Small-group health insurance, explained

What small-group coverage is

Small-group health insurance is the traditional way an employer offers a health plan: you buy a group policy from an insurer, choose what to offer, cover part of the premium, and your employees enroll. In most states it’s for businesses with 1 to 50 full-time-equivalent employees (a few states go up to 100). It’s “fully insured” — the insurance company takes on the claims risk, and your cost is the premium.

How it’s priced: community rating

The defining feature of ACA small-group coverage is how it’s rated. Insurers must offer it to any eligible small employer (guaranteed issue), and they can’t set your rates based on your group’s health or claims history. Premiums vary only by your employees’ ages, your location, tobacco use, and individual-vs-family coverage. That protection cuts both ways: a group with older or less-healthy members can’t be charged more for their health, but a young, healthy group can’t earn a “good health” discount either — which is exactly where level-funded plans (below) come in.

Participation and contribution rules

Two rules shape eligibility. Most insurers require a minimum participation rate — commonly around 70% of eligible employees must actually enroll, though it varies by state and carrier — so you can’t offer a plan only one or two people take. And insurers typically require a minimum employer contribution, usually at least 50% of the employee-only premium. There’s a common exception: the participation requirement is generally waived if you enroll during the annual window each year, roughly mid-November to mid-December.

The renewal dynamic

Unlike individual coverage, you can start a small-group plan any time of year. But every year it renews — and re-prices. Renewal increases have been running in the mid-single digits or higher, and they compound. The average employer-sponsored premium in 2026 is around $9,300 a year for single coverage and roughly $27,000 for a family, and small groups feel rate swings more sharply than large ones. Managing those renewals — and shopping carriers when they spike — is part of the job.

How to buy it

Most small employers buy through an insurance broker or directly from a carrier, and you can do it any time of year. One specific path, the SHOP marketplace, matters mainly because it’s the gateway to the small-business tax credit. The guides below break down each piece — SHOP, the tax credit, the level-funded alternative, and a framework for choosing among all your options, including an ICHRA.

Explore the small-group guides