the state’s fully insured continuation or benefit rules automatically to another arrangement. Ask about claim liability, coverage exclusions, terminal obligations and any state restrictions that apply to the employer’s size. A fixed monthly invoice alone does not explain which party bears the ultimate risk.

## Use local rate information as context, not a personal quote

A regulator’s rate filing can show what an insurer requested or what the regulator reviewed for a market and year. It does not establish the premium for a particular employee census. Confirm whether a number is proposed or final, individual or small group, and an average or a specific product rate. A market-wide percentage is useful context for a renewal discussion but should not be multiplied into every employee’s bill as if it were an approved quote.

For care prices, use the exact service and facility whenever a public estimator is available. Confirm whether the figure is a cash price, a negotiated insured rate or an estimate of the patient’s share. A hospital facility quote may exclude the physician, anesthesia or laboratory charge. If the scope cannot be established, omit the number from the comparison. The worked budget here uses hypothetical premiums so it does not imply that a local employer or patient has received those prices.

## Compare the insurance contract and the administration separately

I would request a short written comparison before choosing an arrangement. Put the coverage effective date, eligible people, insurer, exact network, monthly premium, employer contribution and administrative fees on one sheet. Add the deductible, out-of-pocket maximum, prescription coverage and referral requirements. A cheaper premium is useful only after the coverage meets the needs of the people who will use it. An insurance brand alone does not identify the network or the benefits in the contract.

A traditional group policy lets the employer select a common set of benefits. An individual coverage HRA lets eligible employees select qualifying individual coverage with employer reimbursement under a formal arrangement. A PEO combines benefits access with an employment administration relationship. These are different purchases. If payroll and HR already work well, price insurance separately before paying for a broader package. If the company needs payroll, onboarding and HR support too, compare the complete service and the exit terms.

Ask who answers an enrollment problem, who corrects a payroll deduction and who handles an insurer dispute. One sales contact may introduce several service providers without taking responsibility for their work. Record the support route for each problem before the first bill. When considering a change, ask whether the old administrator will provide the enrollment history and documents needed by its replacement. Keep that handoff in the project budget.

## Test how people will actually get care

Give employees a private way to check an important physician, a hospital and a recurring prescription against each finalist. They should use the exact network name and plan year, and confirm participation with the insurer and provider. Do not collect diagnoses in a shared spreadsheet. HR generally needs to know whether a plan meets the employee’s access needs, not the details of the treatment. A broker or insurer can handle sensitive follow-up through its secure process.

For prescriptions, compare the drug, dose, pharmacy, tier, prior authorization and any specialty pharmacy requirement. A drug appearing in a directory does not tell you its final cost or whether authorization is required. For ongoing treatment, ask about transition-of-care procedures before changing coverage. An existing authorization may need to be reviewed again. Build time for that review into the switch rather than discovering it at the first appointment.

An employee with dependents may value family coverage more than the lowest employee-only deduction. Compare at least one employee-only household and one family household using the same assumptions. Show the annual payroll contribution and the in-network out-of-pocket maximum separately. Their sum is a useful insured-care stress case, but it is not a ceiling on every possible expense: excluded services, some out-of-network care and premiums follow different rules.

## Move from a proposal to active coverage

I would assign one owner to the enrollment project and work backward from the requested start date. A quote is not an approval, and an application is not proof of active insurance. Ask the carrier or administrator to specify the last date for a complete application, initial payment and employee elections. Keep the actual requirements in writing. If a deadline slips, revisit the start date before anyone cancels their current coverage.

Prepare a current census using the fields the quoting party requests. Confirm employment status, work and home locations, dependent tiers and requested effective dates. Keep personal identifiers out of email attachments when a secure upload is available. Reconcile the census against payroll, then record enrollments and valid waivers. Ask the insurer how it counts participation rather than assuming that every waiver counts against the group.

Before launch, obtain the benefit summary and the required plan and enrollment documents. Give employees the contribution schedule, election instructions, support contact and a clear deadline. The Department of Labor’s disclosure guide is a starting point for identifying documents; the employer and its adviser should determine which duties apply to the actual arrangement. Buying administration services does not by itself establish that every employer obligation has been performed.

After enrollment, compare the carrier’s active roster with payroll and the first invoice. Resolve a missing dependent, incorrect tier or wrong effective date immediately. Check the next payroll run too: a corrected insurer invoice does not automatically correct a wage deduction. Retain the confirmation and correction history so the next administrator can understand what happened without asking the employee to repeat a sensitive story.

## Keep the 2027 decision tied to current documents

This guide is for planning 2027 coverage. A year in the title does not make an older carrier directory, rate table or tax illustration current. Ask for documents that name the intended coverage year, the actual product and the quoted effective date. Where an annual limit matters, check the current IRS publication or the linked specialist guide before putting a number into payroll. A prior-year illustration is background, not a current quote.

Set a renewal review date when coverage starts. Keep the original comparison, contribution policy and enrollment assumptions so the next proposal can be measured against the same facts. Separate a rate change from a workforce change: hiring, dependents and employee moves can change the total bill even if the underlying rate does not move. Review unresolved access problems as well as premium changes. A plan that generated repeated enrollment work has an administrative cost even when no separate fee appears.

For a company approaching the employer-responsibility threshold, have payroll and the adviser review the preceding year’s full-time employees, full-time equivalents and related businesses. Counting enrolled people alone does not answer the federal applicable-large-employer question. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) to organize the inputs, then confirm the legal conclusion and reporting duties before finalizing the offer.

## Compare a Prescience proposal with your alternatives

If the company is shopping for employer coverage, request a proposal based on its actual workforce and locations. Compare the resulting benefits, employee costs and service responsibilities with the other options in this guide. For an owner-only business, establish eligibility before relying on any employer product. I would choose the arrangement that fits the people and the budget, even when that means keeping existing coverage.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.**
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Is the new Connecticut tax credit automatic?**

No. Confirm the BusinessPlus route and all eligibility, timing and filing requirements with the platform and accountant.

**Can Connecticut insured continuation last 30 months?**

The Insurance Department describes that maximum for qualifying fully insured coverage; confirm the policy and event.

**Can a business owner enroll without employees?**

Check state-specific eligibility and individual coverage options. SHOP requires a qualifying employee beyond owners and specified family members.

**Can we offer coverage to remote employees?**

Ask the carrier to confirm eligibility and routine-care access in every employee location.

**Is the example a quote for 2027?**

No. Its premiums and contributions are hypothetical; request a current quote for the actual workforce.

**Does the cheapest premium mean the lowest employee cost?**

No. Compare payroll contributions, prescriptions, networks and cost-sharing.

**Can we keep our current payroll provider?**

Ask the administrator whether the proposed arrangement works with it and how deductions and enrollment changes are exchanged.

**What confirms that coverage is active?**

Carrier confirmation of enrollment and effective dates, reconciled with the roster and initial invoice.

## Sources

- [HealthCare.gov: SHOP eligibility and participation](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [HealthCare.gov: comparing group coverage and HRAs](https://www.healthcare.gov/small-businesses/learn-more/hra-guide/)
- [IRS: identifying applicable large employers](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [Department of Labor: health plan disclosures](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)
- [Connecticut Governor: September 2026 small-business credit announcement](https://portal.ct.gov/governor/news/press-releases/2026/09-2026/governor-lamont-announces-new-state-tax-credit-to-help-small-businesses-offer-health-insurance)
- [Connecticut Insurance Department: state continuation](https://portal.ct.gov/cid/consumer-resource-library/health-insurance/cobra-connecticut-state-continuation-coverage)
- [Connecticut Insurance Department: PEO disclosure](https://portal.ct.gov/-/media/cid/peoformfinalpdf.pdf)

# Small business health insurance in Maryland: full guide for 2027

Source: https://www.getprescience.com/small-business-health-insurance/maryland
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-30
Updated: 2026-10-30
Cite as: Aditya Jain, MD. "Small business health insurance in Maryland: full guide for 2027." Prescience, October 30, 2026. https://www.getprescience.com/small-business-health-insurance/maryland

Maryland employers can compare small-business coverage through Maryland Health Connection resources and carriers, with separate attention to employee choice and state continuation rules.

- **Planning year:** 2027
- **Local focus:** Maryland employer coverage
- **Rates in examples:** Hypothetical, not market quotes
- **Before choosing:** Confirm policy and network eligibility

## Understand Maryland’s small-business employee choice

Maryland Health Connection for Small Business describes an employee-choice approach in which an employer can select up to two consecutive metal levels and employees can choose among participating plans at those levels. I would ask the broker to explain which current options are available to the business and how the contribution is applied. A choice of metal levels is not a guarantee that every employee’s preferred doctor participates.

Put the employer contribution rule next to each employee option. If workers can choose a more expensive policy, show the additional payroll cost before elections close. Confirm whether dependent choices and out-of-state employees follow the same process. A broad menu can be useful, but someone still needs to reconcile the final elections, carrier records and payroll deductions.

## Use the carrier list as a directory, not a 2027 quote

The Maryland Insurance Administration maintains a list of carriers offering small employer group health benefit plans. The version reviewed for this guide names policies effective on or after January 1, 2026. It is a starting point for contacting the market, not evidence that every listed product or rate is unchanged for 2027. Request the current availability and network documents for the intended start date.

A hypothetical Baltimore employer with workers in Montgomery County should test both areas. For people who receive care in Washington, DC, ask about routine cross-border access. For staff on the Eastern Shore or in western Maryland, use their actual local providers in the comparison. A directory that suits the headquarters may not suit the rest of the team.

## Build Maryland’s election process into offboarding

The Maryland Insurance Administration’s continuation guidance describes conditions including Maryland residence and prior coverage, with a written request generally due within 45 days after leaving employment. It describes coverage lasting up to 18 months, subject to earlier termination conditions, and an administrative fee of up to 2%. Have the insurer confirm applicability to the actual contract and event.

The state guidance excludes self-funded and federal plans from those Maryland requirements. That distinction should appear in the administrator’s instructions. Do not promise the state route to everyone based only on the employer’s location. Provide the notice, full premium and response instructions promptly, and keep the election and payment record with the coverage file.

## Give payroll a stable contribution instruction

If employees choose different carriers or benefit levels, payroll needs each person’s actual deduction rather than a single average. Reconcile the first invoices against the election report. When someone changes a dependent tier, update both insurance and payroll and confirm the effective date. A change in one system does not establish that another system has received it.

I would keep a short renewal summary of the options employees selected and any recurring access problems. Use aggregate feedback rather than individual diagnoses. Compare the next year’s menu against those findings, and show which networks or contribution amounts changed. The practical value of employee choice depends on people understanding the options and successfully using the resulting coverage.

**Turn the Maryland implementation plan into a quote**

Use the actual employee census and contribution policy. Confirm the written benefits, network and effective date before telling employees that replacement coverage is in place.

[Quote my Maryland team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Maryland employer budget example

**Maryland employer budget example**

Illustrative only: A hypothetical employer models eight employee-only elections using one simplified premium; actual employee-choice premiums may differ. Assume 8 enrolled employees, a $730 monthly employee-only premium and a $550 monthly employer contribution per employee.

- Monthly total premium: 8 × $730 = $5,840
- Monthly employer contribution: 8 × $550 = $4,400
- Monthly employee contribution per person: $180
- Annual employer contribution: $4,400 × 12 = $52,800

This is a planning example, not a Maryland market average or insurer quote. Add family tiers, fees and any other employer contributions before using the budget. Obtain current rates for the actual census and effective date.

## Separate state insurance rules from federal employer duties

I would ask the broker to identify the market the policy belongs to and the state in which it is issued. A small group policy, an individual policy used with a reimbursement arrangement and a self-funded employer plan are not subject to identical rules. The employer’s mailing address alone does not answer every jurisdiction question. Confirm how the actual workforce, policy and arrangement are classified before applying a rule from a state consumer guide.

Keep three counts separate: the employees used to classify the employer, the people eligible under the benefit policy and the people who actually enroll. An owner may appear on the insurance roster without counting as a qualifying SHOP employee. Part-time work and related businesses can also matter differently for different rules. Send the underlying workforce facts to the adviser and request the reasoning behind the classification. A quote generated from an incomplete census is not a reliable eligibility determination.

When a proposal involves self-funding or stop-loss coverage, request a separate legal and financial review. Do not apply the state’s fully insured continuation or benefit rules automatically to another arrangement. Ask about claim liability, coverage exclusions, terminal obligations and any state restrictions that apply to the employer’s size. A fixed monthly invoice alone does not explain which party bears the ultimate risk.

## Use local rate information as context, not a personal quote

A regulator’s rate filing can show what an insurer requested or what the regulator reviewed for a market and year. It does not establish the premium for a particular employee census. Confirm whether a number is proposed or final, individual or small group, and an average or a specific product rate. A market-wide percentage is useful context for a renewal discussion but should not be multiplied into every employee’s bill as if it were an approved quote.

For care prices, use the exact service and facility whenever a public estimator is available. Confirm whether the figure is a cash price, a negotiated insured rate or an estimate of the patient’s share. A hospital facility quote may exclude the physician, anesthesia or laboratory charge. If the scope cannot be established, omit the number from the comparison. The worked budget here uses hypothetical premiums so it does not imply that a local employer or patient has received those prices.

## Compare the insurance contract and the administration separately

I would request a short written comparison before choosing an arrangement. Put the coverage effective date, eligible people, insurer, exact network, monthly premium, employer contribution and administrative fees on one sheet. Add the deductible, out-of-pocket maximum, prescription coverage and referral requirements. A cheaper premium is useful only after the coverage meets the needs of the people who will use it. An insurance brand alone does not identify the network or the benefits in the contract.

A traditional group policy lets the employer select a common set of benefits. An individual coverage HRA lets eligible employees select qualifying individual coverage with employer reimbursement under a formal arrangement. A PEO combines benefits access with an employment administration relationship. These are different purchases. If payroll and HR already work well, price insurance separately before paying for a broader package. If the company needs payroll, onboarding and HR support too, compare the complete service and the exit terms.

Ask who answers an enrollment problem, who corrects a payroll deduction and who handles an insurer dispute. One sales contact may introduce several service providers without taking responsibility for their work. Record the support route for each problem before the first bill. When considering a change, ask whether the old administrator will provide the enrollment history and documents needed by its replacement. Keep that handoff in the project budget.

## Test how people will actually get care

Give employees a private way to check an important physician, a hospital and a recurring prescription against each finalist. They should use the exact network name and plan year, and confirm participation with the insurer and provider. Do not collect diagnoses in a shared spreadsheet. HR generally needs to know whether a plan meets the employee’s access needs, not the details of the treatment. A broker or insurer can handle sensitive follow-up through its secure process.

For prescriptions, compare the drug, dose, pharmacy, tier, prior authorization and any specialty pharmacy requirement. A drug appearing in a directory does not tell you its final cost or whether authorization is required. For ongoing treatment, ask about transition-of-care procedures before changing coverage. An existing authorization may need to be reviewed again. Build time for that review into the switch rather than discovering it at the first appointment.

An employee with dependents may value family coverage more than the lowest employee-only deduction. Compare at least one employee-only household and one family household using the same assumptions. Show the annual payroll contribution and the in-network out-of-pocket maximum separately. Their sum is a useful insured-care stress case, but it is not a ceiling on every possible expense: excluded services, some out-of-network care and premiums follow different rules.

## Move from a proposal to active coverage

I would assign one owner to the enrollment project and work backward from the requested start date. A quote is not an approval, and an application is not proof of active insurance. Ask the carrier or administrator to specify the last date for a complete application, initial payment and employee elections. Keep the actual requirements in writing. If a deadline slips, revisit the start date before anyone cancels their current coverage.

Prepare a current census using the fields the quoting party requests. Confirm employment status, work and home locations, dependent tiers and requested effective dates. Keep personal identifiers out of email attachments when a secure upload is available. Reconcile the census against payroll, then record enrollments and valid waivers. Ask the insurer how it counts participation rather than assuming that every waiver counts against the group.

Before launch, obtain the benefit summary and the required plan and enrollment documents. Give employees the contribution schedule, election instructions, support contact and a clear deadline. The Department of Labor’s disclosure guide is a starting point for identifying documents; the employer and its adviser should determine which duties apply to the actual arrangement. Buying administration services does not by itself establish that every employer obligation has been performed.

After enrollment, compare the carrier’s active roster with payroll and the first invoice. Resolve a missing dependent, incorrect tier or wrong effective date immediately. Check the next payroll run too: a corrected insurer invoice does not automatically correct a wage deduction. Retain the confirmation and correction history so the next administrator can understand what happened without asking the employee to repeat a sensitive story.

## Keep the 2027 decision tied to current documents

This guide is for planning 2027 coverage. A year in the title does not make an older carrier directory, rate table or tax illustration current. Ask for documents that name the intended coverage year, the actual product and the quoted effective date. Where an annual limit matters, check the current IRS publication or the linked specialist guide before putting a number into payroll. A prior-year illustration is background, not a current quote.

Set a renewal review date when coverage starts. Keep the original comparison, contribution policy and enrollment assumptions so the next proposal can be measured against the same facts. Separate a rate change from a workforce change: hiring, dependents and employee moves can change the total bill even if the underlying rate does not move. Review unresolved access problems as well as premium changes. A plan that generated repeated enrollment work has an administrative cost even when no separate fee appears.

For a company approaching the employer-responsibility threshold, have payroll and the adviser review the preceding year’s full-time employees, full-time equivalents and related businesses. Counting enrolled people alone does not answer the federal applicable-large-employer question. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) to organize the inputs, then confirm the legal conclusion and reporting duties before finalizing the offer.

## Compare a Prescience proposal with your alternatives

If the company is shopping for employer coverage, request a proposal based on its actual workforce and locations. Compare the resulting benefits, employee costs and service responsibilities with the other options in this guide. For an owner-only business, establish eligibility before relying on any employer product. I would choose the arrangement that fits the people and the budget, even when that means keeping existing coverage.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.**
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Does Maryland offer an employee-choice route?**

Maryland Health Connection for Small Business describes one; confirm current participating plans and employer eligibility.

**Is the state carrier directory a 2027 rate sheet?**

No. Check the directory’s date and request current product availability and rates.

**Can a business owner enroll without employees?**

Check state-specific eligibility and individual coverage options. SHOP requires a qualifying employee beyond owners and specified family members.

**Can we offer coverage to remote employees?**

Ask the carrier to confirm eligibility and routine-care access in every employee location.

**Is the example a quote for 2027?**

No. Its premiums and contributions are hypothetical; request a current quote for the actual workforce.

**Does the cheapest premium mean the lowest employee cost?**

No. Compare payroll contributions, prescriptions, networks and cost-sharing.

**Can we keep our current payroll provider?**

Ask the administrator whether the proposed arrangement works with it and how deductions and enrollment changes are exchanged.

**What confirms that coverage is active?**

Carrier confirmation of enrollment and effective dates, reconciled with the roster and initial invoice.

## Sources

- [HealthCare.gov: SHOP eligibility and participation](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [HealthCare.gov: comparing group coverage and HRAs](https://www.healthcare.gov/small-businesses/learn-more/hra-guide/)
- [IRS: identifying applicable large employers](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [Department of Labor: health plan disclosures](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)
- [Maryland Health Connection: small business coverage options](https://www.marylandhealthconnection.gov/smallbusiness-health-coverage-options/)
- [Maryland Insurance Administration: small employer carriers](https://insurance.maryland.gov/Consumer/Pages/carriersappsmgrp.aspx)
- [Maryland Insurance Administration: continuation coverage](https://insurance.maryland.gov/Consumer/Pages/continuationcoverage.aspx)

# Small business health insurance in Minnesota: full guide for 2027

Source: https://www.getprescience.com/small-business-health-insurance/minnesota
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-31
Updated: 2026-10-31
Cite as: Aditya Jain, MD. "Small business health insurance in Minnesota: full guide for 2027." Prescience, October 31, 2026. https://www.getprescience.com/small-business-health-insurance/minnesota

Minnesota employers should compare small-group coverage using current plan documents, regional access and the state’s separate insurance oversight and continuation resources.

- **Planning year:** 2027
- **Local focus:** Minnesota employer coverage
- **Rates in examples:** Hypothetical, not market quotes
- **Before choosing:** Confirm policy and network eligibility

## Use Minnesota’s employer resources with the correct plan year

The Minnesota Department of Commerce maintains small-business insurance resources and a list of companies approved to sell small-group health plans. The list reviewed for this guide identifies its underlying information as the 2024 plan year. I would use it as a contact starting point, then request 2027 availability directly from the broker or insurer. An older approved-company list is not a current rate or network guarantee.

Commerce also provides small-group counting information and rate-review resources. Ask the adviser to explain the classification using the actual workforce. Keep that determination separate from the federal applicable-large-employer calculation and the enrollment roster. If the business is close to a threshold, the supporting payroll periods and related-entity facts matter more than the number of insurance cards issued.

## Test Twin Cities and regional care access

A hypothetical Minneapolis employer hiring in Duluth or Rochester should test local access for those employees rather than assuming a Twin Cities network works everywhere. Ask about routine care, specialist referrals and the actual hospitals the family would use. If an employee lives across the Wisconsin border, confirm enrollment eligibility and network coverage at that address.

I would also check how the policy handles dependents living elsewhere and employees who move during the year. A large statewide provider list can hide important gaps in a specific specialty or location. Invite employees to conduct private provider checks and report whether the plan meets their needs. HR does not need a list of diagnoses to identify an access problem.

**Price coverage for the places your Minnesota team lives**

Use home ZIP codes and the actual family mix when comparing proposals. Review the written network and employee costs for those locations before choosing a plan.

[Quote my Minnesota team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Use the correct continuation and regulator contacts

The Minnesota Department of Health provides continuation guidance covering federal and state rights. It describes a former employee’s continuation period of up to 18 months in common circumstances, with other beneficiary situations requiring separate review. Have the insurer or plan administrator confirm the governing law, qualifying event and any earlier ending condition. Do not assume every dependent’s rights are identical to the employee’s.

Minnesota’s insurance oversight also depends on the type of plan. Commerce explains the plans it regulates, and Department of Health resources address managed-care questions. Record the correct complaint and assistance route for the chosen policy. A worker struggling with an enrollment or claim issue should not have to determine the regulator from scratch while trying to obtain care.

## Keep MNsure and employer coverage decisions distinct

MNsure’s small-business information directs employers toward the small-employer market and explains that self-employed people may use individual enrollment. For a founder-only business, investigate that individual route alongside any applicable alternatives. For employees receiving an individual coverage allowance, compare the local policies and the effect of the employer offer on financial assistance.

For 2027, use the current rate-review resources and final product documents rather than carrying forward a prior-year premium. Ask whether a quoted change reflects rates, a different network, ages, dependents or workforce location. Preserve that breakdown in the renewal file. It will make the next comparison more useful than a single percentage increase with no explanation.

## Minnesota employer budget example

**Minnesota employer budget example**

Illustrative only: A hypothetical employer models eleven employee-only enrollments in several Minnesota cities. Assume 11 enrolled employees, a $700 monthly employee-only premium and a $525 monthly employer contribution per employee.

- Monthly total premium: 11 × $700 = $7,700
- Monthly employer contribution: 11 × $525 = $5,775
- Monthly employee contribution per person: $175
- Annual employer contribution: $5,775 × 12 = $69,300

This is a planning example, not a Minnesota market average or insurer quote. Add family tiers, fees and any other employer contributions before using the budget. Obtain current rates for the actual census and effective date.

