Small business · ICHRA
ICHRA vs. a group health plan: how the cost mechanics differ
A group plan buys one policy for your team. An ICHRA gives each person a set amount toward their own plan. Here’s how the money moves.
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- Fixed allowance vs. premium
- Classes allowed
- 2027 test: 10.22%
Compare ICHRA and group for my team
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Side by side
| Small group plan | ICHRA | |
|---|---|---|
| Who sets cost | Carrier premium; you pick your share | You set the allowance; the employee’s individual premium varies |
| Enrollment requirement | Carrier contribution and participation rules may apply[2] | Each covered person must be in individual coverage each month[1] |
| Different groups | Set by the plan and carrier terms | Allowed by class, but no class can get both[1] |
| Opting out | Employees waive coverage | Employees may opt out once per plan year[1] |
| Notice | Plan and carrier documents | Written notice at least 90 days before each plan year for most participants[1] |
The affordability test and tax credits
For 2027 plan years, the required contribution percentage used to judge whether an offer is affordable is 10.22% of household income.[3] Someone eligible for affordable employer coverage that provides minimum value can’t get a Marketplace premium tax credit.[4] That’s why the ICHRA amount for each class matters, especially for lower-paid staff; we run the numbers per employee.
When each tends to fit
- Group plan: a team that wants one shared network, and an employer that can meet carrier minimums. See contribution rules.
- ICHRA: an employer that wants a fixed budget, different amounts by class, or staff in several states. See our ICHRA page.
- QSEHRA: under-50 employers without a group plan; 2026 limits are $6,450 single and $13,100 family.[5] See QSEHRA.
Michigan small group insurers requested a 9.6% average increase for 2027 and individual insurers 14.2%, both subject to DIFS approval.[6] We price both ways with your census before you choose.
Sources
- 26 CFR 54.9802-4, Special rule allowing integration of HRAs with individual health insurance coverage (eCFR). https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.9802-4
- 45 CFR 147.104, Guaranteed availability of coverage (eCFR). https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-147/section-147.104
- IRS Rev. Proc. 2026-26 (2027 applicable percentage table, 2.15% to 10.22%). https://www.irs.gov/pub/irs-drop/rp-26-26.pdf
- IRS, Eligibility for the Premium Tax Credit. https://www.irs.gov/affordable-care-act/individuals-and-families/eligibility-for-the-premium-tax-credit
- IRS, Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits. https://www.irs.gov/publications/p15b
- Michigan DIFS, 2027 Michigan Health Insurance Rate Change Requests, Individual Market (as filed, subject to DIFS approval), updated July 14, 2026. https://www.michigan.gov/difs/-/media/Project/Websites/difs/OIRF/EHB/PDFs/2027_Proposed_Rate_Changes.pdf
Checked October 16, 2026. 2027 Marketplace plans and final 2027 rates aren’t published yet; we’ll update this page when they are.
Frequently asked questions
Can I offer employees a choice between an ICHRA and a group plan?
Not within the same class of employees. You can offer an ICHRA to one class and a group plan to a different class.
Do employees with an ICHRA need their own health plan?
Yes. Each covered person must be enrolled in individual health insurance coverage for each month they're covered by the HRA.
What is the 2027 affordability percentage?
10.22% of household income for plan years beginning in 2027, per IRS Rev. Proc. 2026-26.
Will you sell my information?
No. Your information goes to Nexus Benefit Solutions only and is never sold.