Michigan does not require an employer with fewer than 50 employees to offer health insurance, but many small businesses do it anyway to hire and keep good people. You have four main routes: a traditional small group plan, a SHOP plan, an employer-funded health reimbursement arrangement (HRA), or a plan paired with a health savings account (HSA). This guide explains who qualifies, what each route involves, which rules apply in Michigan, and how to decide.
TL;DR
- Michigan employers with fewer than 50 employees are not required to provide health insurance, though employers with 50 or more are.
- Michigan small group coverage generally applies to employers averaging 1 to 50 full-time employees, with at least 2 covered employees under state law.
- Your main options are a group plan (including SHOP), an HRA such as a QSEHRA or ICHRA, or an HSA-eligible plan.
- Employers with fewer than 25 full-time equivalent employees may qualify for a tax credit of up to 50% of premium contributions through SHOP.
- A licensed advisor can compare carriers and handle enrollment at no cost to you, because carriers pay the advisor's commission.
Table of Contents
- Do you have to offer health insurance in Michigan?
- Who counts as a small employer in Michigan?
- Your four main options compared
- Traditional group plans: what you control
- SHOP: the federal marketplace for small employers
- HRAs: reimburse instead of buying a group plan
- HSAs and high-deductible plans
- What about short-term plans?
- How to choose: a five-step process
- Our perspective: what owners get wrong
- Get help building your small business plan
- FAQ
- Sources
Do you have to offer health insurance in Michigan?
No, not if you have fewer than 50 employees. The Michigan Department of Insurance and Financial Services says employers below that size are not required to provide coverage, while employers with 50 or more are. It adds that employers with 50 or fewer employees must give their employees information about the Marketplace (DIFS, Employer Group Coverage).
That leaves a real choice, and it is a business decision more than a legal one. Offering coverage can help with recruiting, retention and your own family's protection. Skipping it means your employees shop on their own, often through the Michigan Marketplace. If you go that way, our guide to Michigan Marketplace plans walks them through it.
Once you do offer coverage, one Michigan rule applies right away: employers who offer health coverage must offer it to all eligible employees within 90 days of their start date (Michigan Consumer Guide to Health Insurance). Build that timeline into your onboarding.
Who counts as a small employer in Michigan?
There are two definitions, and they are close but not identical.
Michigan law. The state's small group rules (MCL 500.3703) cover plans for 2 or more employees of small employers. Since 2018, a small employer generally means one with an average of 1 to 50 full-time employees in the preceding year and at least 1 employee on the first day of the plan year (Michigan Insurance Code).
SHOP. The federal Small Business Health Options Program defines a small employer as having at least 1 and no more than 50 full-time equivalent employees (Employer Guide to SHOP Insurance). To enroll, you need at least one common-law employee on payroll. That is a W-2 employee, not an owner-only business.
If you are a sole proprietor with no employees, you generally would not use small group coverage. An individual plan through the Marketplace is the usual path, and we can help with that too.
Your four main options compared
The right route depends on headcount, budget and how much control you want over benefits.
| Option | Best for | How it works | Key limit |
|---|---|---|---|
| Traditional small group plan | Employers who want a standard benefit package | You choose a carrier plan and contribute toward employee premiums | Participation requirements apply |
| SHOP plan | Very small employers who may qualify for the tax credit | Enroll through an insurer or a SHOP-registered agent or broker | Tax credit has strict eligibility rules |
| QSEHRA | Employers under 50 employees with no other group plan | You reimburse employees tax-free for qualifying medical costs | Annual reimbursement cap |
| ICHRA | Employers who want employees on individual plans | You reimburse premiums and qualifying expenses | Employees must carry individual coverage |
| HSA-eligible plan | Healthy, cost-aware teams | High-deductible plan paired with a tax-advantaged account | Plan must be HSA-eligible |
Michigan's insurance regulator confirms the first three families of options: small businesses can offer traditional group plans, including SHOP plans, or employer-funded HRAs, including ICHRAs, that reimburse qualifying medical expenses and individual premiums (Michigan Consumer Guide to Health Insurance).
Traditional group plans: what you control
With group coverage, you are the master policyholder. That gives you several levers: you can negotiate policy terms, change benefits, raise employees' premium contributions and switch insurers (Michigan Consumer Guide to Health Insurance). In practice, most small employers review their plan once a year, before renewal, and compare it against other carriers.
Participation requirements
Carriers can require a minimum share of eligible employees to join, which keeps the risk pool balanced. Under MCL 500.3709, Michigan carriers may require participation of up to 100% for employers with 10 or fewer eligible employees, 75% for 11 to 25, and 50% for 26 to 50 (MCL 500.3709).
A worked example: a five-person shop could be asked to enroll all five eligible employees, while a 20-person company could be asked to reach 15. Employees who have other coverage, such as through a spouse, are typically handled under the carrier's rules, so ask about waivers before you commit.
How premiums are usually shared
Most employers pay part of the employee-only premium and let employees pay the rest, plus any dependent cost. The split is your decision, and it is one of the strongest signals to candidates. We do not publish rate figures here because small group premiums in Michigan depend on the carrier, county, ages of your employees and plan design. The only way to get a real number is a quote built from your census. We prepare those comparisons for free.
SHOP: the federal marketplace for small employers
SHOP is the route that unlocks the Small Business Health Care Tax Credit. You can enroll through an insurance company or through a SHOP-registered agent or broker (Employer Guide to SHOP Insurance). Working with an agent is usually the fastest way to see plans side by side and to get the paperwork right the first time.
The participation rule
In most states, 70% of eligible employees must enroll, with an exception for enrollments from November 15 through December 15 (Employer Guide to SHOP Insurance). Michigan's state carrier rules above may also apply to the plan you choose, so confirm which threshold governs your specific policy before you tell employees the plan is guaranteed.