## Separate state insurance rules from federal employer duties

I would ask the broker to identify the market the policy belongs to and the state in which it is issued. A small group policy, an individual policy used with a reimbursement arrangement and a self-funded employer plan are not subject to identical rules. The employer’s mailing address alone does not answer every jurisdiction question. Confirm how the actual workforce, policy and arrangement are classified before applying a rule from a state consumer guide.

Keep three counts separate: the employees used to classify the employer, the people eligible under the benefit policy and the people who actually enroll. An owner may appear on the insurance roster without counting as a qualifying SHOP employee. Part-time work and related businesses can also matter differently for different rules. Send the underlying workforce facts to the adviser and request the reasoning behind the classification. A quote generated from an incomplete census is not a reliable eligibility determination.

When a proposal involves self-funding or stop-loss coverage, request a separate legal and financial review. Do not apply the state’s fully insured continuation or benefit rules automatically to another arrangement. Ask about claim liability, coverage exclusions, terminal obligations and any state restrictions that apply to the employer’s size. A fixed monthly invoice alone does not explain which party bears the ultimate risk.

## Use local rate information as context, not a personal quote

A regulator’s rate filing can show what an insurer requested or what the regulator reviewed for a market and year. It does not establish the premium for a particular employee census. Confirm whether a number is proposed or final, individual or small group, and an average or a specific product rate. A market-wide percentage is useful context for a renewal discussion but should not be multiplied into every employee’s bill as if it were an approved quote.

For care prices, use the exact service and facility whenever a public estimator is available. Confirm whether the figure is a cash price, a negotiated insured rate or an estimate of the patient’s share. A hospital facility quote may exclude the physician, anesthesia or laboratory charge. If the scope cannot be established, omit the number from the comparison. The worked budget here uses hypothetical premiums so it does not imply that a local employer or patient has received those prices.

## Compare the insurance contract and the administration separately

I would request a short written comparison before choosing an arrangement. Put the coverage effective date, eligible people, insurer, exact network, monthly premium, employer contribution and administrative fees on one sheet. Add the deductible, out-of-pocket maximum, prescription coverage and referral requirements. A cheaper premium is useful only after the coverage meets the needs of the people who will use it. An insurance brand alone does not identify the network or the benefits in the contract.

A traditional group policy lets the employer select a common set of benefits. An individual coverage HRA lets eligible employees select qualifying individual coverage with employer reimbursement under a formal arrangement. A PEO combines benefits access with an employment administration relationship. These are different purchases. If payroll and HR already work well, price insurance separately before paying for a broader package. If the company needs payroll, onboarding and HR support too, compare the complete service and the exit terms.

Ask who answers an enrollment problem, who corrects a payroll deduction and who handles an insurer dispute. One sales contact may introduce several service providers without taking responsibility for their work. Record the support route for each problem before the first bill. When considering a change, ask whether the old administrator will provide the enrollment history and documents needed by its replacement. Keep that handoff in the project budget.

## Test how people will actually get care

Give employees a private way to check an important physician, a hospital and a recurring prescription against each finalist. They should use the exact network name and plan year, and confirm participation with the insurer and provider. Do not collect diagnoses in a shared spreadsheet. HR generally needs to know whether a plan meets the employee’s access needs, not the details of the treatment. A broker or insurer can handle sensitive follow-up through its secure process.

For prescriptions, compare the drug, dose, pharmacy, tier, prior authorization and any specialty pharmacy requirement. A drug appearing in a directory does not tell you its final cost or whether authorization is required. For ongoing treatment, ask about transition-of-care procedures before changing coverage. An existing authorization may need to be reviewed again. Build time for that review into the switch rather than discovering it at the first appointment.

An employee with dependents may value family coverage more than the lowest employee-only deduction. Compare at least one employee-only household and one family household using the same assumptions. Show the annual payroll contribution and the in-network out-of-pocket maximum separately. Their sum is a useful insured-care stress case, but it is not a ceiling on every possible expense: excluded services, some out-of-network care and premiums follow different rules.

## Move from a proposal to active coverage

I would assign one owner to the enrollment project and work backward from the requested start date. A quote is not an approval, and an application is not proof of active insurance. Ask the carrier or administrator to specify the last date for a complete application, initial payment and employee elections. Keep the actual requirements in writing. If a deadline slips, revisit the start date before anyone cancels their current coverage.

Prepare a current census using the fields the quoting party requests. Confirm employment status, work and home locations, dependent tiers and requested effective dates. Keep personal identifiers out of email attachments when a secure upload is available. Reconcile the census against payroll, then record enrollments and valid waivers. Ask the insurer how it counts participation rather than assuming that every waiver counts against the group.

Before launch, obtain the benefit summary and the required plan and enrollment documents. Give employees the contribution schedule, election instructions, support contact and a clear deadline. The Department of Labor’s disclosure guide is a starting point for identifying documents; the employer and its adviser should determine which duties apply to the actual arrangement. Buying administration services does not by itself establish that every employer obligation has been performed.

After enrollment, compare the carrier’s active roster with payroll and the first invoice. Resolve a missing dependent, incorrect tier or wrong effective date immediately. Check the next payroll run too: a corrected insurer invoice does not automatically correct a wage deduction. Retain the confirmation and correction history so the next administrator can understand what happened without asking the employee to repeat a sensitive story.

## Keep the 2027 decision tied to current documents

This guide is for planning 2027 coverage. A year in the title does not make an older carrier directory, rate table or tax illustration current. Ask for documents that name the intended coverage year, the actual product and the quoted effective date. Where an annual limit matters, check the current IRS publication or the linked specialist guide before putting a number into payroll. A prior-year illustration is background, not a current quote.

Set a renewal review date when coverage starts. Keep the original comparison, contribution policy and enrollment assumptions so the next proposal can be measured against the same facts. Separate a rate change from a workforce change: hiring, dependents and employee moves can change the total bill even if the underlying rate does not move. Review unresolved access problems as well as premium changes. A plan that generated repeated enrollment work has an administrative cost even when no separate fee appears.

For a company approaching the employer-responsibility threshold, have payroll and the adviser review the preceding year’s full-time employees, full-time equivalents and related businesses. Counting enrolled people alone does not answer the federal applicable-large-employer question. Use the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) to organize the inputs, then confirm the legal conclusion and reporting duties before finalizing the offer.

## Compare a Prescience proposal with your alternatives

If the company is shopping for employer coverage, request a proposal based on its actual workforce and locations. Compare the resulting benefits, employee costs and service responsibilities with the other options in this guide. For an owner-only business, establish eligibility before relying on any employer product. I would choose the arrangement that fits the people and the budget, even when that means keeping existing coverage.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.**
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**Is the Commerce carrier list a current-year quote?**

No. Check its stated data year and obtain current availability, rates and networks.

**Can self-employed owners use MNsure?**

MNsure identifies individual coverage as an option for self-employed people, subject to eligibility.

**Can a business owner enroll without employees?**

Check state-specific eligibility and individual coverage options. SHOP requires a qualifying employee beyond owners and specified family members.

**Can we offer coverage to remote employees?**

Ask the carrier to confirm eligibility and routine-care access in every employee location.

**Is the example a quote for 2027?**

No. Its premiums and contributions are hypothetical; request a current quote for the actual workforce.

**Does the cheapest premium mean the lowest employee cost?**

No. Compare payroll contributions, prescriptions, networks and cost-sharing.

**Can we keep our current payroll provider?**

Ask the administrator whether the proposed arrangement works with it and how deductions and enrollment changes are exchanged.

**What confirms that coverage is active?**

Carrier confirmation of enrollment and effective dates, reconciled with the roster and initial invoice.

## Sources

- [HealthCare.gov: SHOP eligibility and participation](https://www.healthcare.gov/small-businesses/choose-and-enroll/qualify-for-shop-marketplace/)
- [HealthCare.gov: comparing group coverage and HRAs](https://www.healthcare.gov/small-businesses/learn-more/hra-guide/)
- [IRS: identifying applicable large employers](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [Department of Labor: health plan disclosures](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans)
- [Minnesota Commerce: small business insurance](https://mn.gov/commerce/insurance/industry/small-business/)
- [Minnesota Commerce: rate questions](https://mn.gov/commerce/insurance/health/consumer-protections/rates/faq.jsp)
- [Minnesota Department of Health: continuation coverage](https://www.health.mn.gov/facilities/insurance/managedcare/faq/cobra.html)
- [MNsure: small business coverage](https://www.mnsure.org/employer-employees/)
- [Minnesota Commerce: regulated health plans](https://www.commerce.mn.gov/commerce/insurance/health/consumer-protections/regulate.jsp)

# ACA affordability calculator for 2026 and 2027

Source: https://www.getprescience.com/tools/aca-affordability-calculator
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-13
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "ACA affordability calculator for 2026 and 2027." Prescience, October 28, 2026. https://www.getprescience.com/tools/aca-affordability-calculator

Employer coverage is affordable under the ACA when the employee's cost for the cheapest self-only, minimum-value plan is no more than 9.96% of household income in 2026, or 10.22% in 2027. Employers can't see household income, so the IRS lets them test against one of three safe harbors instead. Enter your numbers to see the most you can charge.

- **2027 affordability limit:** 10.22%
- **2026 affordability limit:** 9.96%
- **2027 FPL safe harbor:** $135.92/month
- **2027 penalty, unaffordable:** $5,670 per subsidized employee

## Check your contribution

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

I use this calculator to estimate a contribution ceiling, then verify the payroll inputs and plan terms. Test employees with the lowest applicable pay in each category only if their contribution amounts and other adjustments are the same. A result here does not establish minimum value or resolve opt-out payments, flex credits or partial-year eligibility.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Coverage fails affordability when the employee's share is too high. A lower total premium is the easiest fix: our quotes usually come in 10–20% below comparable fully insured coverage, which leaves room to cut what employees pay.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## What the affordability test actually checks

The test looks at one number: what a full-time employee must pay for the **lowest-cost self-only plan you offer that provides minimum value.** Minimum value requires at least 60% of expected allowed costs for a standard population and substantial coverage of inpatient hospital and physician services. Your richer plans, and what family coverage costs, don't enter the employer test.

The percentage follows the year in which the plan year begins. A July 1, 2026 plan year uses 9.96% through June 30, 2027. Employer penalty dollar amounts, by contrast, are indexed by calendar year and applied monthly. Do not use the plan-year affordability percentage to decide which calendar-year penalty rate applies.

**Affordability percentage and FPL safe harbor by plan year**

| Plan year | Affordability limit | FPL safe harbor (48 states and DC), per month |
| --- | --- | --- |
| 2026 | 9.96% | $129.89 (from the 2025 poverty line of $15,650) |
| 2027 | 10.22% | $135.92 (from the 2026 poverty line of $15,960) |

## The three safe harbors

**Most an employee can pay per month for self-only coverage**

| Safe harbor | How it works | 2026 | 2027 |
| --- | --- | --- | --- |
| Federal poverty line | The single-person poverty line times the limit, divided by 12. One number for every employee. | $129.89 | $135.92 |
| Rate of pay, hourly | The hourly rate times 130 hours times the limit. | $258.96 at $20/hour | $265.72 at $20/hour |
| Rate of pay, salaried | Monthly salary times the limit. | $498 at $60,000 | $511 at $60,000 |
| W-2 wages | Box 1 wages times the limit, checked after the year ends. | $498 at $60,000 | $511 at $60,000 |

- **Federal poverty line.** The regulation permits a poverty guideline in effect within six months before the first day of the plan year. This calculator uses the prior-year guideline as a conservative default, not a rule that every plan must use that year. For 2027 those defaults produce $135.92 monthly in the contiguous states and DC, $169.90 in Alaska and $156.36 in Hawaii, rounded down. Use the applicable guideline for the employee's work state.
- **Rate of pay** works when you know each employee's hourly rate or salary up front. For hourly staff, use the lower of the rate on the first day of the coverage period and the lowest rate during the month. For salaried staff, the safe harbor is lost for anyone whose salary is cut during the year, including a cut in hours.
- **W-2 wages.** Use Box 1 wages, not gross salary. For partial-year employment or offers, the regulation adjusts wages by months coverage was offered divided by months employed, and counts partial months for employment. The calculator's annual-wage field does not perform that case-specific adjustment. Contribution rules must satisfy the safe harbor's consistency requirements; do not assume a year-end average cures every monthly change.
- **You can mix them.** You may use different safe harbors for different reasonable categories of employees (for example, hourly and salaried, or by job category), as long as you apply each one the same way to everyone in the category.
- **Safe-harbor conditions.** The safe-harbor regulation conditions its use on offers of minimum essential coverage to full-time employees and their dependents, with minimum value for the employee's self-only coverage. Review the separate 95% offer threshold and its five-employee allowance when evaluating potential penalties. Apply each safe harbor consistently within reasonable categories. Safe harbors protect the employer from the section 4980H(b) affordability penalty; they do not determine a household's premium-tax-credit eligibility.
- Amounts here are rounded down to the cent, so a contribution at or below them passes.

See [26 CFR 54.4980H-5](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-5) for safe-harbor conditions and partial-year calculations.

## Worked examples with 2026 figures

**Using the FPL safe harbor to set the employer contribution**

Illustrative. The cheapest self-only plan costs $750 a month in total. The employer wants one contribution rule for everyone in 2026.

- Total monthly premium: $750
- Most the employee can pay (FPL, 2026): $129.89
- Least the employer must pay: $620.11
- Employer share, rounded: 83%

With minimum value, the required offers and no other contribution adjustments, an employee share no greater than $129.89 meets this FPL employer safe-harbor example. The 2027 prior-year-guideline default is $135.92. This protects the employer under the safe harbor; it does not determine household tax-credit eligibility.

**An hourly employee at $18 an hour**

Illustrative. An hourly employee earns $18 an hour and pays $200 a month for the cheapest self-only plan in 2026.

- Monthly pay under the safe harbor: $18 × 130 = $2,340
- Limit (9.96%): $233.06
- Employee pays: $200.00

**Affordable,** with $33.06 of room. If the company lowers this employee's rate during the year, rerun the test at the new rate.

**A salaried employee at $52,000 who pays too much**

Illustrative. A salaried employee earns $52,000 a year and pays $450 a month for the cheapest self-only plan in 2026.

- Monthly salary: $4,333.33
- Limit (9.96%): $431.60
- Employee pays: $450.00
- Shortfall: $18.40

**Unaffordable.** If this employee gets a marketplace premium tax credit, an ALE owes up to $5,010 for 2026. Raising the employer contribution by $18.40 a month ($220.80 a year) fixes it.

**W-2 safe harbor and pre-tax deductions**

Illustrative. An employee's gross pay is $50,000, but $5,000 goes to pre-tax 401(k) and Section 125 premium deductions, so Box 1 shows $45,000.

- Box 1 wages: $45,000
- Monthly limit under W-2 (2026): $373.50
- Monthly limit if you'd used $50,000 salary: $415

The W-2 test gives $41.50 a month less room than the employee's salary suggests, and you only learn the Box 1 number in January. Set contributions with the rate of pay or FPL safe harbor and treat W-2 as a backup.

## What changes the employee's cost for the test

**Common plan features and how they affect affordability**

| Feature | Effect on the employee's cost |
| --- | --- |
| Cash for waiving coverage, paid to anyone who waives (unconditional opt-out) | May increase the required contribution; check the arrangement date and applicable IRS transition guidance. |
| Cash for waiving that requires proof of other group coverage (conditional opt-out) | Requires review of the arrangement, applicable guidance and transition relief; proof of other group coverage alone is not a universal exception. |
| Employer flex credits that can only be used for health coverage or a health FSA | Subtracted from the employee's cost, dollar for dollar. |
| Flex credits that can also be taken as cash or used for other benefits | Not subtracted. |
| Wellness discounts (for example, a lower premium for a screening) | Ignored: assume the employee doesn't earn them. Tobacco discounts are the exception: you may use the non-tobacco rate. |

- **Mid-year raises and cuts.** A raise doesn't hurt. A pay cut can, so retest anyone whose pay drops.
- **Non-calendar plan years.** Use the percentage for the year the plan year starts, and keep it for the whole plan year.
- **Part-time employees.** The employer test only applies to full-time employees (30+ hours a week). Part-timers you choose to cover don't create penalties.
- **Family members.** The employer test uses self-only cost. Since 2023, family members may qualify for Marketplace credits if the required contribution for the relevant family coverage is unaffordable and they meet the other eligibility rules. This doesn't create an employer penalty, but it can pull families off your plan.
- **ICHRA is tested differently.** An individual coverage HRA is affordable if the cost of the lowest-cost silver marketplace plan in the employee's area, minus the monthly allowance, is at or below the limit. See [whether to switch to ICHRA](https://www.getprescience.com/guides/should-we-switch-from-a-group-plan-to-ichra).

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Testing an ICHRA instead of a group plan? Use our ICHRA affordability calculator to find the minimum allowance, then run it with Choice for $20 per enrolled employee per month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

> **Opt-out payments are still unsettled:** Opt-out arrangements require review under IRS Notice 2015-87 and subsequent applicable guidance. The calculator does not implement exceptions or transition relief. I would obtain a written determination of the required contribution rather than subtracting an opt-out payment because it is described as conditional.

## Who has to pass the test, and what failing costs

Only [applicable large employers](https://www.getprescience.com/tools/ale-calculator) (50 or more full-time employees including equivalents) face the employer mandate. If an offer fails the applicable rules, no safe harbor or relief protects the employer, and a full-time employee receives a Marketplace premium tax credit, potential annualized section 4980H(b) exposure is $5,010 a year for that employee in 2026 and $5,670 in 2027. The total can't exceed the penalty for offering no coverage at all: $3,780 per full-time employee after the first 30 in 2027.

**4980H(b) penalty for unaffordable coverage**

| Calendar year | Per subsidized employee, per year | Per month |
| --- | --- | --- |
| 2026 | $5,010 | $417.50 |
| 2027 | $5,670 | $472.50 |

The penalty is figured month by month and only for employees who actually receive a tax credit. If 3 of your full-time employees had unaffordable offers and claimed credits for all of 2026, the bill would be 3 × $5,010 = $15,030. The IRS proposes it in Letter 226-J, and employers must receive at least 90 days to respond before an assessment; use the deadline on the letter.

The employer penalty test uses self-only coverage. The Marketplace separately evaluates affordability for related individuals using the required contribution for applicable family coverage and household income, with other tax-credit conditions. A family member receiving a credit does not by itself create an employer penalty.

> **Smaller companies:** Under 50 full-time equivalents there's no federal penalty, but affordability still matters: an employee with an unaffordable offer may qualify for Marketplace credits after declining coverage, subject to all other eligibility rules, and ICHRA allowances use a similar test.

## What to do with your result

1. **Find your cheapest minimum-value plan** Check the plan's summary of benefits or ask your carrier or broker which plan is your lowest-cost option that provides minimum value. That plan's self-only employee share is the only number tested.
2. **Pick a safe harbor per employee category** FPL if you want one rule for everyone; rate of pay if your lowest earners are well paid; W-2 only as a fallback.
3. **Test your lowest-paid employee in each category** Use the calculator above. Check contribution amounts and other adjustments too. A higher-paid employee with a larger required contribution may still fail.
4. **Fix any shortfall before open enrollment** Raise the employer contribution for the cheapest plan, add a lower-cost plan, or set contributions by pay band. Changing contributions mid-year is harder than getting them right at renewal.
5. **Record the safe harbor on Form 1095-C** ALEs report the safe harbor used on line 16 of Form 1095-C (code 2F for W-2, 2G for FPL, 2H for rate of pay), so your filing shows the IRS why each offer was affordable.
6. **Recheck every year** The percentage changes each year: 9.96% in 2026, 10.22% in 2027. Recheck when renewal rates arrive.

**Use the contribution ceiling to compare an actual plan**

This result tests an affordability assumption; it does not price your coverage. Use the actual employee census for a proposal, then rerun the appropriate test against the written premium and contribution policy.

[Get a quote for my team](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Making coverage affordable without raising your cost

A lower total premium can make a larger employer contribution easier to afford. I still test the employee share under the chosen safe harbor before treating an offer as compliant.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

## Frequently asked questions

**What is the ACA affordability percentage for 2027?**

10.22% of household income for plan years beginning in 2027, up from 9.96% in 2026 (IRS Revenue Procedure 2026-26).

**What is the FPL safe harbor amount for 2027?**

$135.92 a month for self-only coverage in the 48 contiguous states and DC, based on the 2026 poverty line of $15,960. Alaska is $169.90 and Hawaii $156.36.

**What is the FPL safe harbor amount for 2026?**

$129.89 a month in the 48 contiguous states and DC, based on the 2025 poverty line of $15,650 and the 9.96% limit.

**Is affordability based on the employee's cost for family coverage?**

No. The employer test uses the employee's cost for the lowest-cost self-only plan that provides minimum value.

**Do employers with fewer than 50 employees need to meet affordability?**

Not for the federal employer mandate, which only applies to applicable large employers. It still affects whether employees can get marketplace subsidies instead.

**Can I use different safe harbors for different employees?**

Yes, by reasonable category, such as hourly and salaried staff or job categories, if you apply the same safe harbor to everyone in a category.

**Does an opt-out payment make coverage unaffordable?**

It can. The result depends on the arrangement and applicable guidance, including transition relief. Requiring proof of other coverage does not by itself settle the test. Have the required contribution determined before entering it here.

**Which affordability percentage applies to a plan year that starts mid-year?**

The one for the year the plan year starts. A plan year beginning July 1, 2026 uses 9.96% until it ends on June 30, 2027.

## Sources

- [IRS Revenue Procedure 2025-25 (2026 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [IRS Revenue Procedure 2026-26 (2027 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-26-26.pdf)
- [IRS Revenue Procedure 2025-26 (2026 employer mandate penalties)](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [IRS Revenue Procedure 2026-22 (2027 employer mandate penalties)](https://www.irs.gov/pub/irs-drop/rp-26-22.pdf)
- [IRS, Minimum value and affordability](https://www.irs.gov/affordable-care-act/employers/minimum-value-and-affordability)
- [IRS, Questions and answers on employer shared responsibility](https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act)
- [IRS Notice 2015-87 (opt-out payments and flex credits)](https://www.irs.gov/pub/irs-drop/n-15-87.pdf)
- [HHS ASPE, Poverty guidelines](https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines)
- [26 CFR 54.4980H-5, affordability safe harbors](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-5)
- [CMS, individual coverage HRA resources](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [Employer Reporting Improvement Act, enacted text](https://www.congress.gov/bill/118th-congress/house-bill/3801/text)

# ALE calculator: are you an applicable large employer?

Source: https://www.getprescience.com/tools/ale-calculator
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-13
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "ALE calculator: are you an applicable large employer?." Prescience, October 28, 2026. https://www.getprescience.com/tools/ale-calculator

You're an applicable large employer (ALE) for a year if you averaged 50 or more full-time employees, including full-time equivalents, during the previous calendar year. Enter your full-time headcount and part-time hours to see where you land and what the employer mandate would cost if you don't offer coverage.

