Having a full-time job does not guarantee access to health coverage. With 4.5% of Michigan residents lacking health insurance coverage, there is a chance that some of your employees also lack coverage. (United States Census Bureau) Finding ways to support your employees when it comes to health insurance is a great way to boost their overall wellness and productivity at work. (National Library of Medicine) The biggest challenges small business owners face when offering employee benefits are all tied to costs. The top concerns include overall affordability (36%), expensive premiums (14%), and high administrative expenses (10%). Among those who do provide benefits, 93% worry about whether their current program will remain financially sustainable in the long run.
If you are a startup owner or a benefits administrator who wants to provide your employees with proper health insurance coverage without affecting your budget, you likely have many questions. When learning how to obtain health insurance in Michigan, it is helpful to understand your legal obligations, how to save money on health insurance, and how to find the right plan for your workforce. Let's take a closer look at how to find health insurance for small business owners in Michigan.
Why small businesses in Michigan need health insurance
Small businesses are the backbone of Michigan's economy. As of 2022, there were 911,914 small businesses, making up 99.6% of all businesses in the state. These businesses collectively employed 1.9 million people, accounting for 47.9% of Michigan's total workforce. With nearly half of the state's employees working for small businesses, providing access to quality health insurance can have a significant impact on both individual well-being and overall economic stability. (U.S. Small Business Administration Office of Advocacy)
Employers offering an ICHRA instead of a traditional group health plan must make sure the allowance is "affordable" under ACA rules, especially if they are an Applicable Large Employer (ALE) with 50+ full-time employees. The IRS updates the affordability threshold each year based on health insurance costs and economic trends. For 2025, the IRS has set the affordability limit at 9.02% of an employee's household income, up from 8.39% in 2024. This percentage is used to determine whether the lowest-cost health plan an employer offers meets ACA requirements for affordability. (SHRM)
Even if you don't have enough employees to meet the federal health insurance requirements, you should still consider offering this coverage as an employee benefit. There are a lot of benefits to doing so:
Demonstrate employee support: Providing health insurance, even when not required, shows you value your employees' well-being
Attract and retain top talent: If you want to compete in the hiring market, health insurance is a key benefit, with 88% of employees considering it the most important employee benefit (U.S. Chamber of Commerce)
Boost workforce health and productivity: Having access to a good healthcare plans helps employees take advantage of preventive care services which reduces the risk of serious health issues and improves workplace productivity
Potential tax savings: Small businesses may qualify for the Small Business Health Care Tax Credit, which can offset costs (Healthcare.gov)
Types of health insurance in Michigan
The type of health insurance plan you choose impacts your spending. That being said, it also impacts how much your employees spend. Again — balance is key here. You need to balance the needs of your budget and how much your employees can afford to spend on healthcare.
According to the KFF 2024 Employer Health Benefits Survey, the overall average annual premium across all plan types in 2024 was $8,951 for single coverage and $25,572 for family coverage.
PPO (Preferred Provider Organization)
Single coverage: $9,383
Family coverage: $26,678
HDHP/SO (High Deductible Health Plan with Savings Option)
Single coverage: $8,275
Family coverage: $24,196
HDHP with HRA (Health Reimbursement Arrangement)
Single coverage: $9,291
Family coverage: $26,813
(KFF)
Health Maintenance Organizations (HMOs)
With HMOs, employees can expect lower out-of-pocket costs and an emphasis on preventive care, but a restricted provider network.This health insurance plan emphasizes coordinated care through a primary care provider (PCP). Members are required to choose a PCP who manages their healthcare and provides referrals to specialists within the HMO network. This structure helps control costs and ensures a more streamlined approach to treatment, focusing on preventive care and efficiency. However, HMOs typically do not cover out-of-network services except in emergencies.
Preferred Provider Organizations (PPOs)
Preferred Provider Organizations (PPOs) offer flexibility in choosing healthcare providers, allowing members to see both in-network and out-of-network doctors without requiring a referral. While staying within the network results in lower costs, PPOs still provide partial coverage for out-of-network care. This flexibility makes PPOs a popular choice for those who want more freedom in selecting specialists and healthcare facilities. However, premiums and out-of-pocket costs tend to be higher compared to other plan types.
Exclusive Provider Organizations (EPOs)
Exclusive Provider Organizations (EPOs) require members to use a specific network of doctors, hospitals, and specialists for coverage, except in emergencies. Unlike PPOs, EPOs do not cover out-of-network care, which helps keep costs lower. While they offer a middle ground between HMOs and PPOs—eliminating the need for referrals while maintaining strict network restrictions—members must carefully ensure their preferred providers are in-network to avoid unexpected expenses.
