What's the Simplest Way to Offer Health Benefits Without a Group Plan?

Offering comprehensive health benefits is one of the most important investments you can make for your employees. But for many small and mid-sized businesses, traditional group health insurance can be cost-prohibitive, limited, and time-consuming to manage. Luckily, you have other options.

If you want to provide health benefits without the complexity of a group plan, a health reimbursement arrangement (HRA) guarantees you flexibility, cost control, and easy administration. In this article, we’ll walk you through how HRAs can offer a simple, budget-friendly alternative to group coverage.

In this blog post, you’ll learn:

• Whether small businesses must offer group health insurance under the Affordable Care Act (ACA).
• How the qualified small employer HRA (QSEHRA) and an individual coverage (ICHRA) allow you to offer tax-free health benefits without the cost or need for a group plan.
• How an HRA administrator can simplify setup, compliance, and ongoing management.

Do small businesses have to offer traditional group health insurance?

According to the ACA’s employer mandate, only businesses with 50 or more full-time equivalent employees (FTEs) must offer at least 95% of their full-time workers and their qualified dependents affordable health coverage that provides minimum value and meets minimum essential coverage (MEC). These organizations, known as applicable large employers (ALEs), may face tax penalties if they don’t comply with the mandate and at least one of their employees receives subsidized coverage through a public exchange.

Federal law doesn’t require smaller employers with fewer than 50 FTEs to offer health insurance or pay a penalty. However, providing a health benefit can help you attract skilled employees, improve retention, and boost workplace morale. But if you choose to offer coverage, you don’t have to offer a traditional group plan.

Here are three common reasons small businesses look for alternatives to group insurance:

1. They typically have high costs. Group premiums can strain a small business budget. According to KFF’s Employer Health Benefits Survey, the average annual premiums for group plans reached $9,325 for self-only coverage and $26,993 for family coverage in 2025¹. In many cases, these prices aren’t affordable for small- to mid-sized companies that need to allocate funds on a variety of organizational priorities.
1. Even if you buy a group plan through the Small Business Health Options Program (SHOP) marketplace, and you qualify for the small business health care tax credit to keep your premiums low, you still may face renewal increases and plan changes that can make costs unpredictable from year to year.
2. There are participation requirements. Many insurers require at least 70% of eligible employees to enroll in the group plan. If you have a small team, having one or two employees decline coverage can prevent you from meeting participation rules.
3. There are administrative challenges. Group plans require ongoing management, including annual open enrollment, eligibility tracking, renewal negotiations, and compliance with federal and state regulations. Without a dedicated HR staff, it’s easy to feel overwhelmed and make mistakes.

How can small to mid-sized businesses easily offer health benefits without a group plan?

If you don’t want to sponsor a traditional group policy, there’s a simpler way to offer health benefits. Your employees can buy their own individual health insurance on a public or private exchange, and you can help cover the cost with an HRA.

An HRA lets you set a defined monthly allowance that your participating employees can use to pay for a variety of out-of-pocket healthcare costs, such as mental health services, doctor visits, and hospital care. After they submit proof of an eligible expense, such as a receipt or explanation of benefits, you reimburse them tax-free up to their allowance amount.

In many cases, HRAs are an easier alternative to group coverage because they:

• Give you predictable monthly costs with no surprise rate hikes due to claims history or employee usage.
• Allow employees to choose the individual health plans that best fit their needs and budgets.
• Offer tax advantages for employers and employees.
• Have no minimum participation requirements.
• Reduce the administrative burden that comes with group plans.

Stand-alone HRAs are personalized health benefits you can offer on their own without pairing them with a traditional group health plan. You simply set a monthly contribution amount and reimburse employees for their individual plan premiums and other qualified medical expenses.

Two of the most popular stand-alone HRAs are the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA). While both allow you to reimburse employees for premiums and other medical expenses, they’re best suited for different types of organizations and offer varying levels of flexibility. We’ll go over each one in the sections below.

Qualified small employer (HRA)

The QSEHRA is an easy-to-use health benefit specifically for employers with fewer than 50 FTEs. Instead of offering a group plan, you provide a set monthly allowance, and employees buy the individual coverage that works best for them. You then reimburse them, tax-free, for eligible expenses, including insurance premiums.

Like all HRAs, reimbursements are payroll tax-free for employers and income tax-free for employees.