- **ALE threshold:** 50 full-time incl. equivalents
- **Full-time:** 30+ hours/week or 130/month
- **One equivalent:** 120 part-time hours a month
- **2027 penalty, no offer:** $3,780 per FT employee after 30

## Count your employees

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

Use last year's numbers: your 2026 workforce decides your status for 2027. The output depends on correctly prepared monthly inputs and does not independently verify worker classification, related employers or an exception.

## How the count works

1. For each month, count employees who averaged 30 or more hours a week (130 hours in the month). Hours include paid leave.
2. Add up the hours of everyone else for the month, counting at most 120 hours per person, and divide by 120. That's the month's full-time equivalents; keep the fraction.
3. Add full-time employees and equivalents for each of the 12 months, divide by 12 and round down.
4. 50 or more makes you an ALE for the next calendar year.

**Worked example: one typical month**

| Group | Count | Counts as |
| --- | --- | --- |
| Full-time employees | 42 | 42 |
| Part-timers | 12 working 100 hours each | 1,200 ÷ 120 = 10 |
| Total for the month |  | 52 |

Companies under common ownership (a controlled group) are counted together, even if each one is small on its own. Seasonal workers count too, but there's an exception: if you passed 50 for 120 days or fewer, and the extra people were seasonal workers, you aren't an ALE.

The [IRS ALE guidance](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer) explains the prior-year average, aggregation and seasonal-worker exception.

## What counts as an hour, and who counts as an employee

Most counting mistakes come from the inputs, not the arithmetic. The IRS defines an hour of service broadly, and a few groups are left out entirely.

**Inputs to the ALE count**

| Item | Counts? | Notes |
| --- | --- | --- |
| Hours worked and paid | Yes | Every hour an employee is paid, or entitled to be paid, for work. |
| Paid vacation, holiday, sick days, paid leave, jury duty, military duty | Yes | Paid time off counts as hours even though no work is done. |
| Employees you hire through a PEO | Yes | A PEO doesn't change who the common-law employer is. Your PEO workers count toward your total. |
| Salaried staff whose hours aren't tracked | Yes | You may count actual hours, or credit 8 hours for each day or 40 hours for each week with at least one hour of service. |
| Independent contractors (1099) | No | Only if they are really contractors. Misclassified workers are employees and count. |
| Students in federal or state work-study programs | No | Their work-study hours are excluded. |
| Employees with TRICARE or VA coverage | No, for those months | They aren't counted toward the 50 for a month in which they have that coverage. |
| Hours paid as foreign-source income | No | Hours whose compensation is foreign-source income under the tax rules are excluded. The payroll account's location alone does not decide this. |

> **Use monthly counts for ALE status:** The look-back measurement method (explained below) can decide which employees you treat as full-time for penalties. It can't be used to decide whether you're an ALE. For the ALE test, count each calendar month as it happened.

## Three worked examples

**A company with a steady part-time staff**

Illustrative. A company had 44 full-time employees every month of 2026 and 14 part-timers who each worked about 80 hours a month.

- Full-time employees, average: 44
- Part-time hours per month: 14 × 80 = 1,120
- Full-time equivalents per month: 1,120 ÷ 120 = 9.33
- Monthly total, averaged and rounded down: 53

**ALE for 2027.** The company has fewer than 50 full-time employees, but its part-timers push it to 53. It is subject to the employer shared responsibility and reporting rules. Offering qualifying coverage to its full-time employees and dependents can avoid employer penalties; reporting is still required. Part-timers don't have to be offered coverage.

**A startup that crossed 50 in the middle of the year**

Illustrative. A startup had 38 full-time employees from January to June 2026 and 58 from July to December. It had no part-timers.

- January to June: 6 months × 38 = 228
- July to December: 6 months × 58 = 348
- Annual total: 576
- Average (576 ÷ 12): 48

**Not an ALE for 2027,** even though it ended 2026 with 58 people. Status looks back at the whole prior year. If it stays above 50 through 2027, it will be an ALE for 2028, so plan the coverage offer and reporting during 2027.

**A retailer with a holiday rush**

Illustrative. A retailer had 46 full-time employees all year. From September to December it added 25 seasonal full-time workers who left in January.

- 8 months × 46: 368
- 4 months × 71: 284
- Average before the exception: 54
- Months above 50: 4 (treated as equal to 120 days)

**Not an ALE under the stated assumptions.** The average is 54, but the workforce was above 50 for no more than four calendar months and everyone above 50 was a seasonal worker, so the seasonal worker exception applies. If the extra workers had been year-round hires, or the busy season had lasted five months, it would be an ALE.

## Edge cases that change the answer

- **Controlled groups.** Companies related under the tax code's common-ownership rules (Section 414) are combined for the ALE test. For example, two companies with 30 and 25 full-time employees form a 55-person group if their ownership meets those rules; both are then ALE members. Each company is then liable for its own penalties, and the 30-employee reduction in the no-offer penalty is split between them in proportion to their full-time headcounts.
- **New companies.** A company that did not exist on any business day in the prior year is an ALE in its first year if it reasonably expects to average 50 or more full-time employees, including equivalents, and actually does.
- **Seasonal workers.** The 120 days don't have to be consecutive, and you can treat four calendar months as 120 days. The exception only helps if everyone above 50 in that window was a seasonal worker, such as holiday retail staff.
- **Variable-hour employees.** If you can't tell at hire whether someone will average 30 hours a week, you may use the look-back measurement method to decide whether they're full-time for penalty purposes (next section). It doesn't change the ALE count.
- **Rehires.** An employee who comes back after at least 13 consecutive weeks with no hours of service (26 weeks for schools and universities) can be treated as a new hire.
- **Owners.** Sole proprietors, partners and more-than-2% shareholders of an S corporation aren't treated as employees, so they don't count. Founders paid as W-2 employees of a C corporation do.

## Look-back measurement for variable-hour employees

Once you're an ALE, you must decide each month who is full-time, because penalties are calculated on full-time employees only. For staff with steady schedules, the monthly method is simple: 130 hours in a month means full-time for that month. For hourly staff whose hours swing, the look-back method gives you stable answers.

**The three periods of the look-back method**

| Period | What happens | Length allowed |
| --- | --- | --- |
| Standard measurement period | You track hours for ongoing employees. | 3 to 12 months, chosen by you |
| Administrative period | You work out who averaged 30+ hours and enroll them. | Up to 90 days |
| Stability period | Status is fixed: full-time employees are offered coverage even if hours drop. | At least 6 consecutive months and no shorter than the measurement period |

New variable-hour, seasonal and part-time hires get an initial measurement period of 3 to 12 months. The initial measurement period plus the administrative period can't run past the last day of the first calendar month that begins on or after the first anniversary of the hire date. For ongoing employees, an employer may align a 12-month standard measurement period and a 12-month stability period with its renewal calendar. Do not copy that calendar onto new hires without checking the separate anniversary limit: adding 60 administrative days after a 12-month initial measurement period can exceed it.

## What an ALE has to do

**Employer mandate penalties, per year**

| Penalty | Triggered when | 2026 | 2027 |
| --- | --- | --- | --- |
| 4980H(a) | Coverage isn't offered to at least 95% of full-time employees and one gets a marketplace subsidy | $3,340 per FT employee after the first 30 | $3,780 per FT employee after the first 30 |
| 4980H(b) | Coverage is offered but unaffordable or not minimum value, for each FT employee who gets a subsidy | $5,010 per subsidized employee | $5,670 per subsidized employee |

ALEs also file Forms 1094-C and 1095-C every year, whether or not they offer coverage. Check what your cheapest plan costs employees with the [ACA affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator).

**What no offer costs an 80-person company**

Illustrative. An ALE with 80 full-time employees offers no coverage for all of 2026, and at least one employee buys a marketplace plan with a premium tax credit.

- Full-time employees: 80
- Less the first 30: 50
- 2026 rate: $3,340
- 2026 penalty: $167,000
- Same company in 2027: $189,000

The penalty is owed on all 50 employees above 30, not only the one who got a subsidy. It is calculated month by month (one-twelfth of the annual amount) and should be compared with a documented coverage budget rather than assumed to be cheaper or more expensive than insurance.

- **The 95% rule.** The section 4980H(a) test generally requires an offer of minimum essential coverage to at least 95% of full-time employees and their dependent children. The regulation also has a five-employee allowance when greater than 5%. Dependent children for this purpose exclude stepchildren and foster children, and spouses are not included. An employee omitted from an offer can still trigger a section 4980H(b) payment when applicable.
- **The (b) penalty has a cap.** It can never exceed what the (a) penalty would have been. With 80 full-time employees in 2026, $5,010 each for subsidized employees could not total more than $167,000.
- **How the IRS bills it.** Review any Letter 226-J against your offer, payroll and tax-reporting records. The Employer Reporting Improvement Act provides at least 90 days to respond before assessment and a six-year assessment period tied to the return due date or actual filing date, whichever is later, under its effective-date rules. Use the letter's deadline and obtain help with disputed employee or offer data.
- **Reporting is separate.** File the required Forms 1094-C and 1095-C even if no employer shared responsibility payment is owed. Electronic returns generally are due March 31 after the coverage year, adjusted for weekends and holidays. Employee statement furnishing has a conditional alternative website-notice and on-request process. Confirm the tax-year instructions, state requirements and any extension before choosing it. Filing and furnishing failures have separate penalty rules and reasonable-cause provisions.

## What to do with your result

1. **Under 40: note the date and move on** If the full related-employer count and applicable exceptions confirm non-ALE status, no federal employer shared responsibility payment applies. You may still choose to offer coverage: compare options in our [guide to the best health insurance for small business](https://www.getprescience.com/guides/best-health-insurance-for-small-business).
2. **40 to 49: count monthly from now on** Track full-time employees and part-time hours every month in a spreadsheet or your payroll system. Hiring plans for next year decide your status for the year after, so check the count before every big hiring push.
3. **50 or more: pick a coverage offer before January 1** Offer at least one plan that provides minimum value to at least 95% of full-time employees and their children. Use the [affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator) to set the employee's share for the cheapest self-only plan.
4. **Decide how you'll identify full-time employees** Use the permitted regulatory categories when choosing monthly or look-back measurement, such as salaried and hourly employees. Document the method and review special transition rules before changing it. Do not create arbitrary named-person categories.
5. **Set up 1094-C and 1095-C reporting** Your payroll provider, PEO or benefits platform usually prepares the forms. Make sure it receives coverage offer codes for each month, not only enrollment data.
6. **Answer any Letter 226-J quickly** Check the IRS list of employees against your offer records, collect proof of offers and waivers, and respond within 90 days.

**Plan coverage for the workforce you counted**

Keep the statutory ALE calculation separate from the employees enrolling in the quoted plan. Use the actual census and contribution policy to compare coverage while you review the employer requirements.

[Compare coverage for my workforce](https://www.getprescience.com/quote)

[Check the affordability side](https://www.getprescience.com/tools/aca-affordability-calculator)

## Growing past 50

Crossing the ALE threshold is a reason to review enrollment offers, employee contributions and reporting responsibilities together. Plan price and employer compliance are separate questions. I would assign one owner to the monthly hours record and another to reconciling offers with the year-end filing.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Crossing 50 means offering affordable, minimum-value coverage to 95% of full-time employees. Diamond's quote shows the monthly cost before you commit, so you can test affordability first.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**How do you calculate full-time equivalent employees for the ACA?**

Each month, add the hours of employees who aren't full-time (at most 120 per person) and divide by 120. Add that to the month's full-time employees, average the 12 months of the prior year and round down.

**Are part-time employees counted toward the 50-employee threshold?**

Yes, as full-time equivalents. But penalties are only calculated on full-time employees, and part-timers don't have to be offered coverage.

**When does a new company become an ALE?**

A company that did not exist on any business day in the prior year is an ALE if it reasonably expects to average 50 or more full-time employees, including equivalents, in the current year and actually does.

**What is the ALE penalty for 2027?**

$3,780 per full-time employee after the first 30 for not offering coverage, and $5,670 per subsidized full-time employee for unaffordable coverage (IRS Revenue Procedure 2026-22). For 2026 the amounts are $3,340 and $5,010.

**Do employees hired through a PEO count toward the 50?**

Yes. A PEO handles payroll and benefits, but your company is still the common-law employer, so PEO employees count toward your ALE status.

**Do commonly owned companies count together?**

Yes. Companies in the same controlled group or affiliated service group under Section 414 are combined for the ALE test. If the group reaches 50, every member is an ALE member, even one with only a few employees.

**If I cross 50 mid-year, do I have to offer coverage right away?**

For an existing employer, generally the prior-year average controls. New employers, predecessors and related employers require separate review. Crossing 50 in 2026 does not by itself determine either year's obligations.

**Does the seasonal worker exception apply to any temporary staff?**

Only if the workforce exceeded 50 for 120 days (or four calendar months) or fewer during the year and everyone above 50 in that time was a seasonal worker.

## Sources

- [IRS, Determining if an employer is an applicable large employer](https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
- [IRS, Questions and answers on employer shared responsibility](https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act)
- [IRS, Employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)
- [IRS Revenue Procedure 2025-26 (2026 employer mandate penalties)](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [IRS Revenue Procedure 2026-22 (2027 employer mandate penalties)](https://www.irs.gov/pub/irs-drop/rp-26-22.pdf)
- [IRS, Identifying full-time employees](https://www.irs.gov/affordable-care-act/employers/identifying-full-time-employees)
- [Employer Reporting Improvement Act, H.R. 3801 (2024)](https://www.congress.gov/bill/118th-congress/house-bill/3801)
- [26 CFR 54.4980H-1, definitions and owner exclusions](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-1)
- [IRS, Forms 1094-C and 1095-C instructions](https://www.irs.gov/instructions/i109495c)
- [26 CFR 54.4980H-2, ALE and seasonal rules](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-2)
- [26 CFR 54.4980H-3, monthly and look-back measurement](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-3)

# COBRA cost calculator

Source: https://www.getprescience.com/tools/cobra-cost-calculator
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-13
Updated: 2026-10-28
Cite as: Aditya Jain, MD. "COBRA cost calculator." Prescience, October 28, 2026. https://www.getprescience.com/tools/cobra-cost-calculator

COBRA generally lets qualified beneficiaries continue an employer plan after a qualifying event causes loss of coverage. The usual premium cap is 102% of the applicable plan cost, including the former employer contribution. I use this calculator to estimate that premium, then check eligibility, duration, subsidies and the actual election notice.

- **Usual federal premium cap:** 102% of applicable plan cost
- **Disability premium exception:** Up to 150%, subject to extension rules
- **Common maximum periods:** 18, 29 or 36 months; exceptions apply
- **Employer size test:** Generally 20+, using prior-year rules

## Estimate COBRA premiums

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

The full premium is on the employer's rate sheet, or ask HR. Paycheck deductions only show the employee's share, which is why COBRA often costs several times what someone paid while employed.

> **What this calculator does not decide:** The calculator is a premium illustration. It does not determine a qualifying event, disability eligibility, a second-event extension or a state continuation right. It holds the entered premium constant; renewal rates and employer subsidies can change what you actually pay. Use the administrator's applicable premium, especially for a self-funded plan.

## What COBRA costs at average 2025 premiums

KFF's 2025 Employer Health Benefits Survey puts the average employer plan at $9,325 a year for single coverage and $26,993 for family coverage, about $777 and $2,249 a month. Workers paid $1,440 and $6,850 of that on average. The examples below use those averages; your plan's rates will differ.

**Single coverage after a job loss**

Illustrative. An employee on single coverage leaves. The plan's full premium is $777 a month, and the employer charges the maximum 102%.

- Full monthly premium: $777
- COBRA premium (102%): $792.54
- What they paid while employed: about $120
- Total for 18 months: $14,265.72

COBRA costs about 7 times what this person paid from their paycheck. Over the full 18 months it's $14,265.72.

**Family coverage after a job loss**

Illustrative. A parent covering a spouse and two children leaves. The full family premium is $2,249 a month.

- Full monthly premium: $2,249
- COBRA premium (102%): $2,293.98
- Average worker share while employed: $570.83
- Total for 18 months: $41,291.64

The family's monthly cost goes from about $570.83 to $2,293.98. That is the number to compare against marketplace plans.

**Family coverage with a disability extension**

Illustrative. Same family, assuming a timely Social Security determination of disability during the first 60 days of COBRA, continued disability through the required period and timely notice to the plan. The plan charges 102% for months 1 to 18 and 150% for months 19 to 29.

- Months 1–18 at 102%: $2,293.98/month
- Months 19–29 at 150%: $3,373.50/month
- Total for 29 months: $78,400.14

This scenario assumes the disabled beneficiary remains enrolled and no second-event rule changes the cap. A second qualifying event during the original 18 months can preserve the 102% cap. A later second event can allow 150% beyond month 29 while the disabled beneficiary is covered. Ask the administrator which rule applies before relying on the calculator.

**A spouse after divorce**

Illustrative. A former spouse keeps single coverage after a divorce. The full premium is $777 a month.

- COBRA premium (102%): $792.54
- Maximum length: 36 months
- Total if kept the whole time: $28,531.44

A spouse or dependent can have a 36-month maximum when the event causes the required loss of coverage. Medicare entitlement alone often does not cause a loss under an active employee plan. Divorce and loss of dependent eligibility require timely notice under the plan's procedure. These totals also assume an unchanged premium, although actual rates may renew.

## How COBRA pricing and timing work

**How long COBRA lasts**

| What happened | Who can elect | Maximum coverage |
| --- | --- | --- |
| Job ended (not for gross misconduct) or hours cut | Employee, spouse and children | 18 months |
| Job loss or reduced hours with a qualifying disability determination and timely notice | Everyone in the family | 29 months |
| Divorce, death, Medicare entitlement or dependent status loss, when it causes qualifying coverage loss | Spouse and children | 36 months |

**COBRA deadlines**

| Step | Who | Deadline |
| --- | --- | --- |
| General notice of COBRA rights | Plan administrator to new enrollees | Within 90 days after coverage starts |
| Notice of job loss, cut in hours, death or Medicare entitlement | Employer to plan administrator | Within 30 days of the event |
| Notice of divorce or a child losing eligibility | Employee or family member to the plan | At least 60 days allowed (plan sets the deadline) |
| Election notice | Plan administrator to everyone who lost coverage | Generally 14 days after employer notice; if employer is administrator, generally 44 days after the event or applicable later coverage-loss date |
| Electing COBRA | Each qualified beneficiary | At least 60 days from the notice or the loss of coverage, whichever is later |
| First premium | The person electing | At least 45 days after electing |
| Later premiums | The person on COBRA | Grace period of at least 30 days |
| Disability extension | The family to the plan | Follow the plan procedure; generally at least 60 days from the latest applicable determination, event, coverage-loss or notice date, and before the initial 18 months end |

- People have **60 days** to elect COBRA after their notice or coverage loss, whichever is later.
- The first payment is due **45 days** after electing, and covers back to the day coverage ended, so there's no gap.
- Later payments have a **30-day grace period.** A small underpayment (no more than the lesser of $50 or 10% of the premium) counts as full payment unless the plan gives notice and time to pay the difference.
- The usual federal cap is 102% of applicable plan cost. Disability and second-event rules can change the cap, as explained above. An employer may charge less or subsidize coverage.
- Each person in the family can elect separately. A spouse can keep COBRA even if the employee doesn't.

> **Under 20 employees:** Federal COBRA generally covers private-sector plans of employers with at least 20 employees on more than half of typical business days in the prior year. Church plans and some other arrangements are excluded; public-sector continuation has separate administration. Many states have continuation laws for smaller groups, often called mini-COBRA; see the rules in your [state guide](https://www.getprescience.com/small-business-health-insurance).

The [federal COBRA premium regulation](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980B-8) includes the disability and second-event exceptions.

## Edge cases employers and employees get wrong

- **Counting to 20.** An employer is subject to federal COBRA if it had 20 or more employees on more than half of its typical business days in the prior calendar year. Part-time employees count as a fraction based on hours.
- **State continuation.** State laws can apply to insured plans below the federal threshold and can have different premium limits or extension rules. Verify the employer size, policy type and state regulator's requirements before using the federal calculator for a state continuation estimate.
- **A second qualifying event.** A spouse or child may extend continuation to 36 months from the original event after a qualifying second event, with timely notice. The second event must satisfy the rule, including that it would cause coverage loss absent the first event.
- **Medicare.** A person who becomes entitled to Medicare after electing COBRA can lose COBRA. If the employee became entitled to Medicare less than 18 months before leaving, the spouse and children can keep COBRA for up to 36 months from the Medicare date.
- **Gross misconduct.** Federal COBRA excludes termination for gross misconduct as a qualifying termination event. Do not assume that an ordinary performance dismissal meets that standard. Have the facts reviewed before denying continuation on that basis.
- **Early termination.** COBRA can end before the maximum if premiums aren't paid on time, the employer stops offering any group health plan, or the person gets other group coverage or Medicare after electing.
- **Paying with an HSA.** COBRA premiums are a qualified medical expense, so someone with an HSA can pay them tax-free.
- **Severance that pays COBRA.** Employers can subsidize part or all of the premium for a set number of months. Put the dates and amounts in the separation agreement.

## What employers risk by getting COBRA wrong

A missed required COBRA notice can expose the responsible party to tax or ERISA consequences. The section 4980B excise tax is generally $100 per affected person per day, with a $200 family cap for the same failure. Statutory exceptions, correction relief and other caps can apply. Under ERISA, a court may impose up to $110 a day for certain administrator notice failures; that award is discretionary, not an automatic invoice.

**One missed election notice**

Illustrative exposure calculation only. Assume a taxable COBRA failure affects an employee, spouse and child for 182 days and no exception, correction relief or other statutory cap changes the calculation.

- Excise tax, family cap: $200 a day
- Days: 182
- Excise tax exposure: $36,400

182 × $200 = $36,400 before considering applicable relief and caps. This is not a prediction of tax assessed or an ERISA award. Preserve the event record, notice, mailing evidence and correction steps so an adviser can evaluate what actually happened.

## Is COBRA worth it?

COBRA continues the employer plan subject to the same changes that affect similarly situated active members. That may preserve current-year deductible progress. A Marketplace plan may cost less after any available credit, but compare real premiums, provider access, medicines and maximum spending. Losing job-based coverage generally opens a Marketplace enrollment window around the loss; verify the effective date before cancelling anything.

- **Choose COBRA if** someone is pregnant, in active treatment, or has met most of the deductible this year; if your doctors aren't in marketplace networks; or if you expect new job coverage within a few months.
- **Compare a Marketplace plan if** its actual premium and benefit terms fit your needs. A subsidy depends on household eligibility, not simply being unemployed. Check both premium and covered-care costs instead of assuming COBRA is always more expensive overall.
- **Use the election window.** You have 60 days to elect, and coverage is retroactive. Some people wait and only elect if they need care, though they then owe every premium back to the start.
- **Mind the timing.** Voluntarily ending COBRA early generally does not create a Marketplace special enrollment period. Exhausting COBRA or losing an employer contribution may qualify. Open-enrollment dates and effective-date rules depend on the coverage year and Marketplace; check the live enrollment page instead of assuming last year's window still applies.

