What Group Health Insurance Plans Should I Offer Employees?

What Group Health Insurance Plans Should I Offer Employees? Deciding Between PPO, HMO, HSA Options

The best group health insurance plan for your team is the one your workers will actually use, and your business can afford year after year. For most small businesses, that means one solid PPO or HMO plan, or a high-deductible plan paired with a health savings account. For some, it means a newer option called an HRA.

I know that answer sounds simple. Getting there is not. When I first looked into health plans for a team, I felt buried in letters. HMO. PPO. HDHP. ICHRA. It felt like alphabet soup with a price tag.

So I wrote the guide I wish I had back then. In plain words, I will walk you through:

• Whether the law says you have to offer health insurance
• The main types of group health plans and who each one fits
• Newer, more flexible options for small businesses
• What health insurance costs employers in 2026
• A simple step-by-step way to pick your plan
• The mistakes I see business owners make most often

Let’s clear up the alphabet soup.

The Quick Answer

If you only have one minute, here is what I would tell a friend who runs a small business:

1. Under 50 full-time workers? You don’t have to offer health insurance. But offering it helps you hire and keep good people.
2. 50 or more full-time workers? You must offer affordable coverage or risk IRS penalties.
3. Want one simple plan? Pick a PPO if your team wants choice. Pick an HMO if keeping costs low matters most.
4. Have a young, healthy team? Look at a high-deductible plan with an HSA.
5. Team spread across many states, or a tight budget? Look at an HRA, like a QSEHRA or ICHRA.
6. Fewer than 25 workers with modest pay? Check if you qualify for a small business tax credit worth up to 50% of what you pay.

Do I Have to Offer Health Insurance to My Employees?

It depends on your business size. The rule comes from the Affordable Care Act, or ACA. People often call it the “employer mandate” or “pay or play.”

Q: What if I have fewer than 50 full-time workers?

You do not have to offer health insurance under federal law. It is your choice. Still, many small business owners offer it because good workers expect it. I have seen people turn down a higher-paying job to keep their health plan.

Q: What if I have 50 or more full-time workers?

Then you are an “applicable large employer.” You must offer health coverage to your full-time workers and their kids. The coverage has to do two things:

• Be affordable. For 2026, the worker’s cost for employee-only coverage can’t exceed 9.96% of their household income. That number went up from 9.02% in 2025. (IRS Rev. Proc. 2025-25, via NFP)
• Give minimum value. The plan must pay at least 60% of the average cost of covered care.

Q: What happens if I don’t follow the rule?

You may owe a penalty. For 2026, the penalty is $3,340 per full-time worker if you offer no coverage at all, after the first 30 workers. If your coverage is not affordable, it is $5,010 for each worker who gets a tax credit on the Marketplace. (OneDigital)

Q: How do I count my workers?

Count anyone who works 30 or more hours a week as full-time. Then add up part-time hours to find “full-time equivalents.” For example, two people working 15 hours a week each count as one full-time worker. If your total is close to 50, ask your accountant to check it.

5 Main Types of Group Health Insurance Plans

Most group plans fall into five types. The big differences are how many doctors workers can see, whether they need a referral, and how much they pay.

1. HMO (Health Maintenance Organization)

With an HMO, each worker picks a main doctor, called a primary care doctor. That doctor sends them to specialists when needed. Care outside the network is usually not covered, except in emergencies.

• Pros: Lower monthly costs. Low copays. Simple to use.
• Cons: Fewer doctors to pick from. Referrals can slow things down.

I like HMOs for teams that live and work in the same area and want to keep costs down.

2. PPO (Preferred Provider Organization)

A PPO gives workers the most freedom. They can see any doctor, in or out of network, with no referral. They pay more for out-of-network care.

• Pros: Lots of choice. No referrals. Works well for people who travel.
• Cons: The most expensive plan type for you and your workers.

If your team is spread out, or people have doctors they love, a PPO is often worth the extra cost.

3. EPO (Exclusive Provider Organization)

An EPO is a mix of the two. Workers must stay in network, like an HMO. But they don’t need referrals, like a PPO.

• Pros: Cheaper than a PPO. No referral hassle.
• Cons: No coverage outside the network, except emergencies.

4. POS (Point of Service)

A POS plan works like an HMO, with a main doctor and referrals. But it offers some out-of-network coverage at a higher cost.

• Pros: A little more freedom than an HMO.
• Cons: More paperwork. Not offered everywhere.

5. HDHP with an HSA (High-Deductible Health Plan)

An HDHP has low monthly premiums but a high deductible. The deductible is what a worker pays before the plan starts paying. For 2026, the deductible must be at least $1,700 for one person or $3,400 for a family. (WEX)

The big perk is the Health Savings Account, or HSA. Workers put in money before taxes and use it for medical bills. The money grows and stays theirs, even if they leave your company. For 2026, the maximum you can contribute to an HSA is $4,400 for an individual and $8,750 for a family. That limit includes what you and the worker contribute together.

• Pros: Lowest premiums. Big tax savings. You can add money to workers’ HSAs.
• Cons: Large upfront bills can scare people who need a lot of care.

