Small business
Group plan, CHOICE (ICHRA), QSEHRA or a stipend
Figures on this page checked . Small group rates and rules reset every year — if you are reading this long after that date, call and we will tell you what moved.
What are the ways a small business can help with health insurance?
You can buy a group plan, give employees a tax-free allowance for individual plans through a CHOICE arrangement (ICHRA) or a QSEHRA, or pay them more and let them buy their own.
- A group plan. You choose one or more plans from one carrier and pay part of the premium. Everybody is on the same network.
- A CHOICE arrangement (ICHRA). You set a monthly allowance, each employee buys their own individual plan, and you reimburse them tax-free up to the allowance. The federal government and the Small Business Administration began calling it a CHOICE arrangement on September 3, 2026; the rules didn’t change.
- A QSEHRA (a qualified small employer health reimbursement arrangement). The same idea for smaller employers who don’t offer a group plan, with a yearly cap set by the IRS.
- A stipend. Extra pay. It’s taxable, and nothing ties it to insurance.
How do the four compare?
Side by side, on the seven questions that usually decide it. On a phone the table scrolls sideways.
| Question | Group plan | CHOICE (ICHRA) | QSEHRA | Stipend |
|---|---|---|---|---|
| Who it usually fits | Small groups of 1 to 50 eligible employees, and larger ones | Any size, from a handful of employees up | Fewer than 50 employees, with no group plan | Any size |
| How you control cost | You pick the contribution; the premium changes each renewal | You set the allowance, by class of employee | You set the allowance, up to the IRS cap | You set the amount |
| Employee choice | The plans you choose, from one carrier | Any individual plan they qualify for | Any individual plan they qualify for | Anything, including no insurance |
| Tax treatment | Your share is deductible and tax-free to employees | Reimbursements are tax-free when the rules are met | Reimbursements are tax-free when the employee has coverage | Taxable wages for both of you |
| Premium tax credits | An affordable offer rules them out for the employee | Taking it, or being offered an affordable one, rules them out | An affordable one rules them out; a smaller one reduces them | No effect, except that it counts as income |
| Participation rules | Carrier minimums, which don't apply from November 15 to December 15 | None | None, but it goes to every eligible employee | None |
| Paperwork for you | Enrollment, payroll deductions, one bill | Plan documents, notices, monthly reimbursements | Plan documents, a notice, monthly reimbursements | Payroll only |
A summary, not plan documents. The tax rows describe federal rules for a typical small employer; your tax preparer should confirm them for your business.
When is a group plan the better choice?
When your people want one network and one card, and when most of them earn too much to get much help with an individual plan. A group plan is also the simplest for employees: they pick a plan at hire and the premium comes out of their pay.
Its weakness is cost control. The renewal sets the price and you react to it; your levers are the plan, the carrier and how much you contribute. How small group works in Colorado has the rules.
How does a CHOICE arrangement (ICHRA) work?
You set a monthly allowance, each employee buys an individual plan, and you reimburse what they spend on it up to the allowance, tax-free. You can set different allowances for different classes of employee, such as full-time and part-time, and by age within a class.
In plain terms
The catch is the premium tax credit. An employee who takes the allowance can’t also get a premium tax credit, and if the allowance counts as affordable they can’t get one even by turning it down (26 CFR 1.36B-2(c)(3)(i)(B)). For a lower-paid employee whose credit would have been larger than your allowance, that’s a real loss.
So a CHOICE arrangement fits best when your employees earn enough that their credits would be small anyway, or when your allowance is generous. We run that test, employee by employee, before you decide.
How does a QSEHRA work?
A QSEHRA reimburses employees for individual premiums and medical costs up to a yearly cap, and it’s only for employers with fewer than 50 full-time employees, counting part-time hours, who don’t offer a group plan. For 2026 the caps are $6,450 a year for an employee alone and $13,100 with family. The IRS hadn’t published next year’s when we checked.
- It has to be offered on the same terms to every eligible employee, though the amount can vary by age and family size.
- An employee needs their own health coverage for the reimbursements to be tax-free.
- An affordable QSEHRA rules out the employee’s premium tax credit, and a smaller one reduces it (26 U.S.C. 36B(c)(4)).
It’s the simplest of the reimbursement options and the narrowest. Businesses that outgrow the cap usually move to a CHOICE arrangement or a group plan.
Can you pay employees more instead?
Yes, and it’s the easiest option to run, but it’s taxed as wages for both of you and nothing makes anyone spend it on insurance.
A stipend doesn’t affect an employee’s premium tax credit except by raising their income. That can make it the better choice for a small team of lower-paid employees, who may get more help from Connect for Health Colorado than you could give through an allowance.
Which one fits your business?
Answer these and the choice usually narrows to one or two:
- Do your people want the same network and one card? That points to a group plan.
- Do you need next year’s cost fixed now? That points to a CHOICE arrangement or a QSEHRA, where you set the number.
- Are most of your employees lower-paid? Check their premium tax credits first. A stipend, or no arrangement at all, can leave them better off.
- Are you a small team with a modest budget? A QSEHRA is the simplest start.
- Do different groups of employees need different amounts? A CHOICE arrangement lets you set them by class.
- Can you meet a carrier’s participation rule? If not, a group plan waits for the November window, and the allowances don’t.
We’d rather lose the sale than set you up with the wrong one.
Questions about the alternatives
Is an ICHRA the same as a CHOICE arrangement?
Yes. The federal government and the Small Business Administration began using the name CHOICE arrangement on September 3, 2026. The rules for an individual coverage health reimbursement arrangement didn't change.
Can I offer a group plan to some employees and a CHOICE arrangement to others?
Yes, by class of employee, such as full-time and part-time. You can't offer both to the same class. A QSEHRA can't be offered beside a group plan at all.
What are the QSEHRA limits?
For 2026, $6,450 a year for an employee alone and $13,100 for an employee with family. The IRS sets them each year and hadn't published the next year's when we checked, October 11, 2026.
Can an employee with a CHOICE arrangement still get a premium tax credit?
Not while they take the allowance. And if the allowance counts as affordable, they can't get one even by turning it down. We check that for each employee before you set the amount.
Is a health insurance stipend taxable?
Yes. Money paid as extra wages is taxed as wages, whatever it's meant for. Only reimbursements through a CHOICE arrangement or a QSEHRA that follows the rules are tax-free.
Who runs the reimbursements?
Usually an administrator you hire, which handles the plan documents, the employee notices and the monthly checks that each claim is for real coverage. We help you choose one and set the allowance.