## What an employer does when someone leaves

1. **Record the qualifying event** Note the last day of coverage under your plan. Many plans end coverage on the last day of the month of termination.
2. **Notify the administrator within 30 days** If a carrier or COBRA vendor administers COBRA, tell them about the termination, cut in hours, death or Medicare entitlement.
3. **Send the election notice** Generally within 14 days after the administrator receives employer notice; when the employer is administrator, generally within 44 days after the event or the applicable later loss of coverage. Use the DOL model notice and mail it to the last known address, addressed to the spouse too.
4. **Set the premium** Determine the applicable premium for the 12-month determination period and the amount charged, normally no more than 102%. The rules permit certain mid-period increases, including ending a subsidy or changing coverage tiers. Tell them the amount and due dates.
5. **Track elections and payments** Allow 60 days to elect, 45 days for the first payment and a 30-day grace period after that. Reinstate coverage back to the loss date when they elect.
6. **End coverage correctly** If coverage ends before the maximum period, for example after a missed premium, send a notice explaining why and the date it ended.

**Changing the company plan? Prepare the replacement comparison**

Use the employee census and proposed effective date to compare written coverage and costs. Keep existing continuation responsibilities separate; a new quote does not change a former employee's COBRA rights or deadlines.

[Compare plans for my company](https://www.getprescience.com/quote)

## COBRA on a Prescience plan

We run COBRA administration for Prescience employers: notices, elections and premium collection, so HR doesn't track deadlines by hand.

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** On a Diamond plan, COBRA notices, elections and premium collection are handled for you, and departing employees keep the same effective $0 deductible plan.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**How much does COBRA cost per month?**

Up to 102% of the plan's full monthly premium, the employer's and employee's shares combined. At the 2025 average single premium of $777 a month, that's about $793. For family coverage at $2,249, it's about $2,294.

**Can COBRA cost more than 102%?**

Yes, under disability-extension rules. The 150% cap generally requires the disabled beneficiary to remain covered. A qualifying second event can change both duration and the applicable cap, including in some cases allowing 150% through month 36. The calculator does not decide those exceptions.

**How long can you stay on COBRA?**

Generally 18 months for termination or reduced hours, up to 29 with a qualifying disability extension, or 36 for specified dependent events. The event must cause qualifying coverage loss, notices must be timely, and early termination rules apply.

**Do small employers have to offer COBRA?**

Federal COBRA generally uses a prior-year 20-employee test, counting part-time workers fractionally, with exceptions including church plans. Many states have continuation laws for smaller employers.

**How long do I have to elect COBRA?**

At least 60 days from the date of the election notice or the date coverage ended, whichever is later. Coverage is retroactive to the loss date if you elect and pay.

**When is the first COBRA payment due?**

At least 45 days after you elect. It covers every month back to the day your coverage ended. Later payments have a grace period of at least 30 days.

**Can I switch from COBRA to a marketplace plan?**

Usually during the loss-of-coverage special enrollment window, open enrollment, or another qualifying event such as COBRA exhaustion or loss of an employer COBRA contribution. Voluntarily dropping COBRA early generally does not qualify by itself.

**What happens if an employer doesn't send a COBRA notice?**

The employer can owe an excise tax of $100 a day per person ($200 per family), and a court can award up to $110 a day per person under ERISA, plus legal fees.

## Sources

- [DOL, Employer guide to COBRA](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra)
- [KFF, 2025 Employer Health Benefits Survey (original survey)](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [HealthCare.gov, COBRA and Marketplace enrollment](https://www.healthcare.gov/unemployed/cobra-coverage/)
- [IRS Publication 969, HSA, FSA and HRA rules](https://www.irs.gov/publications/p969)
- [26 CFR 54.4980B-8, premiums, underpayments and disability exceptions](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980B-8)
- [29 CFR 2590.606-4, election notice timing](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-L/part-2590/subpart-A/section-2590.606-4)
- [26 USC 4980B, tax and relief provisions](https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleD-chap43-sec4980B.htm)
- [29 CFR 2575.502c-1, discretionary ERISA penalty](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-G/part-2575/subpart-A/section-2575.502c-1)
- [HealthCare.gov, special enrollment and loss of coverage](https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/)

# ICHRA affordability calculator for 2026 and 2027

Source: https://www.getprescience.com/tools/ichra-affordability-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-20
Updated: 2026-10-28
Cite as: Rishab Jain. "ICHRA affordability calculator for 2026 and 2027." Prescience, October 28, 2026. https://www.getprescience.com/tools/ichra-affordability-calculator

An individual coverage HRA is affordable when the lowest-cost silver plan's self-only premium, minus your monthly allowance, is no more than 9.96% of the employee's income in 2026 or 10.22% in 2027. Employers can test against the same safe harbors used for group plans. Enter the silver premium and your allowance to see the smallest allowance that passes.

- **2027 affordability limit:** 10.22%
- **2026 affordability limit:** 9.96%
- **Benchmark plan:** Lowest-cost silver, self-only
- **Prescience Choice:** $20 per enrolled employee/month

## Find the smallest affordable allowance

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

I built this because almost every ICHRA conversation I have with a founder starts with the same question: how much do we have to give people? The answer is set by one number per employee, the cost of the cheapest silver plan where they work, and the calculator turns that into the minimum allowance. Run it for your oldest employee in each class, because silver premiums rise with age.

## How the ICHRA affordability test works

With a group plan, affordability looks at what the employee pays for your cheapest plan. With an ICHRA there is no plan you offer, so the test uses a stand-in: the **lowest-cost silver plan (LCSP)** for self-only coverage on the exchange. The employee's "required contribution" is the LCSP premium minus the monthly allowance you give them for self-only coverage.

If that required contribution is at or below the affordability percentage of income (9.96% in 2026, 10.22% in 2027), the ICHRA is affordable. For an applicable large employer, an affordable ICHRA that also counts as minimum value protects you from the section 4980H(b) penalty. For any size employer, it decides whether employees can drop the ICHRA and take a premium tax credit instead.

**What the ICHRA test compares**

| Input | Which number to use |
| --- | --- |
| Benchmark premium | Lowest-cost silver plan, self-only, for the employee's age |
| Location (employer safe harbor) | The employee's primary work site; remote workers use their home |
| Allowance | The self-only amount you make available to that employee class |
| Income | One of three safe harbors: federal poverty line, rate of pay or W-2 wages |

Family members don't change the employer test. You can offer larger allowances for families, but only the self-only amount and the self-only silver premium count toward affordability.

## Safe harbors that make the test practical

You don't know an employee's household income, and the exchange prices plans by ZIP code and age. The IRS gives ICHRA employers three simplifications so the test can be run before the plan year:

- **Location safe harbor.** Use the LCSP at the employee's primary site of employment instead of where they live. Remote employees work from home, so their home ZIP is the site.
- **Look-back month.** Use the silver premiums for January of the prior calendar year when your plan year starts in a calendar year. This lets you set 2027 allowances using premiums that are already published.
- **Income safe harbors.** The same federal poverty line, rate of pay and W-2 safe harbors used for group coverage. The calculator applies all three.

The FPL safe harbor is the strictest and simplest: in 2027 an employee can be asked to pay at most $135.92 a month in the contiguous states and DC. If your allowance covers the silver premium minus $135.92 for everyone, you never need payroll data to prove affordability.

## Worked examples

**A 40-year-old engineer in Austin, FPL safe harbor, 2027**

Illustrative. The lowest-cost silver plan for a 40-year-old at the work ZIP costs $520 a month. The company offers a $400 monthly self-only allowance.

- Silver premium: $520.00
- Allowance: $400.00
- Employee's required contribution: $120.00
- Most allowed (FPL, 2027): $135.92

**Affordable,** with $15.92 of room. The smallest affordable allowance is $384.08 a month.

**A 60-year-old in the same office**

Illustrative. Silver premiums for a 60-year-old are often about 2.5 times a 40-year-old's. Here the LCSP is $1,300 a month and the allowance is still $400.

- Silver premium: $1,300.00
- Allowance: $400.00
- Required contribution: $900.00
- Most allowed (FPL, 2027): $135.92

**Unaffordable** under FPL. The company can raise allowances by age (ICHRA allows up to a 3:1 ratio for the oldest to youngest), or test this employee under rate of pay if their salary supports it: at $120,000 a year, 10.22% of monthly pay is $1,022, so $900 passes.

## Rules that trip employers up

- **Same terms within a class.** Allowances must be the same for everyone in a class (for example full-time, part-time, salaried, hourly, or by rating area), except that they can rise with age and family size.
- **No choosing between ICHRA and group in one class.** You can't offer the same class both a traditional group plan and an ICHRA.
- **Opt-out.** Employees must be able to opt out of the ICHRA each year, and anyone who opts out of an unaffordable ICHRA can claim premium tax credits.
- **Notice.** Send each eligible employee a written notice at least 90 days before the plan year starts.
- **Coverage verification.** Employees must have individual health insurance (or Medicare) to be reimbursed, and the administrator must verify it.

> **Where most small teams land:** For a company under 50 full-time equivalents there's no employer penalty, so affordability mainly decides who can choose subsidies instead. I still recommend designing for affordability: it's how you know the allowance is enough to buy a real plan.

## How I'd set allowances for a real team

The calculator answers the compliance question for one person. Designing allowances for a whole company is a slightly different exercise, and it's the one I walk founders through most often. The goal is an allowance that is affordable for everyone, buys a plan people actually want, and keeps the company's monthly spend predictable.

1. **List every employee's age and work ZIP code** Silver premiums are set by age and rating area, so these two facts drive almost everything. Remote employees use their home ZIP. Group people by state or rating area if you have more than a handful of locations.
2. **Look up the lowest-cost silver premium for each person** Use HealthCare.gov's plan preview or your state exchange, for self-only coverage at each age. Under the look-back rule you can use the prior January's premiums for a calendar-year plan.
3. **Pick a safe harbor** FPL is simplest because it needs no pay data, but it demands the largest allowance. Rate of pay lets well-paid teams pass with smaller allowances. Most venture-backed companies I talk to can pass under rate of pay with room to spare.
4. **Find the worst case in each class** The oldest employee in a high-cost area usually sets the floor. If one person forces a large allowance for everyone, age-banded allowances (up to 3:1) solve it without overpaying younger employees.
5. **Decide how generous to be above the minimum** Affordable only means the employee pays no more than about a tenth of pay for the cheapest silver plan. Many companies give enough to cover a mid-priced silver or gold plan so the benefit feels like real coverage, not a discount.
6. **Add dependents if you want to** Family allowances don't affect affordability, but they decide whether parents can afford to cover their kids. A common pattern is a set amount per employee plus a smaller amount per dependent.

Two practical notes. First, individual premiums can change a lot from one year to the next (many states saw double-digit increases for 2026), so rerun this every fall before your 90-day notice goes out. Second, the employee's actual plan choice doesn't matter for the test: if they pick a more expensive gold plan, they pay the difference, and the ICHRA is still affordable.

**Which safe harbor to start with**

| Your team | Start with | Why |
| --- | --- | --- |
| Everyone well paid (for example $90,000+) | Rate of pay | Smallest compliant allowance |
| Mixed hourly and salaried staff | Rate of pay by category | Hourly and salaried can use different safe harbors |
| You want one number for everyone | Federal poverty line | No payroll data needed, but the largest allowance |
| You can't confirm pay until year-end | W-2 as a backup only | You only know Box 1 wages after the year ends |

**Turn the allowance model into a Choice comparison**

Use the actual employee locations and family tiers to review local policies and allowances. Keep administration charges and employee costs separate, and confirm the affordability inputs for the written proposal.

[Start my Choice comparison](https://www.getprescience.com/employer/choice)

[Compare the group-plan alternative](https://www.getprescience.com/compare/ichra-alternative)

## Running your ICHRA with Prescience Choice

Once you know your allowance, someone has to show employees the plans available to them, help them enroll, verify coverage and track reimbursements. That's what Prescience Choice does, and it's priced below the platforms most founders compare us to.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** We use the same affordability math as this calculator when we set up your allowances, so every class passes before enrollment opens.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

If your team is about 15 people or more in a few states, compare a group plan too. A group plan with an effective $0 deductible can cost less per person than allowances large enough to buy good individual coverage for older employees. Our [savings calculator](https://www.getprescience.com/savings) compares both.

## Frequently asked questions

**What makes an ICHRA affordable in 2027?**

The lowest-cost silver plan's self-only premium minus the employee's monthly self-only allowance must be at or below 10.22% of income, measured under one of the IRS safe harbors. In 2026 the limit is 9.96%.

**Which silver plan do I use for an ICHRA?**

The lowest-cost silver plan available on the exchange for self-only coverage at the employee's age. For the employer safe harbor, use the employee's primary work location; for remote workers that is their home.

**Does a family allowance affect ICHRA affordability?**

No. The test uses only the self-only allowance and the self-only silver premium. Larger family allowances are allowed but don't count.

**Can I vary ICHRA allowances by age?**

Yes. Allowances may increase with age, as long as the oldest employee's amount is no more than three times the youngest's within the class, and they may increase with the number of dependents.

**Do small businesses need an affordable ICHRA?**

There's no federal penalty under 50 full-time equivalents. But if the ICHRA is unaffordable, employees can opt out and claim premium tax credits, and if it is affordable, anyone who accepts it can't also take a credit.

**What does Prescience Choice cost?**

$20 per enrolled employee per month by default, with no setup or platform fee. The allowance you set is separate and goes to employees' premiums.

**Is ICHRA affordability the same as group plan affordability?**

The percentage and income safe harbors are the same. The difference is the cost being tested: the silver premium minus the allowance, instead of the employee's share of your cheapest group plan.

## Sources

- [26 CFR 54.4980H-5, affordability safe harbors including ICHRA](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-5)
- [IRS Revenue Procedure 2026-26 (2027 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-26-26.pdf)
- [IRS Revenue Procedure 2025-25 (2026 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [CMS, Health Reimbursement Arrangements (ICHRA) overview](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [Final ICHRA regulations, Federal Register (June 20, 2019)](https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans)
- [HHS ASPE, Poverty guidelines](https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines)

# Employer health insurance cost calculator

Source: https://www.getprescience.com/tools/employer-health-insurance-cost-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-21
Updated: 2026-10-28
Cite as: Rishab Jain. "Employer health insurance cost calculator." Prescience, October 28, 2026. https://www.getprescience.com/tools/employer-health-insurance-cost-calculator

The average employer plan cost $9,325 a year for single coverage and $26,993 for family coverage in 2025, and employers paid about 84% and 74% of those premiums. That works out to roughly $657 a month per single employee and $1,679 per family. Enter your headcount and premiums to see your company's monthly cost, its cost per employee and what a 10–20% lower premium would save.

- **Average single premium (2025):** $777/month
- **Average family premium (2025):** $2,249/month
- **Employer share, single / family:** 84% / 74%
- **Employer cost, single:** About $657/month

## Estimate your company's cost

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

The defaults are national averages from KFF's 2025 Employer Health Benefits Survey, so they describe a typical plan, not yours. Replace them with the monthly premiums on your renewal or quote and the share you actually pay. Count employees by the coverage tier they enrolled in, not by headcount: people who waive coverage cost nothing in premiums.

**Replace the assumed premium with a proposal for your team**

The calculator uses the inputs you choose. Use your actual employee and family tiers to compare a written proposal with the employer contribution and employee costs you have modeled.

[Get my team's quote](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## What employers pay on average

Founders ask me some version of "how much does it cost to give employees health insurance?" on almost every first call. The honest answer is that it depends on four things: how many people enroll, which tiers they pick, your premiums and the share you pay. Here are the national averages the calculator starts from.

**Average annual premiums and contributions, 2025 (KFF)**

|  | Single | Family |
| --- | --- | --- |
| Total premium | $9,325 | $26,993 |
| Worker contribution | $1,440 | $6,850 |
| Employer contribution | $7,885 | $20,143 |
| Employer share | 84% | 74% |
| Employer cost per month | About $657 | About $1,679 |

Small firms tend to pay a similar premium for single coverage but often ask workers to pay more for family coverage, so their employer share for families is usually lower. Many startups pay 100% for employees and 50% or more for dependents, which puts them above the average on single coverage and close to it on family.

## Worked example: a 12-person startup

**8 employees on single coverage and 4 on family, at KFF averages**

Illustrative. Premiums of $777.08 single and $2,249.42 family a month, with the employer paying 84% and 74%.

- Total premiums per month: $15,214
- Employer pays per month: $11,880
- Employer pays per year: $142,563
- Per covered employee per month: $990
- Employees pay per month, in total: $3,334

About $142,600 a year for the company. A plan priced 10–20% lower on the same premiums would save roughly $18,300 to $36,500 a year, before any change in how the cost is split.

**Paying 100% for employees and 50% for dependents**

Illustrative. Same team and premiums. The employer pays all of single coverage and the employee's portion of family coverage plus half of the dependent portion.

- Single, employer pays: 8 × $777.08 = $6,217
- Family, employer pays: 4 × ($777.08 + 50% × $1,472.34) = $6,053
- Employer pays per month: $12,270

About $147,200 a year: roughly $4,700 more than the KFF-average split, in exchange for $0 premiums for single employees. Enter 100% single and about 67% family in the calculator to model it.

## What drives your number up or down

- **Age and location.** Small-group premiums are rated by each employee's age and your ZIP code. A team of 25-year-olds in Texas pays far less than a team of 50-year-olds in New York.
- **Plan design.** A PPO with a low deductible costs more than an HMO with a high one. Most companies offer one richer plan and one cheaper plan.
- **Tier mix.** One family enrollment costs about as much as three single ones.
- **Your contribution policy.** Paying a flat dollar amount instead of a percentage keeps your cost predictable when premiums rise.
- **Funding model.** Fully insured premiums include the carrier's margin and state premium taxes. Other models can remove some of that. Our guide to [funding models](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured) explains the trade-offs.

> **Don't forget the other costs:** Premiums are most of the bill, but PEO admin fees, broker commissions built into premiums and benefits software can add $50 to $200 per employee per month. Ask for every fee in writing when you compare quotes.

## How company size changes the picture

National averages hide a big difference between small and large companies. In KFF's survey, small firms (3 to 199 workers) and large firms pay similar total premiums for single coverage, but small firms are more likely to offer high-deductible plans and to ask workers to pay more toward family coverage. That's how small companies keep premiums in line with large ones: the cost moves to employees through deductibles and family contributions.

For a startup, the practical question is what share to pay. In the companies I talk to, three patterns cover almost everyone:

- **100% for employees, 0% to 50% for dependents.** The most common choice among venture-backed startups. It makes the offer easy to explain ("your coverage is free") and keeps family costs manageable.
- **A fixed dollar amount per tier.** For example, $700 a month toward any employee and $1,400 toward any family. The company's cost doesn't move when premiums rise; employees absorb increases unless you raise the amounts.
- **The KFF average split, about 84% and 74%.** Common among established small businesses, and the default in this calculator.

To model a fixed-dollar contribution, divide your dollar amount by the premium and enter the result as a percentage. A $700 contribution toward a $777 single premium is about 90%.

**Employer cost per month for one employee, by share paid, at KFF 2025 average premiums**

| Employer share | Single ($777 premium) | Family ($2,249 premium) |
| --- | --- | --- |
| 50% | $389 | $1,125 |
| 74% | $575 | $1,665 |
| 84% | $653 | $1,890 |
| 100% | $777 | $2,249 |

Employer contributions are tax-deductible for the business and tax-free to employees, so a dollar of health benefit is worth more to an employee than a dollar of salary. That's one reason a richer health plan often beats an equivalent raise for retention. Our guide on [what employers pay](https://www.getprescience.com/guides/how-much-do-employers-pay-for-health-insurance) has more benchmarks.

## Ways to lower the cost without cutting benefits

1. **Get a quote outside your PEO or carrier** Renewals are priced to stick. A competing quote is the fastest way to find out whether your rate is fair.
2. **Set contributions in dollars** A fixed employer amount per tier caps how much a renewal increase can cost the company.
3. **Pay premiums pre-tax** A Section 125 plan saves the company 7.65% payroll tax on every dollar employees contribute. Use the [Section 125 calculator](https://www.getprescience.com/tools/section-125-tax-savings-calculator) to size it.
4. **Consider ICHRA for small or spread-out teams** A fixed monthly allowance makes cost fully predictable. Check the minimum allowance with the [ICHRA affordability calculator](https://www.getprescience.com/tools/ichra-affordability-calculator).

## What employees see

The employer's number is only half of the story. When I review a company's benefits, I also look at what a typical employee pays out of their own paycheck, because that's what they compare when a recruiter calls. At the KFF averages, an employee on single coverage pays about $120 a month and one covering a family pays about $571 a month, before deductibles and copays.

Those amounts come out pre-tax for most people, so take-home pay drops by less. You can see the per-paycheck effect with the [paycheck calculator](https://www.getprescience.com/tools/health-insurance-paycheck-calculator). If you pay 100% of employee-only premiums, single employees pay nothing, which is a simple and visible perk in an offer letter.

- **Deductibles move cost to employees too.** KFF found the average single deductible for covered workers was over $1,800 in 2025, and higher at small firms. A low premium share with a high deductible can still feel expensive.
- **Family coverage is where employees feel it.** At a 74% employer share, an employee covering a family pays over $6,800 a year in premiums alone.
- **Waivers save money but cost retention.** If people waive because the plan is expensive, you save on premiums but risk losing them to a company with a better plan.

## What the same team would pay with Prescience

The calculator's 10–20% line isn't hypothetical for us: it's the range our quotes usually land in against comparable fully insured coverage. You can see your real number in about a minute.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Your quote shows one monthly cost for the whole plan, fixed before the plan starts, so the number you put in this calculator stops moving at renewal.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Prefer a fixed allowance per person? Choice lets you set exactly what the company spends each month.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**How much do employers pay for health insurance per employee?**

On average in 2025, about $7,885 a year ($657 a month) for an employee on single coverage and $20,143 a year ($1,679 a month) for family coverage, according to KFF.

**What percentage of health insurance do employers pay?**

About 84% of the premium for single coverage and 74% for family coverage on average in 2025. Many startups pay 100% for employees.

**How much does it cost to offer health insurance to 10 employees?**

At KFF averages and the average split, about $6,500 a month if all ten take single coverage, or about $10,600 if four of them cover their families. Your own quote can differ a lot by age, location and plan.

**Is there a minimum employer contribution?**

Most small-group carriers require the employer to pay at least 50% of the employee-only premium. ICHRA and QSEHRA have no such minimum, though ICHRA allowances affect affordability.

**Are employer health insurance premiums tax-deductible?**

Yes. Employer contributions are a deductible business expense and aren't taxable wages for employees.

**Does this calculator include dental and vision?**

No. It covers medical premiums only. Add dental and vision separately; they usually cost far less per person.

**How accurate is the 10–20% savings line?**

It's an illustration of the range Prescience quotes usually fall in against comparable fully insured coverage. Your quote is the real number.

## Sources

- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits](https://www.irs.gov/publications/p15b)
- [HealthCare.gov, Small business health insurance](https://www.healthcare.gov/small-businesses/employers/)
- [CMS, Market rating reforms (age and geographic rating)](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/market-rating-reforms)
- [U.S. Department of Labor, ERISA](https://www.dol.gov/general/topic/health-plans/erisa)

# HSA contribution calculator for 2026 and 2027

Source: https://www.getprescience.com/tools/hsa-contribution-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-22
Updated: 2026-10-28
Cite as: Rishab Jain. "HSA contribution calculator for 2026 and 2027." Prescience, October 28, 2026. https://www.getprescience.com/tools/hsa-contribution-calculator

You can put up to $4,400 in an HSA for 2026 with self-only coverage, or $8,750 with family coverage. For 2027 the limits rise to $4,500 and $9,000. People 55 and older can add $1,000. Employer contributions count toward the same limit, and a partial year of eligibility lowers it. Enter your situation to see how much you can still contribute and what that is per paycheck.

