Small business health insurance in Pennsylvania

How Pennsylvania's market is set up

Pennsylvania runs its own exchange, Pennie, created by Act 42 of 2019 and live for 2021 coverage (Pennie, launch release). The Insurance Department lists 15 individual-market rate filings and 16 small-group filings for plan year 2026 (PID, ACA health rate filings). Premiums follow the federal defaults — a 3:1 age curve and tobacco rating up to 1.5:1 (CMS, State Specific Rating Variations). The small-group market includes employers with 50 or fewer employees (PID, Consumer Guide to Rate Review). CMS divides the state's 67 counties into nine rating areas.

What a Pennsylvania group plan costs in 2026

The Insurance Department's October 14, 2025 decision: Pennsylvanians who buy their own coverage see an average aggregate weighted increase of 21.5% in the individual market, and PID reduced the small-group average to 12.7% from initial requests averaging 13.1% (PID, 2026 rates). Insurers had proposed 19% and 13% in August; PID cited the end of enhanced federal premium tax credits, new federal regulations, rising medical and prescription drug costs, and worsening morbidity in some rating areas (PID, August 1 and October 14, 2025).

The consequence showed up in enrollment. Pennie reported in February 2026 that nearly one in five enrollees were unable to keep their plan for 2026, facing an average price increase of 102% once the expired federal credits were counted, with enrollment near 486,000 (Pennie, February 9, 2026). For an employer, that is the population an ICHRA allowance reaches: employees who were in the individual market on their own and just lost their subsidy, or who dropped coverage.

Your four real options as a Pennsylvania employer

There are four ways to offer health insurance to employees in Pennsylvania, and the state's market rules change how each one performs.

• A small-group plan (50 or fewer employees) through a carrier or the SHOP route. Predictable coverage, age-rated premiums, annual renewals, participation and contribution minimums.
• A PEO, which pools your staff into its own group plan and bundles payroll and HR for a fee on top of premiums. See our ICHRA vs PEO comparison.
• A taxable stipend. Simple, but it is wages: you owe employer payroll tax on it, the employee owes income tax, and it does not count as an offer of coverage. See our guide to health insurance stipends.
• An ICHRA — a fixed, tax-free monthly allowance employees use to buy their own individual plan on or off Pennie. No participation minimum, no renewal negotiation, and the allowance is a number you choose.

Reinsurance, the state affordability program, and Medicaid

Pennsylvania's Section 1332 reinsurance program, authorized by Act 42 of 2019, was extended for plan years 2026 through 2030; it lowers individual premiums by a range of 4–6% annually and is funded by Pennie and the federal savings it generates. CMS set the 2026 federal pass-through at $104,899,937 (PID, Act 42 reinsurance page; CMS, June 25, 2026 letter). That is why the gross individual premium an ICHRA employee pays is lower than it would otherwise be.

Act 54 of 2024 also created a State Health Insurance Exchange Affordability Program, but Pennie states it requires funding to operate; we found no confirmation that it is funded for 2026, so do not plan on state subsidies. Pennsylvania adopted Medicaid expansion effective January 1, 2015 (KFF), so employees under roughly 138% of poverty are generally covered there and outside the ICHRA question; above that line, an affordable ICHRA offer replaces the federal premium tax credit — the employee-by-employee check to run before setting the allowance.

Is there a Pennsylvania ICHRA tax credit?

We found no Pennsylvania ICHRA or QSEHRA credit on Insurance Department or Pennie sources. Plan the arrangement on its own economics.

Setting an ICHRA allowance in Pennsylvania

Pennsylvania rates individual premiums on the federal 3:1 age curve, so a 64-year-old's premium can be up to three times a 21-year-old's for the same plan. Federal ICHRA rules let you vary the allowance by age up to that same 3:1 ratio, and in an age-rated state that is usually the fair design: a flat allowance treats a 25-year-old and a 60-year-old very differently in real purchasing power.

Location matters too. Pennsylvania's nine rating areas run from Philadelphia and its suburbs to the northern tier, and premiums differ by more than double across them. In our 2026 calculator dataset (the figures shown on our ICHRA in Pennsylvania page), the lowest-cost Silver plan for a 40-year-old in Pennsylvania averages about $589/month, ranging from $455 to $996 across the state's 67 counties. That spread is why an allowance set from a statewide average fails the ACA affordability test in some counties and over-funds others.

Our ICHRA calculator uses those county-level 2026 lowest-cost Silver premiums by ZIP code, so you can see the affordability line for each employee before you set a number. For 2026, an offer is affordable when the employee's cost for the lowest-cost Silver plan, minus your allowance, is no more than 9.96% of the applicable income measure (IRS).

Group plan vs. ICHRA for a Pennsylvania employer

Pennsylvania's 2026 numbers are stark on both sides: a 12.7% small-group increase and a 21.5% individual-market increase. What tips the comparison is the population — employees who just lost federal credits and dropped Pennie coverage are exactly the people an employer allowance brings back. The table puts the two models side by side.

How to set up an ICHRA in Pennsylvania

The setup is the same federal process as anywhere: adopt a written plan document, define employee classes, set the allowance (by age band and rating area if you choose), deliver the required employee notice at least 90 days before the plan year begins, and reimburse against proof of individual coverage. Give employees a clear enrollment path — Pennie or an off-exchange carrier — and time the launch to a window when they can actually enroll: the annual open enrollment, or the special enrollment period that a new ICHRA offer triggers.

Who we are

The ICHRA Broker is licensed in New York and works with employers nationwide, including Pennsylvania. We design, set up, and support ICHRAs for small and mid-sized employers — the county-by-county allowance work, the affordability testing, and the enrollment support employees need. Free quote, no obligation. This page is education, not tax, legal, or insurance advice.

Sources

• Pennsylvania Insurance Department, 2026 ACA health insurance rates (October 14, 2025): individual 21.5%; small group 12.7% from 13.1%.
• Pennsylvania Insurance Department, proposed 2026 rate updates (August 1, 2025): 19% individual, 13% small group; drivers.
• Pennsylvania Insurance Department, ACA health rate filings page (15 individual, 16 small-group filings for PY2026) and Consumer Guide to Rate Review (small group: 50 or fewer employees).
• Pennie, launch release (Act 42 of 2019); Pennie, February 9, 2026 release (one in five enrollees dropped; 102% average increase; ~486,000 enrolled); Pennie affordability page (Act 54 of 2024 program requires funding).
• Pennsylvania Insurance Department, Act 42 reinsurance / 1332 waiver page; CMS, 2026 pass-through funding letter (June 25, 2026): $104,899,937.
• KFF, State Activity Around Expanding Medicaid (Pennsylvania: adopted 1/1/2015).
• CMS, Pennsylvania Geographic Rating Areas (9); Market Rating Reforms — State Specific Rating Variations.
• The ICHRA Broker calculator dataset: 2026 lowest-cost Silver premiums by ZIP.