Tennessee businesses with fewer than 50 full-time employees aren't required to offer health insurance, but those that do can choose a traditional small group plan, a level-funded plan, a Reference Based Pricing (RBP) plan, or a health reimbursement arrangement (QSEHRA or ICHRA). With individual Marketplace premiums in Tennessee up about 37.5% for 2026, offering a smart group option is one of the strongest recruiting tools a Tennessee small business has right now.
Tennessee's small business owners are dealing with the same rising health costs as the rest of the country — plus a few factors that are unique to our state. Here's what the Tennessee market looks like right now, and how employers here are getting ahead of it.
Are Tennessee Small Businesses Required to Offer Health Insurance?
No — not if you have fewer than 50 full-time equivalent employees. Tennessee doesn't add its own employer health insurance mandate on top of federal law. Under the ACA, only businesses with 50 or more full-time equivalents face penalties for not offering affordable coverage.
What's Happening in Tennessee's Health Insurance Market
Three things make 2026 different for Tennessee employers and their employees:
- Individual premiums jumped. Full-price Marketplace premiums in Tennessee rose about 37.5% on average for 2026, and the enhanced federal subsidies expired. Employees who have been buying their own coverage are feeling it — which makes a good group plan more valuable than ever.
- Fewer Marketplace carriers ahead. Cigna is leaving Tennessee's individual Marketplace at the end of 2026, dropping the number of carriers from six to five for 2027.
- No Medicaid expansion. Tennessee hasn't expanded Medicaid, so many lower-income working adults don't have a public coverage option. For a lot of Tennessee workers, an employer plan is the most realistic path to affordable coverage.
Your Options as a Tennessee Employer
Traditional Small Group Plans
A fixed premium paid to a carrier, which pays all claims. Familiar and simple, but the carrier keeps any surplus when your employees stay healthy, and renewals are based on market trends you can't control.
Level-Funded Plans
A level-funded plan keeps one predictable monthly payment but splits it into a claims fund, stop-loss insurance, and admin fees. If your claims come in low, you can get money back at year end. Employees keep access to the major PPO networks they already know. For healthy groups, level-funded plans can save up to 30% compared to traditional coverage.
We've written more about why Tennessee businesses with 20 to 200 employees are moving to level-funded plans.
Reference Based Pricing (RBP) Plans
RBP plans pay providers a fair, transparent multiple of Medicare rates instead of negotiating "discounts" off inflated hospital prices. They can save 20–40% versus traditional coverage.
Tennessee is one of the strongest RBP markets in the country — Trustmark gives the state a 9 out of 10 RBP Market Score, with Nashville, Knoxville, Memphis, and Chattanooga all scoring 8 or higher.
QSEHRA and ICHRA
With a health reimbursement arrangement, employees buy their own individual plans and you reimburse them tax-free. A QSEHRA (for employers under 50 with no group plan) is capped at $6,450 self-only and $13,100 family for 2026. An ICHRA works for any size employer with no cap. With Tennessee's individual premiums up sharply this year, run the numbers carefully before choosing this route.
Tennessee employers have a real advantage right now: the state is one of the best RBP markets in the country, and level-funded plans are still underused here compared to other states.
Don't Overlook the Small Business Tax Credit
Tennessee employers with fewer than 25 full-time equivalents and modest average wages may qualify for the federal Small Business Health Care Tax Credit — worth up to 50% of the premiums you pay — when you cover at least half of employee premiums and buy through the SHOP Marketplace. It's available for two consecutive years. Check the current IRS Form 8941 instructions or ask your CPA.
How to Get Started
- Pull together a simple census — employee ages and ZIP codes.
- Decide on a budget per employee per month.
- Get more than one funding structure quoted — traditional, level-funded, and RBP side by side.
- Work with an independent Tennessee-based consultant who isn't tied to a single carrier.
Frequently Asked Questions
Do small businesses in Tennessee have to offer health insurance?
No. Tennessee doesn't have its own employer mandate. Under federal law, only employers with 50 or more full-time equivalent employees face penalties for not offering affordable coverage.
What is the cheapest way for a Tennessee small business to offer health insurance?
It depends on your group, but for many healthy groups, level-funded plans (up to 30% savings) and Reference Based Pricing plans (20–40% savings) cost less than traditional fully insured coverage. Tennessee is also one of the strongest RBP markets in the country.
Why did health insurance go up so much in Tennessee in 2026?
Full-price individual Marketplace premiums in Tennessee rose about 37.5% on average for 2026, and the enhanced federal premium tax credits expired at the start of the year, so many people saw higher net costs.
Can a Tennessee small business get a tax credit for offering health insurance?
Possibly. Employers with fewer than 25 full-time equivalents and modest average wages that pay at least half of employee premiums and buy through the SHOP Marketplace may qualify for a federal credit of up to 50% of premiums paid, for two consecutive years.
The Bottom Line
Tennessee's individual market is getting more expensive, which makes a well-built group plan one of the best tools a small business has to hire and keep good people. The key is not settling for the first traditional quote — Tennessee employers have strong alternative options, and they're worth a look.