Why Small Businesses Are Switching From Group Plans to Individual Coverage

Key Takeaways

• Small and midsize employers are turning to individual coverage HRA options as a practical small business health benefits alternative to rising group premiums.
• Moving from group to individual health insurance through an ICHRA model gives employers a fixed, tax‑free budget while employees choose their own coverage.
• ICHRAs continue to grow among businesses of all sizes going into 2026, especially in organizations with 20–500 employees and distributed workforces.

Small businesses are switching from traditional group plans to individual coverage HRA arrangements because they want more predictable costs, simpler compliance, and better choice for employees. The ICHRA vs group insurance decision has moved to the center of benefits strategy for employers that are tired of large renewals but still want strong health coverage.

The Shift From Group To Individual Coverage

For many employers, traditional small group health plans have become difficult to sustain. Premiums have risen steadily, and employers often have limited control over plan design, networks, and year‑over‑year increases. That tension shows up every renewal season when finance and HR teams are forced to absorb higher costs or cut benefits.

In response, more employers are looking at individual market strategies and moving from group to individual health insurance. Instead of fighting each renewal, they adopt an individual coverage HRA so they can keep offering meaningful benefits while stabilizing their long‑term budget. This change is not a niche trend anymore; growth in ICHRA adoption between 2024 and 2025 was strong across both small and large employers, and that momentum is carrying into 2026.

What An Individual Coverage HRA Actually Is

An individual coverage HRA is an employer‑funded, tax‑advantaged arrangement that reimburses employees for individual health insurance premiums and certain medical expenses. To participate, employees must be enrolled in qualifying individual health coverage, such as an Affordable Care Act–compliant plan purchased on or off the Marketplace, or Medicare in some cases.

Instead of the employer selecting a single group plan, each employee chooses their own policy, and the employer sets a monthly allowance amount. Regulations updated through 2024 continue to permit wide flexibility in how much employers can contribute, provided contributions are offered fairly within defined employee classes and the offer meets affordability rules when an employer is subject to the Affordable Care Act’s employer mandate.

ICHRA vs Group Insurance: Core Differences

At its core, the contrast between ICHRA vs group insurance is a shift from a defined benefit to a defined contribution mindset. In a group plan, the employer promises a specific plan design and shares whatever premium the carrier charges. With an individual coverage HRA, the employer promises a fixed dollar amount, and the employee picks coverage that fits their needs.

For employers, this means they can set and adjust their health benefits budget without being locked into a single carrier’s renewal. For employees, this means they get to choose a plan that matches their doctors, medications, and family situation instead of settling for a one‑size‑fits‑all group option. That mix of cost control and personal choice explains why ICHRAs are gaining ground across industries.

Why Group Plans Are Getting Harder To Defend

Many small and midsize employers used to feel they had only two choices: pay for an expensive, inflexible group plan or drop coverage altogether. Rising healthcare costs made it harder to keep absorbing premium hikes, and minimum participation rules sometimes blocked groups from qualifying at all.

Traditional group plans also come with limited transparency. Employers often cannot see detailed claims data, which makes it harder to understand what is driving costs or to tailor wellness and care strategies. When those issues combine with multi‑state workforces and different local networks, a single group contract starts to feel mismatched with how modern teams actually work.

Why Individual Coverage HRAs Work For Modern Workforces

Individual coverage HRAs fit the way people work today. Companies now hire across multiple states, rely on remote workers, and employ more part‑time, seasonal, or variable‑hour staff. Group plans were built around a single location and a mostly full‑time team; that is no longer the norm.

With an ICHRA, employees in different regions can buy plans that fit local provider networks and pricing, while the employer keeps a unified benefits strategy based on standard allowance amounts by class. This is one reason adoption has grown sharply among smaller employers and also among larger employers who want a more scalable model.

Employee Experience: From One Menu To Many Choices

In a traditional group plan, employees usually pick from just a few options chosen by the employer and a single carrier. That might work for some, but it can frustrate those whose doctors are out of network, whose medications are not well covered, or whose families need a different balance of premium and deductible.

Under an individual coverage HRA, employees choose their own qualifying individual plan and then use the ICHRA funds to cover premiums and eligible expenses. Younger employees might opt for lower premiums with higher deductibles, while families or employees with chronic conditions might select richer coverage or wider networks. The key is that the employer’s contribution is consistent and tax‑advantaged, while the employee’s coverage can be tailored.

Small Business Health Benefits Alternatives Beyond Group Plans

Historically, small employers considered options like level‑funded plans, association health plans, or joining a professional employer organization when group plans became too expensive. Those options can help in some cases, but they still leave employers tied to pooled risk and carrier‑driven pricing.

Individual coverage HRAs have introduced a different kind of small business health benefits alternative. Instead of trying to negotiate better group rates, employers step out of that cycle and give employees direct access to the individual market. This model can be especially powerful for organizations that want to keep offering health benefits but need a solution that is more sustainable than traditional group coverage.

How ICHRAs Help Finance And HR Leaders

For CFOs, CEOs, CHROs, and HR leaders, predictability and compliance matter as much as employee satisfaction. An ICHRA makes it possible to treat health benefits as a more controllable line item. Employers decide how much to contribute, design classes based on roles or locations, and then track spending over time.

Because the rules for individual coverage HRAs are clearly defined and have remained stable since their introduction in 2020, they also give employers a compliance framework they can plan around. Affordable ICHRA designs can satisfy the Affordable Care Act employer mandate for applicable large employers, which is important for organizations with 50 or more full‑time equivalent employees.

Where ICHRAs Fit Best

Individual coverage HRAs tend to be a strong fit in a few common scenarios:

• Employers with 20–500 employees who face steep group plan renewals year after year.
• Organizations with multi‑state or remote teams where a single group network no longer fits.
• Small employers that were priced out of or blocked from small group coverage but still want to offer a meaningful health benefit.
• Companies that want a clear, tax‑efficient compensation strategy where health benefits are easier to understand and budget for.

In these settings, moving from group to individual health insurance through an ICHRA structure often delivers both cost savings and a better employee experience.

Venteur’s Role In The ICHRA Market

Venteur is focused on helping employers, workers, and brokers make ICHRAs practical and easy to manage. The Venteur platform is designed specifically around individual coverage HRA administration and supports companies and employees in all 50 states. It combines a user‑friendly interface with robust back‑end capabilities so that HR teams, employees, and brokers can all work from the same, clear set of tools.

What sets Venteur apart is the blend of customization, expert guidance, and transparent pricing. Employers can tailor their ICHRA design to different employee classes or locations, while Venteur’s team helps ensure everything stays compliant with federal and state regulations. There are no setup fees or monthly minimums, which makes the platform accessible for smaller employers that still want a high‑quality ICHRA solution. For workers, Venteur focuses on helping them understand their options and choose individual plans that fit their needs, reinforcing the idea of “your health, on your terms.” For brokers, Venteur’s software and support help them serve clients faster and stay competitive in a rapidly changing benefits landscape.