If you run a small business in South Carolina, you have probably had a good employee ask whether you offer health insurance, and you have probably felt the pull of wanting to say yes without knowing what it would cost or how it works. Here is the good news. You have more ways to offer health benefits than you did a few years ago, and some of them are simpler and cheaper than the traditional group plan most owners picture.

Let me lay out the real options, in plain terms, so you can see which one fits your business.

First, you are probably not required to offer anything

Under federal law, the requirement to offer health coverage only kicks in at 50 full-time-equivalent employees. Below that, offering benefits is your choice, not a mandate. Most small businesses in the Midlands fall under that line, which means this is a decision you make to compete for good people, not a box you are forced to check.

And it is a real edge. A lot of small South Carolina employers still offer nothing, so being the shop, office, or crew that provides health benefits helps you attract and keep the people you want. It is often cheaper than the constant cost of turnover. The question is not usually whether it is worth it. It is which structure makes sense for your size and budget.

Option 1: A traditional group health plan (and the tax credit that comes with it)

This is the classic setup, one plan the business offers to its team, with the employer paying part of the premium and employees paying the rest. In South Carolina, the small group market covers businesses with 1 to 50 employees, and you buy through carriers directly or through the Small Business Health Options Program, known as SHOP.

Two things worth knowing. Group plans usually come with participation and contribution rules, meaning a minimum share of your eligible employees has to enroll and the employer has to cover a minimum portion of the premium, often around half. And group coverage is guaranteed issue, so nobody on your team gets turned down for a health condition.

Here is the piece owners miss: if you have fewer than 25 full-time-equivalent employees, pay average wages under a set threshold, cover at least half the premium, and buy through SHOP, you may qualify for the Small Business Health Care Tax Credit. That credit can be worth up to half of what you contribute, for two consecutive years. For a small employer, that changes the math in your favor.

Option 2: A QSEHRA, the simple route for the smallest teams

If a full group plan feels like too much to take on, there is a simpler path built specifically for small employers. A Qualified Small Employer Health Reimbursement Arrangement, or QSEHRA, lets a business with fewer than 50 employees that does not offer a group plan reimburse employees tax-free for the cost of their own individual health insurance and certain medical expenses.

The way it works is clean. You set a monthly allowance, the employee buys their own plan on the individual market, they submit proof, and you reimburse them tax-free up to the limit you set. There are annual caps set by the IRS, which for 2026 are $6,450 for a single employee and $13,100 for family coverage. You control the budget, there is no group plan to manage, and employees keep their own plan even if they leave.

A couple of catches to know. You cannot offer a QSEHRA and a group plan at the same time. The employee has to carry qualifying coverage to get the reimbursement tax-free. And it interacts with the subsidies an employee might get on the marketplace, so it is worth walking through the details before you set it up. There are also special rules for how it applies to S-corporation owners, which is a conversation for your CPA.

Option 3: An ICHRA, the flexible reimbursement option

An Individual Coverage Health Reimbursement Arrangement, or ICHRA, works on the same reimburse-for-individual-coverage idea as a QSEHRA, with more flexibility. Any size employer can offer one, there is no cap on how much you can contribute, and you can set different allowances for different classes of employees, like full-time versus part-time, or by location.

That flexibility makes ICHRA a good fit for owners who want to control costs precisely or who have a mix of employee types. As with a QSEHRA, employees buy their own individual plans and get reimbursed tax-free, and they keep their coverage if they move on. The tradeoff is a little more setup and compliance, so you want it done right.

Option 4: A level-funded plan

For some small groups, especially healthier ones, a level-funded plan sits in between traditional group coverage and self-funding. You pay a steady monthly amount, and if your group has a good claims year, you may get money back at the end. It can come in cheaper than a standard group plan for the right group, though it works better for some businesses than others. It is worth putting on the table when you compare.

The tax angle, briefly

However you do it, there are tax advantages. The premiums a business pays toward employee coverage are generally a deductible business expense. With a traditional group plan, employee contributions can often be set up to come out pre-tax, which lowers everyone's taxable income. The reimbursement arrangements are tax-free to the employee when the rules are followed. This is real money, and it is a big reason offering benefits costs less on a net basis than the sticker price suggests. Your CPA is the right partner on the tax specifics.

What is shifting for 2026

The individual market is in a period of change heading into 2026, with premiums moving and some of the enhanced subsidies of recent years in question. That matters because it affects how attractive the reimbursement options are compared to a group plan. It is not a reason to wait. It is a reason to actually compare your options with current numbers instead of assuming what you heard two years ago still holds.

How to choose

There is no single right answer. The best structure depends on your headcount, your budget, whether you want to manage a plan or just fund reimbursements, and where your employees live and what coverage fits them. The smart move is to look at more than one option side by side, a traditional group plan or SHOP, a QSEHRA or ICHRA, and a level-funded quote if it fits, and compare the real costs and tradeoffs before you decide.

Let us run the comparison for your business

As an independent agency based in Lexington, we help small employers across the Midlands sort through this without the sales pressure. We will look at your team size, your budget, and your goals, model the options against each other, check whether you qualify for the tax credit, and give you a straight recommendation. We work alongside your CPA so the tax side lines up too.

If you have been thinking about offering health benefits, or you already do and want to know whether you are overpaying, call or text us and we will walk through it. The review is free.