Good news for 2026. A new law made $0 telehealth visits a permanent option for HDHPs, without hurting HSA rules. (Winston & Strawn)

Newer Options That Small Businesses Should Know About

A traditional group plan is not your only choice anymore. These newer setups can save money or simplify things.

QSEHRA (Small Business HRA)

A QSEHRA lets you give workers a set amount of tax-free money each month. They buy their own health plan, and you reimburse them. It is only for businesses with fewer than 50 full-time workers.

For 2026, you can give up to $6,450 a year for one person or $13,100 a year for a family. (WEX)

• Good fit if: You want a fixed, predictable budget and a simple setup.
• Watch out for: You can’t also offer a regular group plan alongside it.

ICHRA (Individual Coverage HRA)

An ICHRA works the same basic way, but it has no dollar limit, and any size business can use it. You can also give different amounts to different groups. For example, you might give full-time workers more than part-time workers.

• Good fit if: Your team lives in many states, or you want full control over costs.
• Watch out for: Workers have to shop for their own plan, so they may need help.

A 2026 change makes these HRAs even more useful. Bronze and catastrophic plans bought on the Marketplace now count as HSA-friendly plans. That means workers who use your HRA to buy a bronze plan may also be able to save in an HSA. (Winston & Strawn)

Level-Funded Plans

With a level-funded plan, you pay a set amount each month, like regular insurance. But if your team has a healthy year and uses less care, you may get some money back. Insurance covers you if claims run high.

• Good fit if: You have 10 or more workers who are mostly healthy.
• Watch out for: One very sick worker can raise your renewal rates.

Self-Funded Plans

Here, your business pays workers’ medical bills directly. You buy “stop-loss” insurance to protect you from huge bills. This is usually for bigger companies, often 100 or more workers.

• Good fit if: You are large and can handle ups and downs in cost.
• Watch out for: More risk and more rules to follow.

Metal Tiers and the Small Business Tax Credit

Many small group plans come in “metal” levels. The metal tells you how the costs are split between the plan and the worker.

• Bronze: Plan pays about 60% of care costs. Lowest premiums, highest out-of-pocket costs.
• Silver: Plan pays about 70%—a balance of both.
• Gold: Plan pays about 80%: higher premiums, lower bills at the doctor.
• Platinum: Plan pays about 90%: highest premiums, lowest bills.

Many businesses I’ve seen offer a silver or gold plan as their main choice. Some offer two levels so workers can pick.

Q: Can I get a tax break for offering health insurance?

Yes, in many cases. All employer premium payments are usually a tax-deductible business expense. On top of that, very small businesses may get the Small Business Health Care Tax Credit. It can cover up to 50% of what you pay toward premiums, for two years in a row. (IRS Taxpayer Advocate)

To qualify, you generally need to:

1. Have fewer than 25 full-time equivalent workers.
2. Pay average yearly wages under about $68,000 (this number rises with inflation each year).
3. Pay at least half of the cost of employee-only coverage.
4. Buy the plan through the SHOP Marketplace.

One catch: SHOP plans are not sold in many parts of the country anymore. (healthinsurance.org) Ask a broker if they are offered where you are before you count on this credit.

How I Would Pick a Group Health Plan: 7 Simple Steps

Here is the process I would follow if I were choosing a plan for my own team today.

1. Set your budget first. Decide how much you can spend per worker each month. Think about next year too, since prices tend to go up.
2. Ask your team what they want. A short, anonymous survey works great. Ask whether they have kids, have favorite doctors, and would trade a lower paycheck cost for a higher deductible.
3. Look at who is on your team. A young, healthy team may love an HDHP with an HSA. A team with families or long-term health needs may do better with a PPO or a low-deductible plan.
4. Check where people live. If everyone lives in one city, an HMO or EPO can work. If people live in different states, look at a PPO or an ICHRA.
5. Check the doctor networks. Before you sign, make sure the local hospitals and popular doctors are in network. A cheap plan is useless if no one can use it.
6. Get quotes from a broker. A licensed broker usually costs you nothing extra, since insurance companies pay them. They can compare many plans side by side.
7. Think about offering two choices. Many businesses offer one low-cost plan and one richer plan. Workers like having a say, and you can keep your contribution the same for both.

Q: Should I offer more than one plan?

If you have more than about 10 workers, I think two choices are often the sweet spot. One HDHP with an HSA and one PPO or HMO covers most people’s needs. More than three choices tends to confuse people. Some insurers also need a minimum number of people in each plan, so ask your broker.

How Much Does Group Health Insurance Cost?

In the most recent national survey from KFF, the average yearly premium for employer health insurance was $9,325 for one person and $26,993 for a family. (KFF 2025 Employer Health Benefits Survey) Here is how that cost was split:

These dollar splits are my rough math based on KFF averages. Your real costs depend on where you are, your team’s age, and the plan you pick.

Prices keep climbing, too. Family premiums rose 6% from 2024 to 2025. KFF’s leaders said they expect even sharper increases in 2026, with costly weight-loss drugs and higher hospital prices among the reasons. (Parrott Benefit Group summary of KFF)

Q: How much of the premium should I pay?

