Michigan employer health insurance laws come from two directions at once. The federal Affordable Care Act decides whether you’re required to offer coverage and sets the rules the plan has to meet, while Michigan’s Insurance Code adds state-level mandated benefits, small-employer protections, and a continuation-coverage rule that fills the gap left by federal COBRA. Which rules apply to your business depends almost entirely on headcount.
When You’re Required To Offer Coverage
The ACA’s employer shared responsibility provisions apply to “applicable large employers,” or ALEs, meaning businesses that averaged 50 or more full-time employees (including full-time equivalents) during the prior calendar year.1Internal Revenue Service. Employers Full-time means 30 or more hours a week on average. Part-time hours roll up into equivalents that count toward the 50-person threshold.
An ALE has to offer minimum essential coverage to at least 95 percent of its full-time employees and their dependents. If it doesn’t, and a single full-time employee gets subsidized coverage through the Health Insurance Marketplace, the IRS assesses a penalty.2Internal Revenue Service. Employer Shared Responsibility Provisions
Michigan does not add its own employer mandate on top of this. If you employ fewer than 50 full-time workers, no federal or state law requires you to offer health insurance. But if you decide to offer a plan anyway, it still has to meet Michigan Insurance Code requirements and any ACA market rules that apply to the plan you choose.
What A Compliant Plan Must Include
Offering a plan isn’t the finish line. Coverage has to be affordable, has to meet a minimum value threshold, and has to include benefits Michigan requires of any fully insured group health plan.
Affordability And Minimum Value
For the 2026 plan year, a plan is “affordable” when the employee’s share of the self-only premium is no more than 9.96 percent of household income. Because employers rarely know an employee’s household income, the IRS accepts three safe harbors: W-2 wages, rate of pay, or the federal poverty line. Using any one of them shields you from an affordability penalty even if the employee’s real household income turns out to be lower.
A plan meets minimum value when it covers at least 60 percent of the total allowed cost of benefits expected under the plan.3Internal Revenue Service. Minimum Value and Affordability Employee cost-sharing through deductibles, copays, and coinsurance can account for no more than 40 percent on average. HHS publishes a minimum value calculator for standard plan designs; nonstandard designs need an actuarial certification.
Plans also have to cap what employees pay out of pocket each year. For plan years starting in 2026, the caps are $10,600 for self-only coverage and $21,200 for family coverage. The caps include deductibles, copays, and coinsurance, but not premiums.
Michigan Mandated Benefits
Michigan requires insurers to build specific benefits into health plans sold in the state. These include coverage for mental health services, obstetrical and gynecological care, mental health screenings during the postpartum period, and treatment for substance use disorders.4Justia. Michigan Code Chapter 500, Division 218-1956-34 – Disability Insurance Policies The Insurance Code also bars annual and lifetime dollar limits on essential health benefits. These mandates apply to fully insured plans, meaning plans purchased through an insurance carrier rather than self-funded by the employer.
Guaranteed Issue For Small Employers
Michigan defines a small employer, as of 2018, as a business that averaged at least one but not more than 50 full-time employees during the preceding calendar year.5Michigan Legislature. Michigan Compiled Laws 500.3701 Every carrier that sells to small employers in Michigan must make all of its small-employer plans available and must issue coverage to any small employer that applies and pays the required premium.6Michigan Legislature. The Insurance Code of 1956 (Excerpt) Chapter 37 Small Employer Group Health Coverage Carriers cannot deny a small business coverage based on employee health status or claims history.
Continuation Coverage When Employees Leave
What happens after an employee loses group coverage depends on how many people you employ.
Federal COBRA
Federal COBRA covers private-sector group health plans at employers that had at least 20 employees on more than 50 percent of typical business days in the prior calendar year. Both full-time and part-time employees count toward that threshold.7U.S. Department of Labor Employee Benefits Security Administration. FAQs on COBRA Continuation Health Coverage for Employers and Advisers
After a qualifying event like termination (other than for gross misconduct) or a reduction in hours, the employer notifies the plan administrator within 30 days, and the administrator sends an election notice within another 14 days.8U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers The qualified beneficiary has 60 days to elect. Coverage runs up to 18 months for job loss or reduced hours, and up to 36 months for events like divorce, death of the covered employee, or a dependent aging out.
Michigan’s Mini-COBRA
Employers with fewer than 20 employees aren’t covered by federal COBRA, but Michigan has its own continuation rule. Employees and dependents enrolled in a fully insured group health plan can continue coverage for up to nine months after a qualifying event, and the events mirror federal COBRA: termination, reduction in hours, divorce, death of the covered employee, or Medicare eligibility. This applies only to fully insured plans. Self-funded plans at small employers are outside both federal COBRA and Michigan’s continuation rule.
Coverage During FMLA Leave
Employers covered by the Family and Medical Leave Act must maintain an employee’s group health coverage during FMLA leave on the same terms as if the employee had kept working.9eCFR. 29 CFR 825.209 – Maintenance of Employee Benefits Family coverage in place before the leave continues as family coverage. If you change plans or add benefits while the employee is out, the employee on leave gets the change on the same basis as everyone else.
An employee can drop coverage during leave, but on return they get immediate reinstatement without a new waiting period or pre-existing condition exclusions. Your obligation to maintain coverage ends only if the employee tells you they won’t return, fails to come back after exhausting FMLA leave, or the position would have ended regardless of the leave.
