--- title: Health Coverage for Tennessee Small Employers: The Three Models url: https://www.tnhealthcoverageexplained.org/guides/small-business description: TN small employer? Compare SHOP, ICHRA, and QSEHRA at a high level — plus 2027 rate context — before talking to a broker or tax advisor. last_verified: 2026-10-17 publisher: TN Health Coverage Explained (independent; does not sell insurance) --- # Health Coverage for Tennessee Small Employers: The Three Models If you run a small business in Tennessee and you're evaluating health coverage for your team, there are three main models. This page explains them at a high level — the concepts, the tradeoffs, and the market context — so you can have an informed conversation with a licensed broker or tax advisor. We don't publish contribution formulas or setup specifics here; those depend on your business and need professional advice. ## Model A: SHOP — the small-business marketplace SHOP (Small Business Health Options Program) is the small-business side of HealthCare.gov. You shop for group plans, choose how much of the premium to cover, and your employees enroll. It's the most traditional of the three: one group plan (or a limited choice of them), employer-selected, with the administrative simplicity of buying through the federal marketplace. ## Model B: ICHRA — reimburse employees for their own plans With an Individual Coverage Health Reimbursement Arrangement, the employer reimburses employees **tax-free** for individual-market premiums they buy themselves — typically on HealthCare.gov. Instead of picking one group plan for everyone, you set a reimbursement budget and each employee shops for the plan that fits them. The tradeoff: more employee choice, but you're asking employees to navigate the individual market, and the tax and compliance details matter. ## Model C: QSEHRA — the simpler option for very small employers The Qualified Small Employer Health Reimbursement Arrangement is a simpler reimbursement model designed for very small employers. Like an ICHRA, it reimburses employees for individual coverage rather than buying a group plan — with tighter limits and simpler administration. Which reimbursement model fits depends on your headcount and how much complexity you can absorb. ## The 2027 market context For context on costs: small-group rates in Tennessee rose about **14.7% on average for 2027** — part of a broader year of steep increases (individual-market approved increases averaged roughly 15.6–15.9%, and one major carrier, Cigna, is exiting the individual market entirely at the end of 2026). Whatever model you choose, budget for a market where premiums are moving up significantly. ## How to compare When weighing the three models, compare on total cost and on people, not just the premium line: - **Total employer cost** — premiums or reimbursements, plus administration, plus your time. - **Employee needs** — a young single workforce and a workforce of parents near 65 want very different things; reimbursement models let each person choose. - **Predictability** — a defined reimbursement budget is easier to forecast than renewing group premiums in a 14%+ increase year. - **Compliance burden** — reimbursement arrangements have tax and notice rules. This is exactly what a broker or tax advisor earns their fee on. ## FAQ **What's the real difference between an ICHRA and a QSEHRA?** Both reimburse employees tax-free for individual coverage instead of buying a group plan. The QSEHRA is the simpler, more limited version aimed at very small employers; the ICHRA is more flexible but carries more setup and compliance work. A tax advisor can tell you which fits your headcount. **Can my employees get marketplace subsidies if I offer an ICHRA?** The interaction between employer reimbursement offers and premium tax credit eligibility has specific rules — this is a question for your broker or tax advisor, not a web page. **Is SHOP the same as buying on HealthCare.gov myself?** No. SHOP is the small-business marketplace for employer group coverage; the individual marketplace is for people buying their own plans. They're separate doors on the same federal platform. **With rates up ~14.7%, should I just drop coverage?** That's a business decision with tax, recruitment, and retention consequences. Before dropping anything, price the reimbursement models — a defined ICHRA or QSEHRA budget may cost less than renewing a group plan while still giving employees real help. ## Sources - SHOP marketplace for small businesses — HealthCare.gov - ICHRA and QSEHRA reimbursement arrangement frameworks — HealthCare.gov, CMS - 2027 Tennessee small-group average rate increase (~14.7%) — TN Dept. of Commerce & Insurance rate filings - 2027 individual-market context (avg ~15.6–15.9% increases; Cigna exit 12/31/2026) — TN Dept. of Commerce & Insurance ## Related - [The marketplace explained](https://www.tnhealthcoverageexplained.org/marketplace) - [Employer coverage](https://www.tnhealthcoverageexplained.org/employer-coverage) *(planned)* - [How costs work](https://www.tnhealthcoverageexplained.org/costs) - [When you can enroll](https://www.tnhealthcoverageexplained.org/enrollment-calendar) - [How we verify our information](https://www.tnhealthcoverageexplained.org/how-we-verify) ## Your next step 1. **Write down your constraints.** Headcount, budget, and what your employees actually need — this determines which of the three models is even viable. 2. **Price all three models.** Get SHOP group quotes and sketch reimbursement budgets for ICHRA/QSEHRA against the ~14.7% small-group increase backdrop. 3. **Talk to a licensed broker or tax advisor.** Setup specifics, contribution design, and tax treatment need professional advice tailored to your business. 4. **Revisit annually.** In a market moving this fast, the right model this year may not be the right model next year.