- **2027 limit, self-only / family:** $4,500 / $9,000
- **2026 limit, self-only / family:** $4,400 / $8,750
- **Catch-up, age 55+:** $1,000
- **2027 HDHP minimum deductible:** $1,750 / $3,500

## Work out your HSA limit

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

"HSA contribution" shows up in our Search Console data more than almost any other benefits term, usually from people trying to figure out how much to set aside per paycheck. The calculator answers exactly that: your limit for the year, minus what your employer puts in, divided across your remaining pay periods.

## HSA and HDHP limits for 2026 and 2027

**IRS HSA and high-deductible health plan figures**

|  | 2026 | 2027 |
| --- | --- | --- |
| HSA limit, self-only | $4,400 | $4,500 |
| HSA limit, family | $8,750 | $9,000 |
| Catch-up contribution (55+) | $1,000 | $1,000 |
| HDHP minimum deductible, self-only | $1,700 | $1,750 |
| HDHP minimum deductible, family | $3,400 | $3,500 |
| HDHP out-of-pocket maximum, self-only | $8,500 | $8,700 |
| HDHP out-of-pocket maximum, family | $17,000 | $17,400 |

Limits apply per calendar year, regardless of your plan year. You have until the tax filing deadline (normally April 15) to make contributions for the prior year, so 2026 contributions can still be made in early 2027.

## What counts toward the limit

- **Your payroll contributions,** pre-tax through a Section 125 plan.
- **Employer contributions,** including any "seed" money or wellness rewards deposited to your HSA.
- **Contributions you make directly** to your HSA provider, which you deduct on your tax return.
- **Not rollovers.** Moving money from another HSA doesn't count, and neither do investment gains.

If you and a spouse both have HSAs and either has family HDHP coverage, you share one family limit, split however you like. Each spouse who is 55 or older adds their own $1,000 catch-up, but only to their own HSA.

## Partial years and the last-month rule

You're HSA-eligible for a month only if you're covered by an HDHP on the first day of that month and have no disqualifying coverage, such as a general-purpose health FSA, Medicare or a non-HDHP plan. Normally your limit is prorated: one-twelfth for each eligible month.

The **last-month rule** is the exception. If you're eligible on December 1, you can contribute the full year's limit. The catch is the testing period: you must stay eligible through December 31 of the following year. If you don't, the extra you contributed becomes taxable income plus a 10% additional tax.

**Starting a new job with an HDHP in June 2027**

Illustrative. A 34-year-old joins a company on May 15, 2027 and is covered by its self-only HDHP from June 1. The employer deposits $500. Paid every two weeks, with 15 paychecks left in the year.

- Eligible months (June–December): 7
- Prorated limit: $4,500 × 7/12 = $2,625
- Minus employer deposit: $2,125
- Per paycheck (15 left): $141.66

Using the last-month rule instead would allow the full $4,500 ($4,000 after the employer deposit, $266.66 a paycheck), but only if they keep HDHP coverage through all of 2028.

## If you contribute too much

Excess contributions are subject to a 6% excise tax for every year they stay in the account. Ask your HSA provider for a "return of excess contribution" before your tax filing deadline; you'll pay income tax on any earnings it made, but not the 6%.

> **Changing jobs mid-year:** Your new employer's payroll system doesn't know what you put in at your old job. Add both employers' deposits and your own when you check your limit.

Read more about how HSAs work in our [HSA guide](https://www.getprescience.com/guides/what-is-an-hsa), and what you can spend the money on in [HSA and HRA eligible expenses](https://www.getprescience.com/guides/hsa-hra-eligible-expenses).

## What an HSA contribution is worth in taxes

An HSA is the only account in the tax code that is tax-free on the way in, while invested and on the way out for qualified medical expenses. Contributions through payroll also skip Social Security and Medicare taxes, which a deduction on your tax return does not.

**Maxing out a self-only HSA through payroll in 2027**

Illustrative. An employee in the 22% federal bracket with 5% state income tax contributes the full $4,500 through a Section 125 plan.

- Federal income tax avoided (22%): $990
- State income tax avoided (5%): $225
- Social Security and Medicare avoided (7.65%): $344
- Total tax saved: $1,559

The $4,500 contribution only reduces take-home pay by about $2,941. California and New Jersey don't exempt HSA contributions from state income tax, so subtract the state line there.

If you contribute directly instead of through payroll, you still get the income tax deduction on Form 8889 but not the 7.65% payroll tax saving. That's why payroll is usually the better route when your employer offers it.

- **Spend or save.** Money spent on qualified medical costs comes out tax-free at any age. Money left in the account rolls over every year and can be invested.
- **After 65,** you can withdraw for any purpose without penalty; non-medical withdrawals are taxed as income, like a traditional IRA.
- **Before 65,** non-medical withdrawals are taxed plus a 20% penalty.
- **Keep receipts.** You can reimburse yourself years later for a medical expense incurred after you opened the HSA, as long as you can document it.

One more reason people search for HSA rules this year: starting in 2026, the One Big Beautiful Bill Act made bronze and catastrophic exchange plans HSA-compatible and let direct primary care arrangements sit alongside an HSA, within limits. If you buy your own coverage, check whether your plan now qualifies.

## For employers: contributing to employee HSAs

If your company offers an HSA-qualified plan, an employer contribution is one of the most tax-efficient benefits you can give. Employer deposits aren't wages: no income tax for the employee and no payroll tax for either side. A $1,000 deposit costs the company $1,000, while an equal raise would cost $1,076.50 after the employer's payroll tax and be worth less to the employee after tax.

- **Comparability rules.** Contributions made outside a cafeteria plan must be comparable for all employees with the same coverage tier, or a 35% excise tax applies. Contributions through a Section 125 plan follow cafeteria plan nondiscrimination rules instead.
- **Deposit timing.** Many employers spread contributions across paychecks; others deposit a lump sum in January. A lump sum is more generous but can't be recovered if the employee leaves.
- **Count it in the limit.** Tell employees what you'll deposit so they can lower their own contributions and avoid excess contributions.
- **It's their money.** HSA balances belong to the employee immediately and go with them when they leave.

Most employers I talk to contribute somewhere between $500 and $1,500 a year for single coverage, often to offset part of the deductible. If you're weighing an HSA plan against a copay plan for your team, our [HDHP vs. copay plan guide](https://www.getprescience.com/guides/hdhp-vs-copay-plan) compares the total cost for typical employees.

**Choosing an employer plan? Compare the HSA budget alongside it**

Use the actual census to price the medical proposal, then confirm its HSA eligibility before setting contributions. Keep the employer premium, account contribution and employee cost-sharing in the same comparison.

[Compare my team's medical plan](https://www.getprescience.com/quote)

[Review the employer HSA questions](https://www.getprescience.com/guides/what-is-an-hsa)

## A year-end HSA checklist

1. **Add up every contribution** Your payroll contributions, your employer's deposits and anything you sent directly, for every job you had this year.
2. **Confirm your eligible months** Count each month you had HDHP coverage on the first day and no disqualifying coverage, including a spouse's general-purpose FSA that could pay your claims.
3. **Top up before the deadline** If you're under your limit, you can still contribute for this year until your tax filing deadline in April. Tell your HSA provider which year the deposit is for.
4. **Remove any excess** If you're over, request a return of excess contribution before the deadline to avoid the 6% excise tax.
5. **File Form 8889** Report contributions and distributions with your tax return. Your HSA provider sends Form 5498-SA and 1099-SA with the numbers you need.

## When an HSA isn't the best deal

HSAs are great tax shelters, but they only exist because the plan underneath has a high deductible. A lot of the people we talk to are putting money in an HSA mainly to cover a deductible they'd rather not have.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** With an effective $0 deductible, employees pay simple copays from the first visit instead of saving up to reach a deductible.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What is the HSA limit for 2027?**

$4,500 for self-only HDHP coverage and $9,000 for family coverage, plus $1,000 if you're 55 or older (IRS Revenue Procedure 2026-24).

**What is the HSA limit for 2026?**

$4,400 for self-only coverage and $8,750 for family coverage, plus the $1,000 catch-up for people 55 and older.

**Do employer HSA contributions count toward the limit?**

Yes. Employer deposits and your own contributions share one annual limit.

**Can I contribute to an HSA if I have Medicare?**

No. You stop being HSA-eligible the month your Medicare coverage starts, and Part A can be backdated up to six months when you sign up after 65.

**When is the deadline for HSA contributions?**

Your tax filing deadline for that year, normally April 15 of the following year, not counting extensions.

**How is the HSA limit prorated?**

One-twelfth of the annual limit for each month you're eligible on the first day, unless you use the last-month rule by being eligible on December 1 and staying eligible for the following year.

**What is the minimum deductible for an HSA-qualified plan in 2027?**

$1,750 for self-only coverage and $3,500 for family coverage, with out-of-pocket maximums of $8,700 and $17,400.

## Sources

- [IRS Revenue Procedure 2025-19 (2026 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS Revenue Procedure 2026-24 (2027 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-26-24.pdf)
- [IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans](https://www.irs.gov/publications/p969)
- [IRS Form 8889 instructions (last-month rule and testing period)](https://www.irs.gov/instructions/i8889)

# How much health insurance takes out of your paycheck

Source: https://www.getprescience.com/tools/health-insurance-paycheck-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-23
Updated: 2026-10-28
Cite as: Rishab Jain. "How much health insurance takes out of your paycheck." Prescience, October 28, 2026. https://www.getprescience.com/tools/health-insurance-paycheck-calculator

The average worker paid $1,440 a year for single coverage and $6,850 for family coverage in 2025, which is about $55 and $263 per paycheck if you're paid every two weeks. Most employers take it out pre-tax, so your take-home pay drops by less than the deduction. Enter your share of the premium and pay schedule to see both numbers.

- **Average worker cost, single (2025):** $120/month
- **Average worker cost, family (2025):** $571/month
- **Biweekly paychecks per year:** 26
- **Payroll tax saved pre-tax:** 7.65% + income tax

## Calculate your deduction

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

Use your share of the premium, which you'll find on your benefits enrollment page or your pay stub, not the plan's full price. If you pay for dental and vision too, add them in: they're usually deducted the same way.

## How the deduction is calculated

Payroll systems convert your annual premium share into equal amounts per paycheck. The formula is simple: monthly share × 12 ÷ number of paychecks. The number of paychecks is what trips people up.

**A $120 monthly premium share by pay schedule**

| Pay schedule | Paychecks per year | Deduction per paycheck |
| --- | --- | --- |
| Weekly | 52 | $27.69 |
| Every two weeks (biweekly) | 26 | $55.38 |
| Twice a month (semimonthly) | 24 | $60.00 |
| Monthly | 12 | $120.00 |

Some employers on a biweekly schedule take deductions from only 24 paychecks and skip the two "extra" paychecks a year. In that case your deduction looks like the semimonthly number. Either way, you pay the same total for the year.

## Why pre-tax deductions cost you less

Most employer plans run premiums through a Section 125 "premium only" plan. Your share comes out before federal income tax, Social Security and Medicare (7.65% together), and usually state income tax. That means every dollar of premium only costs you about 65 to 75 cents of take-home pay.

**Family coverage, paid every two weeks**

Illustrative. You pay $571 a month for family coverage, in the 22% federal bracket with 5% state income tax, pre-tax through Section 125.

- Annual premium share: $6,852
- Deduction per paycheck (26): $263.54
- Tax rate avoided: 22% + 5% + 7.65% = 34.65%
- Taxes saved per year: $2,374.22
- Take-home pay drops by, per paycheck: $172.22

The deduction is $263.54, but your take-home pay only falls about $172 a paycheck. Pre-tax payment is worth about $2,374 a year to you.

Your employer saves too: it doesn't pay its 7.65% share of payroll tax on the money you contribute. See the [Section 125 calculator](https://www.getprescience.com/tools/section-125-tax-savings-calculator) for the company side.

## Is my deduction normal?

- **Single coverage:** the 2025 average was $120 a month. Many startups pay 100%, so $0 is common at venture-backed companies.
- **Family coverage:** the 2025 average was about $571 a month, and higher at small firms, which often pay a smaller share for dependents.
- **Above about 9.96% of pay for single coverage** (10.22% in 2027) may mean the plan isn't "affordable" under the ACA. Check it with the [ACA affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator).

> **The deduction isn't your whole cost:** Premiums are what you pay to have insurance. Deductibles, copays and coinsurance are what you pay when you use it. A cheap premium with a $5,000 deductible can cost more in a bad year than a pricier plan with copays. Our guide to [deductibles, copays and coinsurance](https://www.getprescience.com/guides/deductible-copay-coinsurance-explained) walks through it.

## Your premium share versus your total health costs

The paycheck deduction is the part of health insurance you pay every month whether or not you see a doctor. Your total cost for the year is that premium plus whatever you pay when you get care: the deductible, copays and coinsurance, up to the plan's out-of-pocket maximum.

**Two plans, one bad year**

Illustrative. Plan A costs you $60 a month with a $3,000 deductible. Plan B costs $140 a month with a $500 deductible. You have a $4,000 hospital bill and the plans' coinsurance is the same after the deductible.

- Plan A: premiums + deductible: $720 + $3,000 = $3,720
- Plan B: premiums + deductible: $1,680 + $500 = $2,180

In a healthy year Plan A saves you $960. In a year like this one, Plan B saves you $1,540. If you expect care, a larger paycheck deduction can be the cheaper choice.

When you pick a plan at open enrollment, estimate both a normal year and a bad year. The plan with the smallest paycheck deduction is only the cheapest if you stay healthy.

## When your deduction can change

Pre-tax elections are locked for the plan year. You can change them at open enrollment or within 30 days of a qualifying life event such as marriage, a birth or adoption, or losing other coverage. A mid-year jump in your deduction without one of those usually means a payroll error, so ask HR.

See the full list in our guide to [qualifying life events](https://www.getprescience.com/guides/qualifying-life-events).

## Reading health insurance on your pay stub

Pay stubs label health deductions differently depending on the payroll provider, which is a big reason people can't tell what they're paying. These are the labels I see most often:

**Common pay stub labels for health deductions**

| Label | What it usually means |
| --- | --- |
| MED, MEDICAL, MED PRE-TAX | Your share of the medical premium, deducted pre-tax |
| DEN, DENTAL / VIS, VISION | Dental and vision premiums, usually pre-tax |
| 125, SEC125, POP | Premiums run through your Section 125 plan |
| HSA, HSA EE | Your own HSA contribution (separate from premiums) |
| HSA ER (memo) | Your employer's HSA deposit, shown for information only |
| Employer health (memo) | What your employer pays toward the premium; not taken from your pay |
| FSA, MED FSA | A health flexible spending account election |

Box 12 of your W-2, code DD, shows the total cost of your employer coverage, both your share and your employer's. It isn't taxable; it's there so you can see what your health benefit is worth. For many people it's the first time they realize their employer pays $8,000 to $20,000 a year for their insurance.

**Single coverage on a semimonthly schedule**

Illustrative. You pay the KFF 2025 average of $120 a month for single coverage, paid twice a month, in the 12% federal bracket with no state income tax, pre-tax.

- Deduction per paycheck (24): $60.00
- Tax rate avoided: 12% + 7.65% = 19.65%
- Taxes saved per year: $282.96
- Take-home pay drops by, per paycheck: $48.21

In a state without income tax, pre-tax payment still saves almost $283 a year on single coverage.

## For employers: explaining deductions to your team

Most benefits questions HR teams get in the first month of a plan year are about paychecks: why did my deduction change, why is it different from what the enrollment site said, and why is my take-home pay lower than I expected. A short note at open enrollment heads most of them off.

- **Show the per-paycheck amount, not just the monthly premium.** Employees think in paychecks. Use the same number of pay periods your payroll system uses.
- **Say whether deductions are pre-tax.** If they are, show the estimated take-home effect too, so the smaller net change isn't a surprise.
- **Explain the first paycheck.** If coverage starts mid-month or deductions are taken in arrears, the first deduction can be larger. Say so in advance.
- **Show what the company pays.** Employees rarely know their employer pays $650 to $1,700 a month for their coverage. Putting it next to their own deduction makes the benefit visible.

If you're choosing between contribution strategies, the [employer cost calculator](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator) shows how each split changes both the company's cost and what employees pay.

**Setting employee deductions? Price the underlying plan**

Use your actual employee and family tiers to compare the written premium and contribution policy. Check the payroll and pre-tax treatment separately before changing paycheck deductions.

[Price coverage for my employees](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## For employers: making the deduction smaller

If you run a company and your team's deductions feel high, the cheapest fix is usually a lower premium, not a bigger employer contribution.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** A lower total cost lets you cut what employees pay per paycheck without raising your own budget.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**How much does health insurance take out of a paycheck?**

On average in 2025, about $55 per biweekly paycheck for single coverage and $263 for family coverage, based on KFF's average worker contributions of $1,440 and $6,850 a year.

**Is health insurance deducted before or after taxes?**

Usually before. Most employers use a Section 125 plan so premiums come out before federal income tax, Social Security and Medicare, and generally state income tax.

**Why did my health insurance deduction go up?**

Most often because of open enrollment price changes, a new coverage tier (such as adding a dependent) or a change in how many paychecks the deduction is spread over. If none apply, ask HR to check payroll.

**How much does a family plan cost per month through work?**

Workers paid about $571 a month on average for family coverage in 2025, though it varies widely by employer.

**Can I stop my health insurance deduction mid-year?**

Only after a qualifying life event, such as gaining other coverage, or at the next open enrollment, because pre-tax elections are fixed for the plan year.

**Do pre-tax premiums lower my Social Security benefits?**

Slightly, because they reduce the wages Social Security counts. For most people the tax saving today is much larger.

## Sources

- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits](https://www.irs.gov/publications/p15b)
- [IRS, Topic 751, Social Security and Medicare withholding rates](https://www.irs.gov/taxtopics/tc751)
- [26 CFR 1.125-4, permitted election changes](https://www.ecfr.gov/current/title-26/section-1.125-4)

# Section 125 tax savings calculator

Source: https://www.getprescience.com/tools/section-125-tax-savings-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-24
Updated: 2026-10-28
Cite as: Rishab Jain. "Section 125 tax savings calculator." Prescience, October 28, 2026. https://www.getprescience.com/tools/section-125-tax-savings-calculator

When employees pay their share of health premiums through a Section 125 plan, that money isn't subject to Social Security and Medicare taxes or, in most states, income tax. The company saves its 7.65% payroll tax on every dollar, and each employee keeps their 7.65% plus their income tax rate. Enter your team's contributions to see both.

- **Employer payroll tax saved:** 7.65% of contributions
- **2026 Social Security wage base:** $184,500
- **Plan needed:** Written cafeteria plan document
- **Typical setup cost:** Low; often included with payroll

## Estimate the savings

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

Most companies with a group plan already have a premium only plan (POP), often set up by their payroll provider. I've still met plenty of founders who were deducting premiums after tax without knowing it, usually because nobody signed the plan document. This calculator shows what that costs.

## How a Section 125 plan saves taxes

Section 125 of the tax code lets employees choose between cash wages and certain qualified benefits without the benefit being taxed. When an employee elects health coverage through the plan, their premium share is taken from gross pay before taxes are calculated.

**Taxes avoided on pre-tax premium contributions**

| Tax | Employee | Employer |
| --- | --- | --- |
| Social Security (up to the wage base) | 6.2% | 6.2% |
| Medicare | 1.45% | 1.45% |
| Federal income tax | Their bracket (10%–37%) | — |
| State income tax | Most states | — |
| Federal unemployment (FUTA) | — | Often, on the first $7,000 |

The calculator counts only Social Security and Medicare for the employer, which is the reliable part. Unemployment tax savings depend on wages and state rules, so treat them as a bonus.

Pre-tax premiums can also lower the wages that some state payroll taxes and insurance premiums are calculated on, depending on the state and the benefit. State income tax treatment usually follows the federal rule for health premiums, but states differ on other cafeteria plan benefits, so check your state before quoting exact savings to employees. When in doubt, model only the 7.65% federal payroll tax, which applies everywhere and is the number this calculator uses for the company.

## Worked example: a 20-person company

**Average single-coverage contributions, run pre-tax**

Illustrative. 20 employees each pay $1,440 a year (KFF's 2025 single average). Typical federal bracket 12%, state income tax 5%, all pay below the Social Security wage base.

- Total employee contributions: $28,800
- Employer payroll tax saved (7.65%): $2,203.20
- Each employee saves (12% + 5% + 7.65%): $354.96
- Employees save in total: $7,099.20

About $2,200 a year for the company and $355 per employee, for what is mostly a paperwork exercise. With family contributions near KFF's $6,850 average, the numbers are almost five times larger.

## Who benefits most

The savings scale with how much employees contribute, so the payoff is largest where premiums are shared rather than fully paid by the company. If you pay 100% of every premium, a premium only plan saves nothing on medical coverage, because there are no employee contributions to run through it, though it still matters for dental, vision and FSAs.

**Annual savings per employee by contribution level (12% federal, 5% state)**

| Employee premium share per year | Employee saves | Employer saves |
| --- | --- | --- |
| $1,440 (KFF single average) | $355 | $110 |
| $3,600 | $887 | $275 |
| $6,850 (KFF family average) | $1,689 | $524 |

Employees in states with no income tax, such as Texas, Florida and Washington, save a little less, but the 7.65% payroll tax saving applies everywhere.

## Setting up a premium only plan

1. **Adopt a written plan document** Section 125 requires a written plan describing the benefits, eligibility and election rules, adopted before the plan year starts. Payroll providers and benefits administrators usually supply one.
2. **Give employees a summary** Employees need to know what they're electing and that elections are generally fixed for the plan year.
3. **Set up pre-tax deductions in payroll** Mark the medical, dental and vision deductions as Section 125 so they reduce taxable wages on the W-2.
4. **Run nondiscrimination tests** Cafeteria plans can't favor highly compensated or key employees. A plan where everyone pays premiums the same way usually passes easily.

Our guide to [Section 125 and pre-tax health insurance](https://www.getprescience.com/guides/section-125-pre-tax-health-insurance) covers the rules in more depth.

## Common Section 125 mistakes I see

- **No signed plan document.** Payroll marks deductions as pre-tax, but nobody ever adopted the plan. In an audit, the deductions can be treated as taxable wages.
- **Letting people change elections whenever they ask.** Elections are fixed for the plan year except after a qualifying event. Allowing ad hoc changes can disqualify the plan.
- **Including owners.** More-than-2% S corporation shareholders get their premiums added to W-2 wages instead. Running them through the POP is a common payroll error.
- **Forgetting new hires.** New employees need to make an election when they join; until they do, their deductions may default to after-tax.
- **Skipping the annual nondiscrimination test.** It's usually easy to pass, but it has to be done.

None of these are hard to fix. If you're not sure your plan is set up correctly, ask your payroll provider for a copy of the plan document and the date it was adopted. If they can't produce one, adopt one before your next plan year.