Reporting And Disclosure
Every ALE files Form 1094-C (transmittal) and Form 1095-C (per-employee statements) with the IRS each year and furnishes 1095-C to each full-time employee. For the 2025 tax year filed in 2026, employees must receive their statements by March 2, 2026, and electronic filing with the IRS is due March 31, 2026.10Internal Revenue Service. Instructions for Forms 1094-C and 1095-C The forms tell the IRS which employees were offered coverage, whether that coverage was affordable, and for which months.
Failing to file correct returns or furnish correct statements draws a penalty of $340 per return, with a calendar-year cap of $4,098,500 for the 2025 tax year.10Internal Revenue Service. Instructions for Forms 1094-C and 1095-C An employer required to file electronically that files on paper without a waiver faces the same per-return penalty.
Employers sponsoring group health plans are also generally subject to ERISA. You must give each participant a Summary Plan Description that accurately reflects current plan terms, and participants can inspect plan documents at your office or request copies in writing.11eCFR. 29 CFR 2520.102-3 – Contents of Summary Plan Description Ignoring a written request can cost the plan administrator up to $110 a day, assessed by a court or the Department of Labor. That figure is statutory and not indexed to inflation, so a long delay compounds.
Penalties For Getting It Wrong
Financial exposure sits in three places: the IRS, Michigan’s regulator, and the courts.
ACA Shared Responsibility Payments
The IRS assesses two separate penalties on ALEs, and only one can apply in a given year.2Internal Revenue Service. Employer Shared Responsibility Provisions
- The no-coverage penalty under Section 4980H(a) applies when you fail to offer minimum essential coverage to at least 95 percent of full-time employees and their dependents and at least one full-time employee gets a premium tax credit. For 2026, the amount is $3,340 per full-time employee annually, minus the first 30 employees. An employer with 100 full-time employees calculates the penalty on 70.
- The inadequate-coverage penalty under Section 4980H(b) applies when you do offer coverage to at least 95 percent of full-time employees, but the coverage isn’t affordable or doesn’t meet minimum value. It runs $5,010 per year for each full-time employee who actually receives a Marketplace premium tax credit, calculated only on those employees rather than the whole workforce.
The no-coverage penalty is usually the more expensive of the two for a large employer because it sweeps in nearly the entire workforce.
DIFS Enforcement
The Michigan Department of Insurance and Financial Services regulates insurance companies, agents, and agencies operating in Michigan, and handles licensing, market conduct reviews, and consumer complaints.12State of Michigan: Department of Insurance and Financial Services. Department of Insurance and Financial Services DIFS can audit and pursue enforcement through administrative hearings, director’s orders, and prohibition orders.13Michigan House Fiscal Agency. Overview of the Department of Insurance and Financial Services (DIFS) Most enforcement targets carriers, but an employer that misrepresents plan terms or ignores state benefit mandates can also be investigated, and a carrier that discovers non-compliance may terminate the plan.
Litigation
Employees denied promised coverage, or given plans that don’t match what they were told, can sue under ERISA or state law. Claims for denied benefits and fiduciary breach are among the more common employment lawsuits, and the legal costs of defending one add up even when the employer eventually wins.
Anti-Discrimination In Benefits
Health insurance is treated as a term and condition of employment, so it falls under Michigan’s Elliott-Larsen Civil Rights Act. The Act prohibits discrimination in compensation and employment benefits based on religion, race, color, national origin, age, sex, sexual orientation, gender identity or expression, height, weight, or marital status.14Michigan Legislature. Elliott-Larsen Civil Rights Act (Excerpt) – Michigan Act 453 of 1976 Article 2 Amendments in 2023 and 2024 expressly added sexual orientation and gender identity or expression as protected classes.
You cannot offer different plans, charge different premiums, or apply different eligibility rules based on a protected characteristic. If you extend spousal coverage to opposite-sex spouses, you have to extend it to same-sex spouses. Employees can file complaints with the Michigan Department of Civil Rights.
Optional Tools: HSAs, ICHRAs, And QSEHRAs
Nothing requires you to offer tax-advantaged accounts, but they can help with the affordability test and give employees more flexibility.
Pairing a Health Savings Account with your group plan requires the plan to qualify as a high-deductible health plan. For 2026, that means a minimum annual deductible of $1,700 for self-only or $3,400 for family coverage, and annual out-of-pocket expenses (excluding premiums) no higher than $8,500 self-only or $17,000 family. The 2026 HSA contribution limits are $4,400 for self-only and $8,750 for family coverage, up notably from prior years under the One, Big, Beautiful Bill Act.15Internal Revenue Service. Expanded Availability of Health Savings Accounts Under the One, Big, Beautiful Bill Act (OBBBA) Employer and employee contributions both count toward the limit and are tax-deductible.
To reimburse employees for buying their own individual coverage, employers have two Health Reimbursement Arrangement options. An Individual Coverage HRA is open to employers of any size with at least one W-2 employee, has no contribution cap, and can vary reimbursement by employee class, but you cannot offer both a group plan and an ICHRA to the same class. A Qualified Small Employer HRA is limited to employers with fewer than 50 full-time equivalents that don’t offer a group plan, has IRS-set annual reimbursement caps, and must give the same benefit terms to every eligible employee. Both arrangements require employees to carry qualifying individual health coverage to receive tax-free reimbursements.