The Small Business Health Care Tax Credit
This is the most valuable incentive for the smallest employers. Through SHOP, a qualifying business may receive a credit worth up to 50% of its premium contributions, or up to 35% for tax-exempt employers. To qualify, you generally need all of the following (Employer Guide to SHOP Insurance):
- Fewer than 25 full-time equivalent employees
- An average employee salary of $65,000 or less, adjusted yearly for inflation
- A contribution of at least 50% of employee-only premium costs
- Enrollment of your employees through SHOP
The credit is claimed on your tax return, so ask your accountant to confirm how it applies in your situation. Our role is to make sure the coverage side meets the rules; your tax professional confirms the amount.
HRAs: reimburse instead of buying a group plan
If a group plan feels too heavy, an HRA lets you give employees a monthly allowance and reimburse them for medical costs and premiums.
QSEHRA. A qualified small employer HRA is generally for employers with fewer than 50 employees who do not offer any other group health plan. You reimburse qualifying medical expenses tax-free. For 2026, the maximum reimbursement is $6,450 for individuals and $13,100 for households (HealthCare.gov HRA guide).
ICHRA. An individual coverage HRA reimburses employees for individual health insurance premiums and qualifying expenses. It suits employers with a mixed workforce, for example employees in different counties or with very different needs, because each person picks the plan that fits.
The tradeoff: with an HRA, your employees buy individual plans, so they need help shopping. That is exactly where an advisor earns their keep. We help employees compare Marketplace plans and check subsidy eligibility so the allowance you provide actually works.
HSAs and high-deductible plans
An HSA is a tax-exempt account paired with a high-deductible health plan to pay out-of-pocket medical costs. Before you offer one, confirm that the plan is HSA-eligible, because that is what keeps contributions tax-free (Michigan Consumer Guide to Health Insurance).
HSA plans lower premiums for you and your team but put more of the first dollars of care on the employee. They work best for people who are generally healthy and can fund the account. Our explainer on high deductible health plans covers who benefits and who does not.
One practical point for employees: HSA and FSA spending sometimes needs paperwork to support a claim. If staff ask about using those accounts for items like prescription weight-loss treatment, this guide on HSA and FSA claim documents lists what to gather.
What about short-term plans?
Short-term health insurance can look cheap to a small employer, but it is not a substitute for a group plan. Coverage limits, exclusions and medical underwriting can leave employees exposed. We cover the rules and the risks in our guide to short-term health insurance in Michigan. For an employee benefit, we nearly always steer owners toward group coverage or an HRA instead.
How to choose: a five-step process
- Count your employees properly. Work out your full-time equivalents for the year and note anyone who will be eligible on day one of the plan year.
- Set a budget per employee. Decide what share of employee-only premium you will pay. If you are near the tax credit thresholds, test a 50% contribution first.
- Gather a census. Ages, ZIP codes and whether employees want dependent coverage drive the quote.
- Compare routes, not just plans. Ask for a group quote, a SHOP quote and an HRA scenario together so you see the real tradeoffs.
- Plan enrollment. Set the effective date, communicate the 90-day eligibility rule to new hires, and brief employees on how to use the plan.
Our perspective: what owners get wrong
In our experience, small business owners usually come to us asking for the cheapest plan. The better question is which arrangement your team will actually use and value. A plan with a low premium and a deductible nobody can afford does not retain anyone.
We also see owners overlook the people side of the decision. Employees nearing 65 may be better served by Medicare than by your group plan, depending on your size and their situation, and that is a conversation to have early. Likewise, employees with spouses on other coverage may prefer an HRA. We sit down with owners and walk through these cases before any application is signed.
Because we are licensed with multiple carriers and paid by the carrier rather than by you, we can compare without leaning on one company's product. Our job continues after enrollment: when you add staff, hit a renewal or change your contribution strategy, we revisit the plan with you.
— Brian
Get help building your small business plan
Platinum Benefit Advisors helps Michigan employers compare group health insurance, handle enrollment and review coverage every year, at no cost to you. We also assist individual employees who need Marketplace help, and owners who want to plan for life insurance or retirement. See our full list of services, or start from our home page.
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FAQ
Can a business with one employee get group health insurance in Michigan?
Often yes, with conditions. SHOP defines a small employer as one with at least 1 and no more than 50 full-time equivalent employees, and you need at least one common-law employee on payroll. Michigan's small group statute, however, speaks of plans covering 2 or more employees, so carrier rules matter. An advisor can tell you which carriers will write your group.
What is the difference between SHOP and a regular small group plan?
SHOP is the federal small-business marketplace and is the only way to claim the Small Business Health Care Tax Credit. A regular small group plan is bought directly from a carrier or through an agent, with no credit but sometimes more plan variety. You can enroll in either through a licensed agent or broker.
Do I have to give employees information about the Marketplace?
In Michigan, employers with 50 or fewer employees must provide Marketplace information to their employees, according to the state insurance department. Your advisor can supply the right notice as part of onboarding.
Is an HRA cheaper than a group plan?
Not automatically. An HRA gives you a fixed, predictable cost because you set the allowance, and a QSEHRA has 2026 caps of $6,450 for individuals and $13,100 for households. Whether it is better value depends on your employees' ages, locations and health needs.
Sources
- DIFS: Employer Group Coverage
- Michigan Insurance Code of 1956 (excerpt)
- MCL 500.3709, Michigan Legislature
- Michigan Consumer Guide to Health Insurance
- Employer Guide to SHOP Insurance, HealthCare.gov
- Deciding between group coverage and an HRA, HealthCare.gov
- HSA and FSA claim documents guide