## Limits and exceptions

- **Owners can't participate the same way.** Sole proprietors, partners and more-than-2% S corporation shareholders aren't treated as employees for Section 125.
- **High earners.** Above the Social Security wage base ($184,500 in 2026), only the 1.45% Medicare portion is saved on the extra dollars.
- **Individual policies.** Employees generally can't pay individual-market premiums pre-tax through a POP. ICHRA allowances, which are already tax-free, are the usual route. Employees who pay more than their allowance may be able to pay the difference pre-tax for off-exchange plans.
- **Mid-year changes.** Elections can change only after a qualifying event, such as marriage or a birth.

> **Pre-tax isn't free money for everyone:** Lower taxable wages slightly reduce Social Security benefits and can lower the wage base for some disability or life insurance formulas. The tax saving is almost always larger, but it's worth knowing.

## What else a cafeteria plan can cover

A premium only plan is the simplest form of Section 125 plan. Once you have the plan document, adding other pre-tax benefits is straightforward, and each one adds payroll tax savings on both sides.

**Benefits that can run through a Section 125 plan**

| Benefit | What employees can pay pre-tax | 2026 limit |
| --- | --- | --- |
| Premium only plan (POP) | Their share of medical, dental and vision premiums | None |
| Health FSA | Deductibles, copays and other medical costs | $3,400 per employee |
| Dependent care FSA | Child care and other dependent care | $7,500 per household |
| HSA (with an HDHP) | Contributions to their HSA | $4,400 self-only / $8,750 family |

The dependent care limit rose from $5,000 to $7,500 for 2026 under the One Big Beautiful Bill Act, the first increase in decades. Health FSAs and HSAs don't mix: a general-purpose health FSA makes someone ineligible for HSA contributions, though a limited-purpose FSA for dental and vision is allowed.

**Adding a dependent care FSA for five parents**

Illustrative. Five employees each set aside the full $7,500 for child care, in the 22% bracket with 5% state income tax.

- Total set aside: $37,500
- Employer payroll tax saved (7.65%): $2,868.75
- Each parent saves (34.65%): $2,598.75

The company saves almost $2,900 a year and each parent about $2,600, on top of premium savings, from the same plan document.

Cafeteria plans must pass nondiscrimination tests, and "key employees" can't receive more than 25% of the plan's total tax benefits. Small companies where owners and executives put away a lot through a dependent care FSA occasionally fail this test, so ask your administrator to run it each year.

**Compare the medical plan before setting the pre-tax deduction**

Use the actual employee census and contribution policy for the quote. Keep the Section 125 document and payroll requirements separate from the medical coverage and price comparison.

[Compare my team's medical coverage](https://www.getprescience.com/quote)

## Lowering the premium itself

A Section 125 plan trims taxes on premiums. The bigger lever is the premium. Both of our products work with your existing payroll provider, so pre-tax deductions keep running the way they do today.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Employee contributions to a Prescience Diamond plan run pre-tax through Section 125 like any group plan.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Choice allowances are tax-free to employees by design, so there's no premium deduction to set up for the allowance itself.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**How much does a Section 125 plan save an employer?**

7.65% of every dollar employees contribute toward premiums, for pay below the Social Security wage base. On $100,000 of employee contributions that's $7,650 a year.

**How much does a Section 125 plan save employees?**

Their Social Security and Medicare rate (7.65%) plus their federal income tax bracket and, in most states, state income tax. That's often 25% to 35% of what they contribute.

**Do I need a plan document for a premium only plan?**

Yes. Section 125 requires a written plan adopted before the plan year begins. Without it, the deductions are taxable.

**Can business owners pay premiums pre-tax through Section 125?**

Not sole proprietors, partners or more-than-2% S corporation shareholders. Their health insurance is handled through other tax rules.

**Does a Section 125 plan work with ICHRA?**

ICHRA allowances are already tax-free. If employees pay more than the allowance for an off-exchange individual plan, the employer can let them pay the difference pre-tax through a cafeteria plan.

**Is a POP the same as an FSA?**

No. Both are Section 125 benefits, but a POP only covers premiums. A health FSA lets employees set aside pre-tax money for out-of-pocket medical costs.

## Sources

- [IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits](https://www.irs.gov/publications/p15b)
- [IRS, FAQs for government entities regarding cafeteria plans](https://www.irs.gov/government-entities/federal-state-local-governments/faqs-for-government-entities-regarding-cafeteria-plans)
- [IRS, Topic 751, Social Security and Medicare withholding rates](https://www.irs.gov/taxtopics/tc751)
- [Social Security Administration, Contribution and benefit base](https://www.ssa.gov/oact/cola/cbb.html)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)

# QSEHRA calculator and 2026 limits

Source: https://www.getprescience.com/tools/qsehra-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-25
Updated: 2026-10-28
Cite as: Rishab Jain. "QSEHRA calculator and 2026 limits." Prescience, October 28, 2026. https://www.getprescience.com/tools/qsehra-calculator

A qualified small employer HRA (QSEHRA) lets companies under 50 full-time equivalents with no group plan reimburse employees' health costs tax-free, up to $6,450 for self-only coverage or $13,100 for family coverage in 2026. That's $537.50 and $1,091.66 a month. Enter your planned allowance to check it against the limit for the months each employee is eligible.

- **2026 limit, self-only:** $6,450 ($537.50/month)
- **2026 limit, family:** $13,100 ($1,091.66/month)
- **Who can offer it:** Under 50 FTEs, no group plan
- **Notice deadline:** 90 days before the plan year

## Check your QSEHRA allowance

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

The IRS publishes the next year's QSEHRA limits each fall with its other inflation adjustments. The 2027 limits weren't out when I published this page, so the calculator uses 2026. I'll update it when the new figures are released.

## What a QSEHRA is

A QSEHRA is a simple way for a small company to help with health costs without sponsoring a group plan. The company sets a monthly allowance. Employees buy their own individual health insurance (or are covered elsewhere) and submit premiums and medical expenses for reimbursement, tax-free up to the allowance.

**QSEHRA requirements at a glance**

| Rule | What it means |
| --- | --- |
| Employer size | Fewer than 50 full-time employees including equivalents |
| No group plan | You can't offer any group health plan to any employee |
| Same terms for all | Allowances can vary only by family size and age, as the individual premiums do |
| Annual limit | $6,450 self-only, $13,100 family in 2026, prorated for partial years |
| Proof of coverage | Employees must have minimum essential coverage to be reimbursed tax-free |
| Written notice | At least 90 days before the plan year, or when someone becomes eligible |

## Worked examples

**A full year at $450 a month, self-only**

Illustrative. A 2026 QSEHRA offers $450 a month to single employees for all 12 months.

- Allowance for the year: $5,400
- 2026 self-only limit: $6,450
- Room left: $1,050

**Within the limit.** The company could raise the allowance to $537.50 a month.

**A new hire in September**

Illustrative. An employee becomes eligible on September 1, 2026 and is offered the family allowance of $1,100 a month.

- Eligible months: 4
- Prorated family limit: $13,100 × 4/12 = $4,366.66
- Allowance offered: $4,400.00
- Over the limit by: $33.34

**Over the limit.** Keep the monthly family allowance at or below $1,091.66.

## What a QSEHRA can reimburse

The plan document decides what's covered, within what the tax code allows. Most small employers choose one of two designs:

- **Premiums only.** The QSEHRA reimburses individual health insurance premiums. Simple to run and easy for employees to understand.
- **Premiums and medical expenses.** The QSEHRA also reimburses deductibles, copays, prescriptions and other eligible expenses under Section 213(d). More flexible, more receipts.

Employees can use a QSEHRA even if they're covered by a spouse's group plan, as long as they have minimum essential coverage. That's a meaningful difference from ICHRA, which requires the employee to be enrolled in individual coverage or Medicare.

A QSEHRA can't be combined with a group plan, and it doesn't satisfy the employer mandate. That's fine while you're under 50 full-time equivalents, but if you're growing quickly, plan the switch to ICHRA or a group plan before you cross the line. The [ALE calculator](https://www.getprescience.com/tools/ale-calculator) shows where you stand.

## How a QSEHRA interacts with premium tax credits

This is the part most small employers miss. An employee who buys an exchange plan and qualifies for a premium tax credit has their credit reduced by the QSEHRA allowance. If the QSEHRA is "affordable" for them, they can't get a credit at all.

A QSEHRA is affordable if the second-lowest-cost silver plan's self-only premium, minus one-twelfth of the annual self-only allowance, is no more than 9.96% of household income in 2026. Employees have to report the allowance when they apply for a credit, so tell them the amount in writing.

> **When a QSEHRA can leave employees worse off:** A lower-income employee getting a large tax credit may lose more in credit than they gain in allowance. If several of your employees buy subsidized exchange plans, model it before you launch.

## Is the QSEHRA limit enough?

The 2026 self-only cap of $537.50 a month covers a lowest-cost silver plan for most people in their 20s and 30s, but often not for people in their 50s and 60s, whose individual premiums can run $1,000 to $1,500 a month in many states. The family cap of $1,091.66 a month rarely covers a family's full premium.

That's fine if your goal is to help with costs rather than cover them. But if you want the allowance to fully fund a good plan for everyone, including older employees and families, a QSEHRA won't get you there. That's the most common reason the small employers I talk to move to ICHRA, which has no cap and lets you set larger allowances for older employees within the 3:1 rule.

If you're comparing the two, run your oldest employee through the [ICHRA affordability calculator](https://www.getprescience.com/tools/ichra-affordability-calculator) to see what a compliant ICHRA allowance would be.

## QSEHRA or ICHRA?

**QSEHRA and ICHRA compared**

|  | QSEHRA | ICHRA |
| --- | --- | --- |
| Employer size | Under 50 FTEs | Any size |
| Allowance limit | $6,450 / $13,100 (2026) | No limit |
| Employee classes | No | Yes: different amounts by class |
| Coverage required | Minimum essential coverage | Individual health insurance or Medicare |
| Effect on tax credits | Reduces the credit | Affordable ICHRA: no credit; otherwise employee can opt out |

I recommend ICHRA over QSEHRA once you want to give more than the QSEHRA limit, which happens quickly with older employees or families, or once you need different allowances for different groups. ICHRA also scales past 50 employees, so you won't need to switch later. Check the minimum allowance with our [ICHRA affordability calculator](https://www.getprescience.com/tools/ichra-affordability-calculator).

**Compare the allowance budget with an actual group proposal**

Use the same employees, family tiers and employer budget for both routes. Keep administration, employee policy costs and any household subsidy questions separate when reviewing the alternatives.

[Compare options for my team](https://www.getprescience.com/quote)

[Review group coverage versus an allowance](https://www.getprescience.com/compare/ichra-alternative)

## Setting up a QSEHRA step by step

1. **Confirm you qualify** Count full-time employees and equivalents. Under 50, and no group health plan for anyone, including a group dental or vision plan that isn't an excepted benefit.
2. **Choose the allowance** Pick monthly self-only and family amounts at or below the limits. Many companies start around $300 to $500 for self-only coverage.
3. **Decide who's eligible** All full-time employees must be offered it. You may exclude employees in their first 90 days, under 25, part-time or seasonal, and those covered by a collective bargaining agreement.
4. **Adopt a plan document** A written plan sets the allowance, eligible expenses and how claims are reimbursed.
5. **Send the written notice** At least 90 days before the plan year starts (or by the date a new employee becomes eligible). It must state the allowance and tell employees to report it if they apply for premium tax credits.
6. **Verify coverage and reimburse** Collect proof of minimum essential coverage, then reimburse premiums and eligible expenses up to the allowance.
7. **Report it on the W-2** Show the amount available in Box 12 with code FF.

Penalties for getting it wrong are real. Reimbursing individual premiums outside a properly designed QSEHRA or ICHRA can be treated as an "employer payment plan," which can trigger an excise tax of $100 per day per affected employee. That is the main reason not to simply add a health stipend to payroll; see our guide to [health insurance stipends](https://www.getprescience.com/guides/health-insurance-stipend).

QSEHRA allowances are use-it-or-lose-it by default. Unused amounts can carry over within the limit if the plan allows it, but the total available in a year still can't exceed the cap.

## Running an HRA with Prescience

Prescience Choice is an ICHRA, so it has no annual cap and lets you set allowances by class. For most small teams the price is similar to a QSEHRA administrator, and you avoid outgrowing it.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** If your planned QSEHRA allowance hits the cap, Choice lets you give more, by class, in every state.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

## Frequently asked questions

**What are the QSEHRA limits for 2026?**

$6,450 a year for self-only coverage and $13,100 for family coverage, or $537.50 and $1,091.66 a month (IRS Revenue Procedure 2025-32).

**What are the QSEHRA limits for 2027?**

The IRS publishes them each fall. They weren't released when this page was published; this page will be updated when they are.

**Who can offer a QSEHRA?**

Employers with fewer than 50 full-time employees including equivalents that don't offer a group health plan to any employee.

**Can I offer different QSEHRA amounts to different employees?**

Only by family size or by age in line with individual premiums. Otherwise every eligible employee gets the same terms. ICHRA allows different amounts by employee class.

**Is a QSEHRA allowance taxable?**

No, as long as the employee has minimum essential coverage. Reimbursements to an employee without it are taxable income.

**Do QSEHRA allowances reduce premium tax credits?**

Yes. An employee's credit is reduced by the allowance, and an affordable QSEHRA means no credit at all.

**Is ICHRA better than QSEHRA?**

ICHRA has no allowance cap, supports employee classes and works at any company size, so it suits most growing teams. QSEHRA is simpler for very small companies that want to offer a modest allowance to everyone.

## Sources

- [IRS Notice 2017-67 (QSEHRA guidance)](https://www.irs.gov/pub/irs-drop/n-17-67.pdf)
- [IRS Revenue Procedure 2025-32 (2026 inflation adjustments)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [HealthCare.gov, Qualified small employer HRAs](https://www.healthcare.gov/small-businesses/learn-more/qsehra/)
- [CMS, Health Reimbursement Arrangements (ICHRA) overview](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans](https://www.irs.gov/publications/p969)

# Employer mandate penalty calculator for 2026 and 2027

Source: https://www.getprescience.com/tools/employer-mandate-penalty-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-26
Updated: 2026-10-28
Cite as: Rishab Jain. "Employer mandate penalty calculator for 2026 and 2027." Prescience, October 28, 2026. https://www.getprescience.com/tools/employer-mandate-penalty-calculator

Companies with 50 or more full-time employees, including equivalents, owe a penalty under Section 4980H if they don't offer affordable, minimum-value coverage and a full-time employee gets a marketplace subsidy. In 2027 the "A" penalty is $3,780 a year for every full-time employee after the first 30, and the "B" penalty is $5,670 for each subsidized employee, capped at the A amount. Enter your headcount to see which penalty applies and what it could cost.

- **2027 A penalty:** $3,780 per full-time employee, minus 30
- **2027 B penalty:** $5,670 per subsidized employee
- **2026 A / B:** $3,340 / $5,010
- **Who it applies to:** 50+ full-time employees and FTEs

## Estimate your 4980H penalty

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

The calculator uses the IRS amounts for each year and assumes your headcount and offer stay the same for all twelve months. The IRS actually works the penalty out month by month, at one-twelfth of the annual amount, so a company that started offering coverage in April or grew past 50 mid-year will owe less than a full year.

## The two employer mandate penalties

The employer mandate, formally the employer shared responsibility provision, has two separate penalties. Which one you face depends on whether you offer coverage to almost everyone.

**4980H penalty amounts by year**

|  | 2026 | 2027 | Who it counts |
| --- | --- | --- | --- |
| 4980H(a): no offer | $3,340 a year ($278.33 a month) | $3,780 a year ($315 a month) | Every full-time employee, minus 30 |
| 4980H(b): offer not affordable or not minimum value | $5,010 a year ($417.50 a month) | $5,670 a year ($472.50 a month) | Only full-time employees who get a subsidy |

- **The A penalty** applies when you don't offer coverage to at least 95% of full-time employees and their children up to age 26, and at least one full-time employee buys a marketplace plan with a premium tax credit. It's charged on your whole full-time workforce, minus 30, even if only one person got a subsidy.
- **The B penalty** applies when you do offer coverage to 95%, but it isn't affordable or doesn't provide minimum value for some employees, and those employees get a premium tax credit. It's charged only for those employees, and it can never exceed what the A penalty would have been.

Part-time employees count toward whether you're an applicable large employer, but they don't count in either penalty. Neither do employees who turn down an affordable offer, or employees who don't qualify for a subsidy because their household income is too high or they're on a spouse's plan.

## Worked examples

**60 full-time employees and no plan, 2027**

Illustrative. A company with 60 full-time employees offers no health coverage in 2027. One employee buys a marketplace plan and qualifies for a premium tax credit.

- Full-time employees: 60
- Less the first 30: 30
- Annual A penalty per employee: $3,780
- Penalty for the year: 30 × $3,780 = $113,400

**$113,400 a year,** triggered by a single subsidized employee. A plan covering everyone usually costs more than this, which is why some large employers pay it; but it isn't tax-deductible, and it buys employees nothing.

**The same company with a plan that isn't affordable for some**

Illustrative. The company now offers a plan to everyone, but its cheapest self-only option costs more than 10.22% of pay for its four lowest-paid employees, who all get premium tax credits.

- Subsidized full-time employees: 4
- Annual B penalty per employee: $5,670
- B penalty: 4 × $5,670 = $22,680
- Cap (the A amount): $113,400

**$22,680 a year.** Lowering those four employees' share below the affordability limit would remove it. The [ACA affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator) shows the most you can charge.

## Does the employer mandate apply to you?

The mandate applies only to applicable large employers (ALEs): companies that averaged at least 50 full-time employees, counting full-time equivalents, across the prior calendar year. A company with 40 full-time employees and enough part-time hours to make 12 more equivalents is an ALE. Companies under common ownership are counted together as a controlled group.

If you're close to 50, run last year's numbers through the [ALE calculator](https://www.getprescience.com/tools/ale-calculator) first. A company that becomes an ALE for 2027 based on its 2026 workforce has to offer coverage from January 1, 2027, or face the penalties from that month.

> **Controlled groups share the 30-employee reduction:** When several related companies make up one ALE, the 30-employee reduction in the A penalty is split among them in proportion to their full-time headcount. Each company is liable only for its own penalty, but the reduction doesn't multiply.

## How to avoid the penalty

1. **Offer coverage to at least 95% of full-time employees** Include their children up to age 26. Spouses don't have to be offered coverage. Meeting the 95% test removes the A penalty entirely.
2. **Make sure the plan provides minimum value** The plan has to pay at least 60% of covered costs and include substantial hospital and physician coverage. Most group plans do; skinny plans often don't.
3. **Keep the cheapest self-only option affordable** In 2027 the employee's share can't exceed 10.22% of pay under one of the three IRS safe harbors (9.96% in 2026). Using the federal poverty line safe harbor, that's $135.92 a month in 2027.
4. **Report it on Forms 1094-C and 1095-C** The IRS assesses penalties from these forms. A correct 1095-C showing an affordable offer is your evidence that no penalty is owed.
5. **Answer any Letter 226-J promptly** The IRS proposes penalties by letter, often two or more years after the fact. You have a short window to respond with corrections, such as employees who were part-time or offered coverage.

An individual coverage HRA (ICHRA) can also satisfy the mandate, as long as the allowance makes the lowest-cost silver plan affordable for each full-time employee. Our [ICHRA affordability calculator](https://www.getprescience.com/tools/ichra-affordability-calculator) works out the minimum allowance.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Choice is an ICHRA at $20 per enrolled employee per month, with allowances set by class, so you can meet the mandate with a fixed budget.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Compare a plan while you review the employer requirements**

Use the employee census and contribution policy for pricing. Keep the ALE count, offer rules and affordability tests separate; the penalty estimate or a new quote does not establish compliance.

[Compare coverage for my workforce](https://www.getprescience.com/quote)

[Check the contribution affordability test](https://www.getprescience.com/tools/aca-affordability-calculator)

## When penalties arrive and what they cost after tax

Penalties aren't paid with your tax return. The IRS matches your 1095-C forms against marketplace subsidy records and sends Letter 226-J with a proposed amount, usually more than a year after the year closes. The letter lists every employee who got a subsidy, by month, and gives you a deadline to respond.

Unlike premiums, 4980H penalties aren't tax-deductible. A $113,400 penalty costs $113,400 after tax, while $113,400 spent on employer premiums is deductible and tax-free to employees. When a founder tells me it's cheaper to pay the penalty, I ask them to compare after-tax numbers and recruiting costs before deciding.

## How the IRS works it out month by month

The penalty is assessed for each calendar month, at one-twelfth of the annual amount, using that month's full-time headcount and that month's subsidized employees. A company that offers coverage for part of the year owes only for the months it didn't, and a month in which no full-time employee had a subsidy costs nothing.

**Coverage that starts in April**

Illustrative. A 2027 ALE with 60 full-time employees has no plan in January through March, then offers affordable, minimum-value coverage from April 1. One employee had a marketplace subsidy in each of the first three months.

- Monthly A amount: $3,780 ÷ 12 = $315
- Each month without an offer: 30 × $315 = $9,450
- January to March: 3 × $9,450 = $28,350
- April to December: $0

**$28,350 instead of $113,400.** Starting coverage mid-year still cuts the exposure by three quarters.

New full-time hires also have a grace period. An ALE isn't penalized for a new full-time employee during their first three full calendar months, as long as coverage is offered by the first day of the fourth. Variable-hour employees can be measured over a look-back period of up to 12 months before you decide whether they're full-time.

## Meeting the mandate with Prescience

Both Prescience plans can satisfy the mandate when they're offered to full-time employees and priced within the affordability limit. Diamond is a group plan with an effective $0 deductible; Choice is an ICHRA where you set the allowance.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond is a minimum-value group plan, so offering it affordably to 95% of full-time staff takes both penalties off the table.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What is the employer mandate penalty for 2027?**

$3,780 a year per full-time employee after the first 30 if you don't offer coverage (4980H(a)), or $5,670 per subsidized full-time employee if your offer isn't affordable or minimum value (4980H(b)), per IRS Revenue Procedure 2026-22.

**What is the employer mandate penalty for 2026?**

$3,340 per full-time employee after the first 30 under 4980H(a), and $5,010 per subsidized full-time employee under 4980H(b), per IRS Revenue Procedure 2025-26.

**Do part-time employees count in the penalty?**

No. Part-time hours count toward whether you have 50 full-time equivalents, but the penalties are calculated on full-time employees only.

**What triggers the employer mandate penalty?**

At least one full-time employee buying a marketplace plan and receiving a premium tax credit. If no full-time employee gets a subsidy, no penalty is owed, even without a plan.

**Can the B penalty be more than the A penalty?**

No. The B penalty is capped at the amount the A penalty would have been for the same month.

**Is the employer mandate penalty tax-deductible?**

No. 4980H assessable payments are not deductible, unlike premiums the company pays for coverage.

**Does an ICHRA satisfy the employer mandate?**

Yes, if it's offered to at least 95% of full-time employees and the allowance makes the lowest-cost silver plan affordable for them under an IRS safe harbor.

