If you run a small business in Michigan, you’ve probably done the math on group health insurance—and it’s getting harder to make the numbers work. With small group premiums rising 11.1% on average for 2026, many employers face a difficult choice: absorb costs that strain the budget, pass more to employees, or drop coverage entirely.
But there’s a third path that 52% more small employers chose last year—one that flips the traditional model entirely.
The Problem With Traditional Group Plans
Traditional group health insurance works well for some businesses, but it comes with constraints that don’t fit every situation. Most carriers require at least 70% of eligible employees to enroll before they’ll offer coverage. If too many of your team members have coverage through a spouse or decline for other reasons, you may not qualify for a group plan at all.
Then there’s the renewal process. You build your budget around a certain premium, only to receive a double-digit increase at renewal that forces difficult mid-year decisions. According to the HRA Council’s 2025 report, this unpredictability is one of the top reasons employers are exploring alternatives.
And for Michigan’s smallest businesses—those with five, ten, or fifteen employees—the administrative burden of managing a group plan can consume time better spent running the company.
A Different Model: You Set the Budget, They Choose the Plan
Individual Coverage Health Reimbursement Arrangements (ICHRA) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRA) work differently. Instead of purchasing a group plan, you provide employees with a fixed monthly allowance—tax-free—that they use to buy their own individual health insurance.
Here’s what that changes:
Predictable costs. You decide exactly what you’ll contribute each month. No renewal surprises. If you budget $400 per employee, that’s what you spend—period.
No participation minimums. Unlike group plans, there’s no requirement that a certain percentage of employees enroll. Even if you have just one W-2 employee, you can offer this benefit.
Employee choice. Instead of everyone fitting into the same plan, each employee selects coverage that matches their situation—their doctors, their family size, their priorities. Employees ages 18 to 44 represent the largest share of marketplace enrollment via ICHRA and QSEHRA, suggesting younger workers particularly value this flexibility.
Tax advantages for both sides. Your contributions are tax-deductible. Employee reimbursements are tax-free. The arrangement creates savings that don’t exist when employees simply buy coverage on their own.
ICHRA vs. QSEHRA: Which Fits Your Business?
Both accomplish the same goal, but they’re designed for different situations.
QSEHRA is built specifically for employers with fewer than 50 full-time employees who don’t currently offer any group health plan. For 2026, you can contribute up to $6,450 per year for individual coverage or $13,100 for family coverage. The trade-off: you must offer the same terms to all eligible employees.
ICHRA is available to employers of any size and has no contribution limits—you set the budget based on what makes sense for your business. You can also vary allowances by employee class (full-time vs. part-time, salaried vs. hourly, different locations), which provides more flexibility for businesses with diverse workforces.
According to the HRA Council, 83% of employers who adopted ICHRA or QSEHRA in 2025 had never offered health coverage before. These arrangements opened a door that traditional group plans kept closed.
Is This Right for Your Michigan Business?
ICHRA and QSEHRA aren’t the answer for every employer. If your team values a unified plan with shared networks, or if you have enough employees to negotiate competitive group rates, traditional coverage may still make sense.
But these alternatives deserve serious consideration if:
– You’ve struggled to meet participation requirements for group plans
– You want fixed, predictable benefit costs you can budget with confidence
– Your employees have diverse needs that a single group plan can’t serve
– You’re a very small business that’s never been able to offer coverage before
– You’re tired of renewal increases that force annual benefit redesigns
The 92% retention rate among employers who offer these arrangements suggests that once businesses try this model, they rarely go back.
Getting Started
Evaluating whether ICHRA or QSEHRA fits your business requires understanding your current costs, your employees’ situations, and how the numbers compare to traditional options. It’s not a decision to make based on a blog post alone.
At JDW & Associates, we help Chelsea-area employers navigate health insurance options—including these newer alternatives—with straightforward guidance and no pressure. We’ll help you compare approaches and figure out what actually works for your situation.
Schedule a consultation to discuss whether a different model might make health benefits more sustainable for your business.
This information is general and not legal or tax advice. Plan availability and rules vary by situation. Contact JDW & Associates for guidance specific to your business.