Here are a few ways the QSEHRA keeps things simple for employers:

• The QSEHRA is available to employers who have at least one W-2 employee.
• Employers can’t offer a QSEHRA and a group health plan simultaneously.
• All full-time W-2 employees must be eligible to participate, provided they have minimum essential coverage (MEC). You may also include part-time employees in the benefit as long as you offer them the same allowance amount as your full-time staff.
• The IRS sets annual maximum contribution limits for the QSEHRA. However, there are no minimum allowance requirements.
• Employers can choose to reimburse only health insurance premiums or include other qualified out-of-pocket medical expenses, depending on their budget and goals.

Individual coverage HRA (ICHRA)

If you’re looking to grow your business, the ICHRA offers greater scalability than the QSEHRA. It allows you to reimburse employees tax-free for individual health insurance and eligible medical expenses. But it goes a step further by giving you more control over plan design.

With no contribution caps and the ability to customize allowances and eligibility requirements, the ICHRA makes it easy to fit your workforce and budget, regardless of whether you’re a growing small business or a larger employer looking for a flexible alternative to group coverage.

Here are a few ways the ICHRA keeps things simple for employers:

• The ICHRA is available to organizations of all sizes, provided they have at least one W-2 employee.
  
• There are no annual contribution limits, allowing employers to set allowances that align with their budget and adjust them over time.
  
• Employees must enroll in qualifying individual health coverage, such as ACA-compliant individual plans, Medicare Parts A and B together, or Medicare Part C, to participate in the ICHRA.
  
• Employees who have coverage through a spouse’s group plan or a healthcare sharing ministry must enroll in qualifying individual coverage to use the benefit.
  
• Business owners can tailor eligibility rules and allowance amounts by employee class, age, and family status to better control costs and support a diverse workforce.
  
• Employers can offer both a group health plan and an ICHRA. However, they can’t offer both benefits to the same class or give employees within the same class a choice between the two. If offering both benefits, minimum class size rules may apply.
  
• ALEs can use an ICHRA to satisfy the ACA’s employer mandate, as long as their set allowance amounts meet annual affordability requirements.

How PeopleKeep by Remodel Health makes it simple to offer a QSEHRA or ICHRA

While HRAs are more flexible and easier to control than group health insurance, designing the benefit and staying compliant takes time and expertise. With PeopleKeep by Remodel Health, we remove the complexity of offering an HRA. Our intuitive software and knowledgeable support team handle the administrative heavy lifting so you can easily provide a QSEHRA or an ICHRA without the added stress.

PeopleKeep makes offering and managing an HRA simple by:

• Helping you build a benefits strategy that fits your size, budget, and goals.
• Preparing and maintaining the required legal plan documents.
• Guiding you through plan setup with an easy, step-by-step design process.
• Sending employee invitations and required compliance notices automatically.
• Allowing employees to log in to their PeopleKeep member portal and shop for individual health insurance directly from their dashboard, with access to our benefits specialists for personal support.
• Reviewing your employees’ reimbursement requests for eligible out-of-pocket costs to keep your benefit tax- and HIPAA-compliant.
• Ensuring claim documentation meets IRS guidelines while protecting your employees’ confidential health information and medical records.
• Securely storing documentation and substantiation for compliance purposes.
• Tracking essential deadlines, including reminders for Form 720 PCORI fees.
• Providing responsive, award-winning customer support when you need help.

For small to mid-sized employers, our easy-to-use software may be all you need. If you’re a larger or growing organization, our parent company, Remodel Health, and its ICHRA+® solution provide additional compliance tools and greater, hands-on support, making it just as easy to offer health benefits to a larger workforce.

Conclusion

These days, you don’t need a traditional group plan to offer competitive health benefits. If group coverage is too expensive, rigid, or complicated for your organization to manage, the QSEHRA and ICHRA are excellent alternatives. With predictable monthly allowances, no participation requirements, and greater flexibility for you and your employees, HRAs can simplify your benefits strategy while still providing value.

If you’re ready to offer a QSEHRA or ICHRA and want to administer it simply and compliantly, PeopleKeep by Remodel Health is here to help! Book a call with us today to learn more about which stand-alone HRA is right for you.

References

1. KFF - 2025 Employer Health Benefits Survey