## Sources

- [IRS, Questions and answers on employer shared responsibility provisions](https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act)
- [IRS Revenue Procedure 2025-26 (2026 employer shared responsibility amounts)](https://www.irs.gov/pub/irs-drop/rp-25-26.pdf)
- [IRS Revenue Procedure 2026-22 (2027 employer mandate penalties)](https://www.irs.gov/pub/irs-drop/rp-26-22.pdf)
- [IRS Revenue Procedure 2026-26 (2027 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-26-26.pdf)
- [26 CFR 54.4980H-5, assessable payments and affordability safe harbors](https://www.ecfr.gov/current/title-26/section-54.4980H-5)
- [IRS, Information reporting by applicable large employers (Forms 1094-C and 1095-C)](https://www.irs.gov/affordable-care-act/employers/information-reporting-by-applicable-large-employers)

# Cost of an employee calculator

Source: https://www.getprescience.com/tools/cost-of-an-employee-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-27
Updated: 2026-10-28
Cite as: Rishab Jain. "Cost of an employee calculator." Prescience, October 28, 2026. https://www.getprescience.com/tools/cost-of-an-employee-calculator

An employee costs more than their salary. On top of pay, the company owes 7.65% in Social Security and Medicare tax, federal and state unemployment tax, workers' compensation insurance, and whatever it spends on benefits, which for most companies means health insurance. For a $100,000 hire with typical benefits, the total is often around $116,000, or 1.16 times salary. Enter your numbers to see the full cost.

- **Employer FICA:** 7.65% (6.2% + 1.45%)
- **2026 Social Security wage base:** $184,500
- **FUTA:** 0.6% of the first $7,000 ($42)
- **Typical total:** 1.15× to 1.4× salary

## Calculate the full cost of a hire

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

The calculator uses 2026 federal rates and the state unemployment rate and wage base you enter. It leaves out costs that vary too much to estimate, like recruiting fees, equipment and office space; add those under other yearly costs if you want them in the total.

## What goes into the cost of an employee

**Employer costs beyond salary, 2026**

| Cost | Rate | On what |
| --- | --- | --- |
| Social Security | 6.2% | Pay up to $184,500 |
| Medicare | 1.45% | All pay, no cap |
| Federal unemployment (FUTA) | 0.6% after the state credit | First $7,000 of pay ($42 a year) |
| State unemployment (SUTA) | Set by your state, often 1% to 4% for new employers | Your state's wage base, from $7,000 to over $70,000 |
| Workers' compensation | Under 1% of pay for office work; far more for trades | Payroll, by job class |
| Health insurance | KFF 2025 average employer share: $7,885 single, $20,143 family a year | Each enrolled employee |
| Other benefits | 401(k) match, dental, vision, life, stipends | As offered |

Payroll taxes are fixed by law. Benefits are the part you choose, and for most small companies health insurance is the largest cost after salary. At KFF's 2025 averages, the employer's share of family coverage is about $20,000 a year, which can be more than all the payroll taxes on a $150,000 salary combined.

## Worked examples

**A $100,000 engineer**

Illustrative. 2026, a state unemployment rate of 2.7% on a $7,000 wage base, workers' comp at 0.5% of pay and $650 a month in employer health benefits.

- Salary: $100,000
- Social Security and Medicare: $6,200 + $1,450 = $7,650
- FUTA and SUTA: $42 + $189 = $231
- Workers' comp: $500
- Health benefits: $650 × 12 = $7,800
- Total: $116,181

**$116,181, or 1.16× salary.** Benefits are close to half of everything above salary.

**A $60,000 hire with the same benefits**

Illustrative. The same assumptions, at a $60,000 salary.

- Salary: $60,000
- Payroll taxes: $3,720 + $870 + $42 + $189 = $4,821
- Workers' comp: $300
- Health benefits: $7,800
- Total: $72,921

**$72,921, or 1.22× salary.** Benefits cost the same at every salary, so they weigh more on lower-paid roles.

## Is 1.25 to 1.4 times salary a good rule of thumb?

You'll often hear that an employee costs 1.25 to 1.4 times their salary. That's a reasonable planning range for companies with rich benefits, family coverage and a 401(k) match. A lean startup paying high salaries with single coverage can land closer to 1.15. A company with many hourly workers, family coverage and high workers' comp rates can go past 1.4.

The multiplier falls as salary rises for two reasons: health premiums are a flat dollar amount, and Social Security stops at $184,500 of pay in 2026. Above that, only the 1.45% Medicare tax continues. For budgeting, I'd use the calculator for each role you plan to hire instead of one multiplier for everyone.

## Ways to lower the cost without cutting pay

- **Run employee premiums through a Section 125 plan.** Premium contributions come out before tax, which saves the company 7.65% on those dollars. The [Section 125 calculator](https://www.getprescience.com/tools/section-125-tax-savings-calculator) shows the savings.
- **Shop the health plan, not just the carrier.** Plan design and funding matter more than the logo. A 10% lower premium on $7,800 a year saves $780 per employee.
- **Use an HSA-qualified plan with employer contributions.** HSA contributions through payroll are free of FICA for both sides.
- **Check your state unemployment rate each year.** New employers get a default rate; after a few years without layoffs, many companies qualify for a lower one.
- **Classify jobs correctly for workers' comp.** Office staff misfiled under a field classification can cost several times more.

> **Contractors aren't automatically cheaper:** A contractor costs no payroll tax or benefits, but misclassifying an employee as a contractor can bring back taxes, penalties and interest. See our guide to [health insurance for contractors](https://www.getprescience.com/guides/health-insurance-for-contractors).

## The real hourly cost of an employee

To compare an employee with a contractor or an agency, convert the total to an hourly figure. A full-time year is 2,080 paid hours, but nobody works all of them: after two weeks of vacation and ten holidays, a typical employee works about 1,920. Dividing the total cost by working hours gives the number to compare.

**What the $100,000 engineer costs per working hour**

Illustrative. The $116,181 total from the first example, with 15 days of vacation and 10 holidays.

- Paid hours: 2,080
- Less 25 days off: −200 hours
- Working hours: 1,880
- Cost per working hour: $116,181 ÷ 1,880 = $61.80

**About $62 an hour,** against a $48.08 hourly salary. A contractor quoting $70 an hour is closer in cost than it first looks.

## Budgeting for a hire's first year

- **Unemployment taxes come early.** FUTA and most state unemployment taxes apply only to the first $7,000 or so of each person's pay, so most of a year's cost lands in the first few paychecks, then stops.
- **Benefits may start later.** If your plan has a waiting period, benefits begin after it. The [waiting period calculator](https://www.getprescience.com/tools/health-insurance-waiting-period-calculator) shows the latest allowed start date.
- **Social Security stops at the wage base.** For salaries above $184,500, the 6.2% tax stops partway through the year, so later paychecks cost less.
- **One-time costs add up.** Recruiting fees are often 15% to 25% of first-year salary through an agency, plus a laptop, software seats and onboarding time.
- **Raises and renewals.** Plan for next year's salary increase and a health renewal; employers in Mercer's 2026 survey expected benefit costs to rise 8.2% for 2027.

**Employee or contractor: who pays what**

| Cost | Employee (W-2) | Contractor (1099) |
| --- | --- | --- |
| Employer Social Security and Medicare | Company pays 7.65% | Contractor pays 15.3% self-employment tax |
| Unemployment taxes | Company | None |
| Workers' comp | Company | Contractor's own policy, if any |
| Health benefits | Company's choice | Contractor buys their own |
| Misclassification risk | None | Back taxes, penalties and interest |

## Common mistakes when budgeting a hire

- **Using single-coverage premiums for everyone.** If a hire has a spouse and children, the company's share of family coverage can be $12,000 or more above single coverage. Ask during the offer process, or budget the average for your team.
- **Forgetting state payroll taxes beyond unemployment.** Some states add paid family leave, disability or training taxes on the employer side. Check your state's payroll tax notice.
- **Leaving out the employer 401(k) match.** A 4% match on $100,000 is $4,000 a year, more than workers' comp and unemployment combined in most states.
- **Treating the multiplier as fixed.** It changes with salary, family status and state, so use one calculation per role rather than one multiplier for the whole hiring plan.

A simple habit helps: when you open a role, run it through this calculator with the salary band's midpoint and your average benefits cost, and put that figure, not the salary, in the hiring plan. It keeps the budget honest when several hires land in the same quarter.

## Health insurance is the cost you can shape

Payroll taxes are fixed, but health benefits come down to choices: which plan, how much the company pays and how the plan is funded. For a 10-person team, the difference between an average plan and a well-priced one can be $10,000 to $20,000 a year. Our [employer health insurance cost calculator](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator) breaks it down by single and family enrollment.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond is usually 10–20% below comparable fully insured coverage, the biggest lever in this calculator after salary.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

**Replace the health-benefit assumption with a team quote**

Keep payroll, taxes and other employment costs on their own lines. Use the actual employee and family tiers to compare the written medical proposal with the benefit budget in your hiring model.

[Price benefits for my next hires](https://www.getprescience.com/quote)

[Prepare the employee census](https://www.getprescience.com/integrations)

## Frequently asked questions

**How much does an employee cost on top of salary?**

Usually 15% to 40% more. Payroll taxes add about 8% for most salaries, workers' comp adds under 1% for office jobs, and health benefits add the most, often $7,000 to $20,000 a year.

**What payroll taxes does an employer pay?**

Social Security at 6.2% up to $184,500 in 2026, Medicare at 1.45% of all pay, federal unemployment (FUTA) at 0.6% of the first $7,000 after the state credit, and state unemployment at your state's rate.

**Why is FUTA only 0.6%?**

The statutory FUTA rate is 6.0%, but employers that pay state unemployment tax on time get up to a 5.4% credit. In credit reduction states the credit is smaller, so FUTA costs more.

**Do employers pay the Additional Medicare Tax?**

No. The extra 0.9% Medicare tax on pay over $200,000 is withheld from the employee only. The employer's Medicare rate stays 1.45%.

**What is the average cost of health insurance per employee?**

KFF's 2025 survey found average premiums of $9,325 for single coverage and $26,993 for family coverage, with employers paying about 84% and 74% of them.

**Is the 1.4 times salary rule accurate?**

It's a rough planning figure. The real multiplier depends on salary, benefits and state. It's often 1.15 to 1.25 for well-paid roles with single coverage and higher for lower-paid roles with family coverage.

## Sources

- [IRS Publication 15 (Circular E), Employer's Tax Guide (FICA and FUTA rates)](https://www.irs.gov/publications/p15)
- [Social Security Administration, Contribution and benefit base](https://www.ssa.gov/oact/cola/cbb.html)
- [IRS Topic 759, Form 940 and FUTA credit](https://www.irs.gov/taxtopics/tc759)
- [U.S. Department of Labor, FUTA credit reductions](https://oui.doleta.gov/unemploy/futa_credit.asp)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)

# HDHP vs PPO calculator

Source: https://www.getprescience.com/tools/hdhp-vs-ppo-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-28
Updated: 2026-10-28
Cite as: Rishab Jain. "HDHP vs PPO calculator." Prescience, October 28, 2026. https://www.getprescience.com/tools/hdhp-vs-ppo-calculator

A high-deductible health plan (HDHP) has lower premiums and lets you save in an HSA, but you pay more before coverage starts. A PPO costs more each month and less when you use care. Which is cheaper depends on how much care you expect, how much your employer puts in the HSA and your tax bracket. Enter both plans to see your total cost for the year and in the worst case.

- **2026 HDHP minimum deductible:** $1,700 self / $3,400 family
- **2026 HDHP out-of-pocket max:** $8,500 self / $17,000 family
- **2026 HSA limit:** $4,400 self / $8,750 family
- **Tax saved on payroll HSA money:** Income tax + 7.65% FICA

## Compare your two plans

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

Try three spending levels: a quiet year (a few hundred dollars), a typical year for you, and a bad year. The plan that wins in all three is an easy choice. If they split, the worst-case line tells you how much risk you're taking on to save in a good year.

Copays are left out, and both plans are assumed to cover the same doctors. If your PPO uses copays for office visits and prescriptions, its real cost in a low-use year will be a little higher than shown.

## How the comparison works

For each plan, the calculator adds a year of your premiums to what you'd pay for care. Care costs are your expected medical bills up to the deductible, then coinsurance on the rest, stopping at the out-of-pocket maximum. The HDHP then gets credit for two things a PPO usually doesn't have:

- **Employer HSA contributions.** Money your employer puts in your HSA is yours to spend on care, so it offsets the deductible dollar for dollar.
- **Tax savings on your own contributions.** HSA money from payroll skips federal and most state income tax and the 7.65% FICA tax. At a 22% federal bracket and 5% state tax, every $1,000 you contribute saves about $347.

The worst case uses each plan's out-of-pocket maximum. That's the most you could pay in a year for covered, in-network care.

## Worked examples

**A typical year, $3,000 in medical bills**

Illustrative. PPO: $200 a month, $1,000 deductible, 20% coinsurance, $5,000 out-of-pocket max. HDHP: $90 a month, $3,000 deductible, 20%, $7,000 max, with a $1,000 employer HSA contribution. The employee puts in $1,000 of their own at 22% federal and 5% state tax.

- PPO premiums + care: $2,400 + $1,400 = $3,800
- HDHP premiums + care: $1,080 + $3,000 = $4,080
- Less employer HSA and tax saved: $1,000 + $346.50
- HDHP net cost: $2,733.50

**The HDHP costs $1,066.50 less.** The premium savings and HSA money more than cover the higher deductible.

**A bad year, $20,000 in medical bills**

Illustrative. The same two plans after a surgery.

- PPO: $2,400 + $4,800 = $7,200
- HDHP before HSA help: $1,080 + $6,400 = $7,480
- HDHP net cost: $6,133.50

**The HDHP still costs $1,066.50 less,** but it needs $6,400 in cash during the year, which is harder if your HSA balance is small.

## Who should pick an HDHP, and who shouldn't

**HDHP or PPO at a glance**

|  | HDHP with HSA | PPO |
| --- | --- | --- |
| Premiums | Lower | Higher |
| Cost before coverage starts | At least $1,700 self-only in 2026 | Often $500 to $2,000 |
| Tax savings | HSA: income tax and FICA | Only a health FSA, up to $3,400 |
| Unused money | Stays in your HSA, invested | Lost, apart from FSA carryover |
| Predictability | Low in the first months of a bad year | Higher, with copays |

- **An HDHP usually wins** for healthy people, people whose employer puts real money in the HSA, and higher earners who can afford to fund the HSA and let it grow.
- **A PPO often wins** for people with ongoing prescriptions or planned care that's mostly copays, and for anyone who couldn't cover the deductible in cash if something happened in January.
- **It's close** for families expecting moderate care. Run your own numbers instead of trusting a rule of thumb.

## For employers choosing a plan lineup

Offering both is common, and it lets employees sort themselves. If you offer only an HDHP, a meaningful HSA contribution makes it fair to the people who will hit the deductible. Seeding $500 to $1,000 a year costs less than the premium difference between the plans for most groups, and the contribution is free of payroll tax.

Be careful about low-paid employees. A $3,000 deductible is a large share of a $40,000 salary, and people who delay care because of it can end up costing the plan more later. Our guide to [HDHP vs copay plans](https://www.getprescience.com/guides/hdhp-vs-copay-plan) covers the trade-off in more detail, and the [HSA contribution calculator](https://www.getprescience.com/tools/hsa-contribution-calculator) shows each employee's limit after your contribution.

**Choosing plans for a team? Quote the coverage you modeled**

Use the same employee tiers, employer contribution and account funding assumptions when comparing proposals. Confirm the actual written benefits and HSA eligibility before relying on the calculator result.

[Compare plans for my employees](https://www.getprescience.com/quote)

[Review the employer plan decision](https://www.getprescience.com/guides/hdhp-vs-copay-plan)

## How to estimate your medical spending

The calculator is only as good as the spending you enter. The best guide is last year: your insurer's website lists every claim with its allowed amount, which is the figure to use. Then adjust for what you know is coming.

- **Regular prescriptions:** the allowed price for a year's supply, not your copay. A brand-name drug at $400 a month is $4,800 of spending.
- **Ongoing care:** therapy, physical therapy and specialist visits at the allowed rate per visit.
- **Planned events:** a pregnancy and delivery, or a planned surgery, often runs well over $10,000 in allowed charges.
- **A cushion for the unexpected:** an urgent care visit, imaging or an ER trip can add $500 to $3,000.

Preventive care, such as annual checkups, recommended screenings and most vaccines, is free on both plans, so leave it out.

## Family coverage: embedded and aggregate deductibles

Family plans handle the deductible in one of two ways, and it can change the answer.

- **Embedded:** each person has their own deductible inside the family one. Once one person meets theirs, coinsurance starts for them even if the family total hasn't been reached. Most PPOs work this way.
- **Aggregate:** the whole family deductible has to be met before coinsurance starts for anyone. Many HDHPs work this way, because an embedded deductible below the HDHP family minimum ($3,400 in 2026) isn't allowed.

**One family member with a $5,000 bill**

Illustrative. A PPO with a $1,500 individual and $3,000 family embedded deductible, and an HDHP with a $5,000 aggregate family deductible; both at 20% coinsurance.

- PPO: $1,500 + 20% × $3,500 = $2,200
- HDHP: $5,000 (all deductible)

**The HDHP costs $2,800 more for this bill** before premiums and HSA money. If one person in your family uses most of the care, run the family numbers carefully.

## Common mistakes when comparing plans

- **Comparing deductibles alone.** A lower deductible doesn't help if the premium difference is larger than the deductible difference and you rarely use care.
- **Ignoring the employer HSA contribution.** $1,000 from your employer closes most of the gap between a $1,000 and a $2,000 deductible.
- **Forgetting the network.** Two plans with the same numbers are not equal if your doctors are only in one of them.
- **Not funding the HSA.** The HDHP's tax advantage only exists if you contribute. If you won't, compare premiums and care costs alone.

Finally, revisit the choice every open enrollment. A plan that was right in a quiet year can be wrong the year you plan a surgery or start a new prescription, and premiums and employer HSA contributions change from year to year.

## A third option: low cost when you use care

The whole HDHP-or-PPO question exists because most plans make you pick between low premiums and low costs at the doctor. Diamond is designed so employees don't have to make that bet: an effective $0 deductible with simple copays shown before each visit.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** With an effective $0 deductible, Diamond takes the worst-case line in this calculator out of most employees' year.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Is an HDHP cheaper than a PPO?**

In premiums, almost always. Over a whole year, it depends on how much care you use, how much your employer puts in the HSA and your tax bracket. For many healthy people the HDHP costs less in total.

**What counts as an HDHP in 2026?**

A plan with a deductible of at least $1,700 for self-only or $3,400 for family coverage, and an out-of-pocket maximum no higher than $8,500 or $17,000. In 2027 the figures are $1,750 / $3,500 and $8,700 / $17,400.

**How much does an HSA save in taxes?**

Contributions through payroll skip federal income tax, FICA (7.65%) and most state income taxes. At a 22% federal bracket and 5% state tax, that's about 34.65 cents on every dollar.

**What if I can't afford the HDHP deductible?**

Then the PPO may be the safer choice even if the HDHP looks cheaper on paper. Medical bills arrive before your HSA has built up, and providers expect payment.

**Can I have an HSA with a PPO?**

Only if the PPO itself qualifies as an HDHP. A standard PPO with a low deductible and copays doesn't, so you can't contribute to an HSA while enrolled in it.

**Does the calculator include copays?**

No. It models the deductible, coinsurance and out-of-pocket maximum. Copays usually make a PPO slightly more expensive in low-use years than shown.

## Sources

- [IRS Revenue Procedure 2025-19 (2026 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [IRS Revenue Procedure 2026-24 (2027 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-26-24.pdf)
- [IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans](https://www.irs.gov/publications/p969)
- [HealthCare.gov, plan and network types](https://www.healthcare.gov/choose-a-plan/plan-types/)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)

# Health insurance renewal calculator

Source: https://www.getprescience.com/tools/health-insurance-renewal-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-29
Updated: 2026-10-29
Cite as: Rishab Jain. "Health insurance renewal calculator." Prescience, October 29, 2026. https://www.getprescience.com/tools/health-insurance-renewal-calculator

A renewal letter gives you a percentage. This calculator turns it into dollars: how much more the company will pay next year, and how much more each employee will see taken out of their paycheck if you keep the same split. Employers in Mercer's 2026 survey expect health benefit costs per employee to rise 8.2% in 2027 after planned changes, and about 11% if they change nothing. For a 20-person team at $900 a month each, a 9% renewal is about $19,400 a year.

- **Expected 2027 cost rise (Mercer):** 8.2% after changes, ~11% without
- **PwC 2027 medical cost trend:** 9%
- **Notice before renewal:** Usually 30 to 90 days
- **Best time to shop:** 90 to 120 days before renewal

## Turn your renewal increase into dollars

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

Use the total monthly premium per enrolled employee: the company's share plus the employee's, divided by the number of enrolled employees. If your renewal quotes separate rates for single and family coverage, the blended average is close enough for a first look. For a tier-by-tier view, use the [employer health insurance cost calculator](https://www.getprescience.com/tools/employer-health-insurance-cost-calculator) with the old and new rates.

## Worked examples

**A 9% renewal for 20 employees**

Illustrative. 20 enrolled employees, an average total premium of $900 per employee per month, a 9% renewal and the company paying 84%.

- Current premium: 20 × $900 × 12 = $216,000
- Renewed premium: $216,000 × 1.09 = $235,440
- Added cost for the year: $19,440
- Company's share (84%): $16,329.60
- Each employee, per month: $900 × 9% × 16% = $12.96

**$19,440 more a year,** most of it paid by the company. Employees see about $13 more a month.

**Three renewals in a row**

Illustrative. The same team renews at 9%, 9% and 9% without changing plans.

- Year 1 premium: $216,000
- Year 2: $235,440
- Year 3: $256,630
- Year 4: $279,726

**Premiums rise about 30% in three years.** A single good year of shopping matters more than it looks, because every later increase compounds on it.

## Why renewals go up

A renewal increase is the carrier's new price for next year, and it usually combines several things. Knowing which ones apply to you tells you how much room you have to negotiate.

- **Medical trend.** Prices for hospitals, doctors and drugs rise every year. PwC projects a 9% group medical cost trend for 2027.
- **Aging.** Small-group premiums are rated by age. A team that's a year older costs more even if nothing else changes.
- **Claims.** Larger groups and level-funded plans are rated partly on their own claims. A few expensive claims can push a small group's renewal well above trend.
- **Specialty drugs.** GLP-1s and other high-cost drugs are a growing share of costs. Mercer attributes about a full percentage point of 2027 cost growth to GLP-1 use alone.
- **Plan changes and taxes.** New state mandates, carrier fees and benefit changes all flow into the rate.

For the full breakdown, see [why did our health insurance renewal go up](https://www.getprescience.com/guides/why-did-our-health-insurance-renewal-go-up).

## What to do with a high renewal

1. **Ask for the renewal early** Small-group renewals often arrive 30 to 60 days before the date. Asking your broker or carrier for it at 90 to 120 days gives you time to shop.
2. **Ask what drove the number** Trend, age, claims and plan changes call for different responses. A claims-driven increase on a level-funded plan, for example, may be worth moving away from.
3. **Get at least two alternative quotes** Compare the same benefits across carriers and funding types. Our guide on [how to compare health insurance quotes](https://www.getprescience.com/guides/how-to-compare-health-insurance-quotes) shows what to line up.
4. **Model plan changes before cutting contributions** Raising the deductible or narrowing the network lowers the premium, but shifts costs to employees who use care. Run the [HDHP vs PPO calculator](https://www.getprescience.com/tools/hdhp-vs-ppo-calculator) to see who wins and who loses.
5. **Decide how to split the increase** Passing it through at the same percentage keeps things simple. Absorbing it signals that benefits matter, and is often cheaper than replacing one employee who leaves.