Point of Service (POS) Plans
Point of Service (POS) plans blend features of HMOs and PPOs, requiring members to designate a primary care provider (PCP) who coordinates care and provides referrals to specialists. While POS plans offer some coverage for out-of-network services, costs are significantly lower when services are received in-network. These plans strike a balance between cost savings and provider flexibility, making them a solid option for those who want a mix of structure and choice.
Health Reimbursement Arrangements (HRAs)
Health Reimbursement Arrangements (HRAs) are employer-funded programs that reimburse employees for qualified medical expenses, including insurance premiums, doctor visits, and prescription medications. Unlike traditional health insurance, HRAs enable businesses to establish defined contribution amounts, providing employees with the flexibility to select their own healthcare coverage. This approach enables employers to control costs while providing valuable health benefits tailored to each employee's individual needs.
Individual Coverage Health Reimbursement Arrangement (ICHRA)
An ICHRA is an employer-funded reimbursement model that lets employees choose their own individual ACA Marketplace plan—Bronze, Silver, Gold, or Platinum—through HealthCare.gov, all of which are eligible for reimbursement. Instead of providing a traditional group health plan, employers set a monthly allowance, and employees use those funds to purchase coverage that best fits their needs.
ICHRA offers flexibility for both employers and employees. Employers can control healthcare spending by setting defined contribution amounts, while employees gain the freedom to select a plan based on their preferred provider network, premium cost, and coverage level. ICHRAs are available to businesses of all sizes and can be structured to meet the needs of different employee classes or locations, as long as IRS guidelines are followed. Employees can use ICHRA funds to pay for premiums and qualified medical expenses, and if they become newly eligible for an ICHRA mid-year, they're granted a special enrollment period to choose a plan.
4 Factors to consider when choosing a plan
How much does health insurance cost in Michigan? There is no average cost of a small business health insurance plan because many factors influence the cost of coverage.
Your workforce: The total number of covered employees and their ages affect pricing. Older employees generally have higher premiums
Plan type: HMO, PPO, EPO, and high-deductible plans all have different cost structures. Your chosen coverage level can also impact spending
Employer contribution: Think critically about how high of a contribution match you can afford to make
Insurance provider: Different insurers offer varying rates and plan structures
Employee participation rate: There are many reasons one of your employees may choose not to opt into coverage, which can help you save
Additional benefits: Dental, vision, and wellness programs may add to the overall cost of your plan
Financial incentives and tax credits
Another reason cost can be hard to predict is that your unique priorities substantially impact pricing. When shopping around for a health insurance provider and plan, you need to balance your budget needs with those of your employees. When reviewing plan options, consider coverage details, employee needs, network size, deductibles, premiums, and copayments to find the best fit.
Small Business Health Care Tax Credit
Understandably, cost is a serious concern, and you want to prepare your budget accordingly. If you're looking to save on health insurance spending, see if you qualify for the Small Business Health Care Tax Credit. This tax credit can cover up to 50% of employee premium costs for for-profit businesses and 35% for non-profits. Your small business must meet these standards to qualify:
Be enrolled in a SHOP plan
Have fewer than 25 FTE employees
Pay employees an average annual wage of $56,000 or less
Cover at least 50% of full-time employees' premium costs
Offer SHOP coverage to all full-time employees (coverage for dependents and part-time employees working under 30 hours per week is not required)
Steps to enroll in a health insurance plan in Michigan
As soon as you verify your business qualifies for a small business health insurance plan, you can begin providing coverage right away. There's no need to wait for an open enrollment period. From there, you need to work on educating your employees about how to enroll in the plan.
According to the Michigan Department of Insurance and Financial Services, employers set their own enrollment policies, including when new employees can sign up for health insurance. Businesses may impose a waiting period of up to 90 days before new hires become eligible for coverage.
Find the right small business health insurance in Michigan with Thatch
Our country has a complicated healthcare history, but we are seeing improvements in enrollment. In recent years, Michigan has experienced a rise in the number of residents with health insurance coverage. In 2014, 8.5% of residents lacked coverage, but by 2023, that number dropped significantly to 3.5% (United States Census Bureau).
Ideally, you want your business to contribute to that successful trend. If you want to lower your healthcare spending while still ensuring your employees get access to high-quality healthcare services, Thatch can help. Book a free demo to learn more about our healthcare business solutions and how you can save an average of $1,620 per employee each year.
This article is for general educational purposes and is not legal or tax advice. The opinions shared here belong to the author and are not official statements from Thatch. For legal and tax questions, please consult with a qualified professional.