Most insurers ask you to pay at least 50% of the cost of employee-only coverage. Many businesses pay 70% to 100% for the worker and less for family members. I suggest picking a number you can stick with. Cutting your share later feels like a pay cut to your team.

Q: How can I keep costs down?

• Offer an HDHP and contribute to workers’ HSAs. You often still save compared to a PPO.
• Pay a set dollar amount instead of a percentage. That way, price hikes don’t land all on you.
• Shop your plan every year at renewal. Don’t just auto-renew.
• Look at level-funded plans if your team is healthy.
• Promote free preventive care and telehealth so small problems don’t turn into big claims.

6 Extras Worth Adding to Your Health Plan

A health plan is the main dish, but small extras can make your benefits feel much bigger. Many of these cost very little.

1. Dental insurance. Cleanings and checkups prevent bigger problems. Workers often value it as much as medical.
2. Vision insurance. It covers eye exams, glasses, and contacts. It is cheap, and people use it a lot.
3. Telehealth. Workers can see a doctor by phone or video, often for $0. It saves time off work.
4. Mental health support. An Employee Assistance Program, or EAP, gives free, private counseling sessions. It is one of the most-used perks I know of.
5. Direct primary care. Workers pay a flat monthly fee for unlimited visits with a primary care doctor. Starting in 2026, this no longer blocks workers from using an HSA. (Winston & Strawn)
6. Flexible Spending Accounts (FSAs). Workers set aside pre-tax money for medical costs. For 2026, the limit is $3,400 per year. The dependent care FSA, which helps pay for child care, jumped to $7,500. (WEX)

7 Mistakes to Avoid When Choosing a Group Health Plan

I have seen smart business owners make these mistakes. Most are easy to dodge once you know about them.

1. Picking the cheapest plan without checking the network. If local doctors aren’t in it, your team will be unhappy fast.
2. Not asking your team. You may guess wrong about what people care about most.
3. Forgetting about families. A plan that is cheap for single workers can be very costly for parents.
4. Explaining the plan poorly. If people don’t understand an HDHP, they may avoid care or feel tricked. Hold a short meeting and use simple examples.
5. Missing the deadline. Plans often start January 1. Start shopping 60 to 90 days before. If you are reading this in October, now is the time.
6. Ignoring the rules as you grow. Once you near 50 full-time equivalent workers, the ACA mandate kicks in. Track your headcount each month.
7. Set it and forget it. Your team changes. Prices change. Review your plan every year.

Frequently Asked Questions About Group Health Insurance

Q: What is the best group health insurance plan for a small business?

There is no single best plan. For most small businesses, I think a PPO or HMO, or an HDHP paired with an HSA, is a great place to start. If your budget is tight or your team is spread out, a QSEHRA or ICHRA may be a better fit.

Q: How many employees do I need for a group health plan?

In most states, you need at least one worker who is not you or your spouse. Some insurers also require a certain share of eligible workers to sign up, often around 70%. The rules vary by state and insurer.

Q: Do I have to cover part-time workers?

No. You only have to offer coverage to full-time workers if you have 50 or more. You can choose to cover part-time workers, though. With an ICHRA, you can even give them a smaller amount.

Q: Do I have to cover workers’ families?

Large employers must offer coverage to children up to age 26. Spouses are optional. Small employers can choose. Paying for family coverage is a strong perk, but it costs a lot more.

Q: When can I start a group health plan?

Small businesses can usually start a plan any time of year. Your workers then get an open enrollment period each year to make changes.

Q: Is employer-paid health insurance taxed?

No, in most cases. What you pay is a business expense and isn’t counted as income for your workers. What workers pay can often come out of their paychecks before taxes, too.

Q: What is the difference between a QSEHRA and an ICHRA?

A QSEHRA is only for businesses with fewer than 50 full-time workers and has yearly dollar limits. An ICHRA works for any size business, has no dollar limit, and lets you set different amounts for different groups of workers.

Q: Should I use a broker?

I usually say yes. A good broker can compare plans, explain the fine print, and help at renewal time. The insurance company usually pays them, so their help often costs you nothing extra.

Final Thoughts: Choose the Plan Your Team Will Use

So, what group health insurance plans should you offer your employees? Here is my short version:

• Start with your budget and what your team needs.
• For most small teams, one PPO or HMO, or an HDHP with an HSA, is a smart start.
• If you have more than about 10 workers, think about offering two choices.
• If costs or locations make a group plan hard, look at a QSEHRA or ICHRA.
• If you have 50 or more full-time workers, make sure your plan meets the 2026 affordability rule.
• Add low-cost extras like dental, vision, telehealth, and mental health support.

Health insurance is one of the best ways I know to show your team you care. It helps you hire good people and keep them. Take it one step at a time, ask questions, and lean on a good broker. You don’t have to figure it all out alone.

This article is for general information only. It is not legal, tax, or insurance advice. Rules and numbers change each year, so check with a licensed broker or tax pro before you decide.

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