> **Don't let affordability slip:** If you have 50 or more full-time employees, raising employee contributions can make your cheapest plan unaffordable under the ACA. Check the new contribution in the [ACA affordability calculator](https://www.getprescience.com/tools/aca-affordability-calculator) before you announce it.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** Tired of renewal letters? With Choice, the company sets the allowance, so its cost only changes when you decide to change it.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

**Put an actual proposal next to the renewal increase**

Use your current employee census, family tiers and contribution policy. Keep changes in enrollment separate from changes in price when comparing the written alternative.

[Compare my renewal costs](https://www.getprescience.com/quote)

[Prepare the renewal census](https://www.getprescience.com/integrations)

[Download the census CSV template](https://www.getprescience.com/api/employer/census-intake/template)

## Passing the increase on to employees

When the company pays a fixed percentage, employees' contributions rise by the same percentage as the premium. When the company pays a fixed dollar amount, employees absorb the whole increase, which can be a surprise: on a $900 premium with the company paying a flat $750, a 9% renewal raises the employee's share from $150 to $231 a month, a 54% jump.

For most small teams, I'd keep the percentage split and explain the renewal in plain numbers at open enrollment. Our [open enrollment email templates](https://www.getprescience.com/guides/open-enrollment-email-templates) include one for a premium increase.

## How to read your renewal letter

A renewal letter usually has more in it than the headline percentage. Before reacting to the number, check these:

- **Rates by tier or by age.** Small-group plans in most states are priced per person by age. A renewal showing "+9%" may mean +6% in base rates and +3% from everyone being a year older.
- **Plan changes.** Carriers sometimes retire a plan and "map" you to a similar one with a different deductible or network. Compare the summary of benefits, not just the name.
- **Rate guarantee.** Most small-group renewals lock rates for 12 months. Level-funded plans may also show a separate change in fees and stop-loss.
- **Census used.** Renewals are priced on the employees enrolled at the time. If people have joined or left, ask for a re-rate.
- **Deadline.** The date by which you have to accept or make changes, usually a few weeks before the renewal date.

## How your group's size and funding shape the renewal

**What drives renewals by plan type**

| Plan type | Typical group | What sets the renewal |
| --- | --- | --- |
| Fully insured small group (ACA) | 1 to 50 employees (100 in some states) | Carrier's filed rates, ages and location; your claims don't count |
| Fully insured large group | 51+ (or 101+) | Partly your own claims, more so as you grow |
| Level-funded | Often 10 to 100 | Your claims, stop-loss pricing and fees |
| Self-funded | Usually larger | Your claims directly, plus stop-loss |
| PEO plan | Any size | The PEO's pool and its own pricing |

This is why the same 9% can mean different things. On an ACA small-group plan, it's mostly the market and your ages; switching carriers can help, but there's little to negotiate on the same plan. On a level-funded plan, a high renewal often follows a bad claims year, and the next year may look the same. Our guide to [level-funded, self-funded and fully insured plans](https://www.getprescience.com/guides/level-funded-vs-self-funded-vs-fully-insured) explains the trade-offs.

## Questions to ask your broker or carrier

- How much of this increase is age, and how much is the base rate?
- Are we being moved to a different plan, and what changed in it?
- What would the same benefits cost with two other carriers, and with a different funding type?
- Is there a plan with a slightly higher deductible that keeps our network, and what does it save?
- When exactly do you need our decision, and what happens if we miss it?

Write the answers down next to the numbers from this calculator. Having the dollar impact, the reason for the increase and at least one alternative in one place makes the decision, and the conversation with your team, much easier.

## A renewal is a good time to compare

Most of the companies that come to us arrive with a renewal letter in hand. We quote Diamond against the renewal so you can see the difference in the same terms: total premium, company share and employee cost.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** Diamond's price is fixed in your quote, so you can put it side by side with your renewal before the deadline.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**What is a normal health insurance renewal increase?**

Employers in Mercer's 2026 survey expect health benefit costs per employee to rise 8.2% in 2027 after planned changes, and about 11% if they changed nothing. Individual small-group renewals range much more widely, from flat to over 20%.

**How do I calculate the cost of a renewal increase?**

Multiply the current total monthly premium by 12, then by the increase. The company's added cost is that amount times its share of the premium.

**Can I negotiate a health insurance renewal?**

Small-group rates are filed with the state, so the carrier usually can't discount the same plan. You can change plans, carriers or funding type, which is where most savings come from.

**When should I start shopping before renewal?**

90 to 120 days before the renewal date. That leaves time to compare quotes, collect any census or applications and run open enrollment.

**Why did our renewal go up when nobody was sick?**

Small-group renewals mostly reflect medical trend, the team's age and carrier pricing, not your own claims. Even a healthy group sees the trend increase.

**Should the company absorb the renewal increase?**

It depends on budget. Keeping the same percentage split is common. Absorbing it costs more but protects take-home pay, which matters most for lower-paid employees.

## Sources

- [Mercer (Marsh), Employers expect health benefit costs to jump 8.2% in 2027 (September 2026)](https://www.mercer.com/en-us/about/newsroom/employers-expect-health-benefit-costs-to-jump-in-2027/)
- [PwC, Medical cost trend 2027 (Behind the numbers)](https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [CMS, ACA market rating rules (age and geographic rating)](https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms)
- [CMS, medical loss ratio rules](https://www.cms.gov/marketplace/private-health-insurance/medical-loss-ratio)

# FSA contribution calculator for 2026

Source: https://www.getprescience.com/tools/fsa-contribution-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-30
Updated: 2026-10-30
Cite as: Rishab Jain. "FSA contribution calculator for 2026." Prescience, October 30, 2026. https://www.getprescience.com/tools/fsa-contribution-calculator

A health flexible spending account (FSA) lets you pay for medical costs with pre-tax pay, up to $3,400 in 2026. Every dollar you put in skips income tax and the 7.65% FICA tax, so a 22% federal bracket and 5% state tax save you about 35 cents per dollar. The catch is that unspent money is mostly lost at year end. Enter your plan and expected spending to pick an election that saves the most without forfeiting much.

- **2026 health FSA limit:** $3,400 per employee
- **2026 carryover maximum:** $680
- **Grace period option:** Up to 2.5 months
- **Tax saved per dollar:** Income tax + 7.65% FICA

## Plan your FSA election

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

Your employer's plan uses one of three rules for money left at year end: a carryover of up to $680 into 2027, a grace period of up to two and a half months to spend it, or neither. Plans can't offer both a carryover and a grace period. Your summary plan description or open enrollment materials say which one you have.

## Health FSA limits for 2026

**Health FSA figures, 2025 and 2026**

|  | 2025 | 2026 |
| --- | --- | --- |
| Employee contribution limit | $3,300 | $3,400 |
| Maximum carryover into the next year | $660 | $680 |
| Grace period (if the plan uses it) | 2.5 months | 2.5 months |

The limit is per employee, per employer. If you and your spouse both have FSAs through work, you can each contribute up to $3,400. Employer contributions don't count toward the $3,400 unless you could have taken them as cash. To keep the FSA an excepted benefit, employer money is usually limited to $500 or a dollar-for-dollar match.

Your whole annual election is available on the first day of the plan year, even though it comes out of your pay over the year. If you elect $2,400 and have a $2,000 procedure in February, the FSA pays it.

## Worked examples

**Electing $2,500 with a carryover plan**

Illustrative. 2026, 26 paychecks, 22% federal and 5% state tax. The employee expects $2,000 of eligible expenses, and the plan allows a $680 carryover.

- Election: $2,500 ($96.15 a paycheck)
- Tax saved: $2,500 × 34.65% = $866.25
- Expected leftover: $500
- Carried into 2027: $500

**$866.25 saved and nothing lost.** With a carryover plan, electing a little more than you expect is low-risk.

**The same election with use-it-or-lose-it rules**

Illustrative. The employee elects $2,500 but only spends $1,500, and the plan has no carryover or grace period.

- Tax saved: $866.25
- Forfeited: $1,000
- Net result: −$133.75

**Worse off than not using an FSA.** Under use-it-or-lose-it rules, elect only what you're confident you'll spend.

## How much to put in your FSA

Start from what you know you'll spend: your deductible if you hit it every year, regular prescriptions, therapy copays, glasses or contacts, and planned dental work. Then adjust for your plan's rule:

- **Carryover plan:** elect your expected spending plus up to $680. Anything unspent up to that amount rolls into next year.
- **Grace period plan:** elect your expected spending. You have until about mid-March to use what's left.
- **No carryover or grace period:** elect a bit less than you expect. Every dollar you forfeit costs a full dollar; every dollar you don't elect only costs you the tax savings, about 35 cents.

If your employer offers an HSA-qualified plan, compare before you elect. A general-purpose health FSA makes you ineligible to contribute to an HSA for the year. A limited-purpose FSA, covering only dental and vision, doesn't. Our [HSA vs FSA guide](https://www.getprescience.com/guides/hsa-vs-fsa) explains the difference.

## Limited-purpose FSAs for HSA owners

A limited-purpose FSA covers only dental and vision care, so it doesn't block HSA contributions. If you're on an HSA-qualified plan, it lets you pay for cleanings, fillings, orthodontics, glasses and contacts with pre-tax money while your HSA balance stays invested. The 2026 limit is the same $3,400, and the same carryover or grace period rules apply.

Some plans also offer a post-deductible FSA, which starts covering medical costs only after you've met the HDHP's minimum deductible. Both are worth asking about at open enrollment if you already max out your HSA and still have predictable dental or vision costs. Spending the FSA first on those costs, and leaving the HSA invested, gets you the tax break on both accounts while the HSA keeps growing for later years.

## What an FSA can pay for

Health FSAs cover medical care as defined in Section 213(d) of the tax code, the same list in [IRS Publication 502](https://www.irs.gov/publications/p502). Common uses:

- Deductibles, copays and coinsurance
- Prescriptions and insulin
- Over-the-counter medicines and menstrual products, without a prescription since 2020
- Glasses, contacts and LASIK
- Dental work, including fillings, crowns and orthodontics
- Mental health therapy and psychiatric care

FSAs can't pay insurance premiums, and they can't pay for cosmetic procedures or general health items like gym memberships. Our list of [HSA and HRA eligible expenses](https://www.getprescience.com/guides/hsa-hra-eligible-expenses) applies to health FSAs too.

## Changing or leaving mid-year

Your election is locked for the plan year unless you have a qualifying change in status, such as marriage, divorce, a birth or adoption, a death in the family, or a change in employment that affects eligibility. The change has to be consistent with the event: a new baby lets you increase your election, not lower it to zero.

If you leave your job, your FSA generally ends on your last day or the end of that month. Claims for care you received before then can still be submitted during the plan's run-out period, often 90 days. Because of the uniform coverage rule, if you'd already spent more than you'd contributed, you don't owe the difference back.

**Leaving in April after a large claim**

Illustrative. An employee elects $3,000, has a $2,600 dental procedure in February, and leaves on April 30 after contributing $1,000 through payroll.

- Reimbursed: $2,600
- Contributed: $1,000
- Owed back to the plan: $0

**The employee keeps the full $2,600 reimbursement.** The plan absorbs the $1,600 difference.

## Common FSA mistakes

- **Electing for expenses that won't happen.** Base the election on care you're confident of, not your deductible if you rarely reach it.
- **Missing the claim deadline.** Even with a grace period or carryover, receipts have to be submitted by the run-out date.
- **Losing receipts.** Most FSA cards ask for documentation on some purchases. Keep itemized receipts, not just card slips.
- **Enrolling in a general FSA alongside an HSA.** It makes you ineligible for HSA contributions for the year. Choose a limited-purpose FSA instead.
- **Forgetting to re-enroll.** FSA elections don't roll over automatically each year at most employers.

A good rule for most people: list the expenses you're sure of, add them up, and elect that amount. If your plan has a carryover, you can add up to $680 for things that might come up. If it doesn't, leave a margin below your estimate instead. The tax savings on the last few hundred dollars are worth less than the risk of losing them. You can always open a bigger account next year once you know your real spending.

## For employers offering an FSA

An FSA is part of a Section 125 cafeteria plan, so it needs a written plan document. The employer saves 7.65% in payroll tax on every dollar employees put in. The main risk is the uniform coverage rule: if an employee spends their full election in February and then leaves, the plan can't recover the difference. Forfeitures from other employees usually cover it.

If you're setting up pre-tax premiums at the same time, the [Section 125 calculator](https://www.getprescience.com/tools/section-125-tax-savings-calculator) estimates what the whole cafeteria plan saves.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** With an effective $0 deductible, Diamond leaves less for employees to budget into an FSA each year.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

**Building the benefits budget? Price the medical plan separately**

Use the employee census to compare the written medical proposal. Keep FSA elections, administration and forfeiture rules separate from the employer premium and contribution policy.

[Compare my team's medical plan](https://www.getprescience.com/quote)

## Frequently asked questions

**What is the FSA limit for 2026?**

$3,400 per employee for a health FSA, with up to $680 allowed to carry over into 2027 if the plan permits it (IRS Revenue Procedure 2025-32).

**What happens to unused FSA money?**

It depends on the plan. With a carryover, up to $680 moves into the next year. With a grace period, you get up to 2.5 extra months to spend it. Otherwise it's forfeited to the plan.

**How much tax does an FSA save?**

Your federal and state income tax rate plus 7.65% FICA on every dollar you contribute. At 22% federal and 5% state, that's about $347 for every $1,000.

**Can I have an FSA and an HSA?**

Not a general-purpose health FSA. You can pair an HSA with a limited-purpose FSA that covers only dental and vision.

**Can I change my FSA election mid-year?**

Only after a qualifying change in status, such as marriage, a birth or a change in employment, and only in a way consistent with that change.

**Is the FSA limit per person or per household?**

Per employee, per employer. Spouses with their own FSAs can each contribute up to $3,400.

## Sources

- [IRS Revenue Procedure 2025-32 (2026 inflation adjustments, including health FSAs)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans](https://www.irs.gov/publications/p969)
- [IRS Notice 2013-71, Modification of the use-or-lose rule for health FSAs](https://www.irs.gov/pub/irs-drop/n-13-71.pdf)
- [IRS Publication 502, Medical and Dental Expenses](https://www.irs.gov/publications/p502)
- [26 CFR 1.125-4, permitted election changes](https://www.ecfr.gov/current/title-26/section-1.125-4)

# Dependent care FSA calculator for 2026

Source: https://www.getprescience.com/tools/dependent-care-fsa-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-31
Updated: 2026-10-31
Cite as: Rishab Jain. "Dependent care FSA calculator for 2026." Prescience, October 31, 2026. https://www.getprescience.com/tools/dependent-care-fsa-calculator

A dependent care FSA lets you pay for daycare, preschool, after-school programs and summer day camp with pre-tax pay. Starting in 2026, the federal limit rose from $5,000 to $7,500 per household, or $3,750 if you're married and file separately, the first increase since 1986. But your employer's plan has to adopt the higher limit, and many still cap at $5,000. Enter your election and plan limit to see what you'll save.

- **2026 limit, per household:** $7,500
- **Married filing separately:** $3,750
- **Limit before 2026:** $5,000
- **Eligible dependents:** Children under 13, others who can't self-care

## Estimate your dependent care FSA savings

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

The limit you can use is the smallest of three numbers: the federal household limit, your employer's plan limit, and the earned income of the lower-earning spouse. If you're single, use your own pay. Savings include federal and state income tax and the 7.65% FICA tax that payroll contributions skip.

## What changed for 2026

**Dependent care assistance limits**

|  | 2025 and earlier | 2026 onward |
| --- | --- | --- |
| Household limit | $5,000 | $7,500 |
| Married filing separately | $2,500 | $3,750 |
| Indexed to inflation | No | No |
| Employer must adopt | n/a | Yes, by plan amendment |

The One Big Beautiful Bill Act raised the Section 129 limit starting with 2026. It isn't automatic: the plan sponsor has to amend the cafeteria plan to allow it. If your open enrollment materials still say $5,000, that's your limit for the year even though the law allows more.

The limit is per household, not per employee. If you and your spouse both have a dependent care FSA through work, your combined elections can't exceed $7,500. Amounts over the limit become taxable wages.

## Worked examples

**A family electing the full $7,500**

Illustrative. A married couple filing jointly. The employer adopted the $7,500 limit; the lower-earning spouse makes $60,000. Their bracket is 22% federal and 5% state.

- Limit: $7,500
- Tax rate saved: 22% + 5% + 7.65% = 34.65%
- Tax saved: $7,500 × 34.65% = $2,598.75

**$2,598.75 saved in 2026,** about $866 more than at the old $5,000 limit.

**The same family on a plan still capped at $5,000**

Illustrative. Same couple, but the employer didn't adopt the new limit.

- Limit: $5,000
- Tax saved: $1,732.50
- Election above the limit: $2,500

**$1,732.50 saved.** If the other spouse's employer adopted $7,500, they could elect the remaining $2,500 there.

## What a dependent care FSA covers

The care has to let you (and your spouse, if married) work or look for work. It must be for a qualifying person: your child under 13, or a spouse or dependent of any age who can't care for themselves and lives with you more than half the year.

- **Covered:** daycare centers, preschool, nannies and au pairs, before- and after-school care, and summer day camp.
- **Not covered:** overnight camp, kindergarten and school tuition, care while you're not working, and payments to your own child under 19 or to someone you claim as a dependent.

Unlike a health FSA, you can only be reimbursed for care that has already happened, up to what's in your account. There's no carryover; most plans allow a grace period of up to two and a half months. Our [health FSA calculator](https://www.getprescience.com/tools/fsa-contribution-calculator) covers the separate medical account.

## How reimbursement works

A dependent care FSA works differently from a health FSA. You can only be reimbursed up to what you've contributed so far, and only for care that has already been provided. If you prepay a month of daycare on the first, you can claim it after the month is over.

1. **Elect an amount at open enrollment** Spread across your paychecks. A $7,500 election over 26 paychecks is $288.46 each.
2. **Pay your provider as usual** Keep receipts showing the dates of care, the amount and the provider's name and tax ID.
3. **Submit claims after the care** Many administrators let you set up recurring claims for daycare so you're reimbursed each month automatically.
4. **File Form 2441 with your tax return** It reconciles the benefits on your W-2 with your actual expenses and providers.

## Changing your election mid-year

Dependent care elections are more flexible than health FSA elections. Besides life events like a birth or marriage, you can usually change your election when your care costs or provider change. Common examples:

- **Your daycare raises its rates** or you move your child to a more expensive center.
- **Your child starts kindergarten** and moves from full-day care to after-school care, which costs less.
- **A relative starts providing free care,** or stops.
- **Your child turns 13** and no longer qualifies.

**A child starting kindergarten in September**

Illustrative. A parent elects $7,500 for 2026 for full-time daycare. In September their child starts public kindergarten, and after-school care costs $500 a month.

- Daycare January to August: $1,200 × 8 = $9,600
- After-school care September to December: $500 × 4 = $2,000
- Eligible expenses for the year: $11,600

**The full $7,500 is still used,** because eligible expenses exceed the limit. Kindergarten tuition itself doesn't count, but before- and after-school care does.

## The earned income limit

Your tax-free dependent care benefits can't be more than your earned income or, if you're married, your spouse's, whichever is lower. For most two-earner families this never binds, because both incomes are well above $7,500. It matters when one spouse works part-time, starts a business partway through the year or isn't working.

- **A spouse with no earnings** generally means no tax-free benefit, because the limit is $0.
- **A spouse who is a full-time student or unable to care for themselves** is treated as earning $250 a month with one qualifying person, or $500 a month with two or more, for each month they're in school or disabled.
- **Single parents** use their own earned income, which is rarely the limiting number, and can elect the full $7,500 if their employer's plan allows it.
- **Married couples filing separately** each have a $3,750 limit, and the earned income test still applies to both spouses.

If you expect the earned income limit to apply, enter the lower-earning spouse's expected pay in the calculator. Any election above it becomes taxable income at the end of the year, so it's better to elect less from the start. If a spouse's work situation changes during the year, that also counts as a change in status, which lets you adjust the election to match.

## FSA or the child and dependent care credit?

You can't use the same expenses for both the FSA and the child and dependent care tax credit. Expenses up to the FSA amount reduce what you can claim for the credit. For most families with earnings in the 22% bracket or higher, the FSA saves more, because it also avoids the 7.65% FICA tax and state income tax.

Lower-income families should compare. The credit's rules also changed for 2026, so run both through your tax software or ask a preparer before open enrollment.

> **Report it on Form 2441:** Your employer reports dependent care benefits in Box 10 of your W-2. You'll file Form 2441 with your return, listing each care provider's name, address and tax ID.

## For employers: should you adopt the $7,500 limit?

For most companies, yes. It costs the company nothing except the plan amendment, and it saves 7.65% in payroll tax on every extra dollar employees elect. The main thing to watch is nondiscrimination testing: dependent care FSAs can't favor highly compensated employees, and a higher limit makes it easier for them to fail the 55% average benefits test.

Dependent care help is one of the benefits parents notice most. Our guide to [health benefits that attract talent](https://www.getprescience.com/guides/health-benefits-that-attract-talent) covers others.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** For families, predictable medical costs matter as much as childcare savings; Diamond has an effective $0 deductible.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

**Building a broader package? Compare the medical budget too**

Dependent care elections and medical coverage are separate benefits. Use the actual employee census to compare the written medical proposal alongside the other employer-funded benefits in your budget.

[Price my team's medical benefits](https://www.getprescience.com/quote)

## Frequently asked questions

**What is the dependent care FSA limit for 2026?**

$7,500 per household, or $3,750 for married people filing separately, if your employer's plan adopted the new limit. Plans that didn't adopt it stay at $5,000.

**Is the $7,500 dependent care limit per person?**

No. It's per household. Spouses with separate accounts share one $7,500 limit.

**Is summer camp covered by a dependent care FSA?**

Day camp is, if it lets you work. Overnight camp isn't.

**Do I lose unused dependent care FSA money?**

Generally yes. There's no carryover, though many plans have a grace period of up to 2.5 months after the plan year ends.

**Can I use a dependent care FSA and the child care credit?**

Yes, but not on the same dollars. FSA reimbursements reduce the expenses you can claim for the credit.

**How much does a dependent care FSA save?**

Your income tax rate plus 7.65% FICA. At 22% federal and 5% state, a $7,500 election saves about $2,600.

## Sources

- [IRS Publication 503, Child and Dependent Care Expenses](https://www.irs.gov/publications/p503)
- [IRS Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits](https://www.irs.gov/publications/p15b)
- [H.R. 1, One Big Beautiful Bill Act (Public Law 119-21)](https://www.congress.gov/bill/119th-congress/house-bill/1)
- [IRS, Instructions for Form 2441](https://www.irs.gov/instructions/i2441)
- [26 CFR 1.125-4, permitted election changes](https://www.ecfr.gov/current/title-26/section-1.125-4)