Small Business Health Insurance

Do small businesses have to offer health insurance?

Generally, no. Under IRS guidance, employers averaging fewer than 50 full-time employees, including full-time equivalent employees, during the prior year aren't subject to the Employer Shared Responsibility Payment. That's the federal payment certain larger employers may owe for not offering qualifying coverage.

Under that guidance, full-time means averaging at least 30 hours of service weekly or 130 monthly. Check your employee count before assuming the small-employer exemption applies.

How do group plans and SHOP work?

A traditional group plan gives employees coverage through your business. SHOP, the Small Business Health Options Program, is a route to health coverage, dental coverage or both. HealthCare.gov says your business or non-profit generally needs 1 to 50 employees to buy SHOP coverage.

You can offer a plan or a selection of plans, choose your premium contribution and decide whether to include dependents. If SHOP isn't available locally, ask a licensed agent about other group plans.

Who qualifies for the small business tax credit?

HealthCare.gov lists these requirements for the Small Business Health Care Tax Credit:

• Fewer than 25 full-time equivalent (FTE) employees.
• Average employee pay of about $65,000 annually or less.
• An employer contribution of at least 50% of full-time employees' premium costs.
• SHOP coverage offered to all full-time employees.

That guidance says the credit can reach 50% of your premium contributions, or 35% for non-profit employers. The IRS limits it to two consecutive taxable years. The credit uses a sliding scale, so don't budget for the maximum automatically. Ask a tax professional to check eligibility and the amount.

Can you reimburse employees instead?

A health reimbursement arrangement (HRA) helps pay eligible medical expenses rather than providing a traditional group insurance policy. These options have different rules:

• QSEHRA: A qualified small employer health reimbursement arrangement lets eligible small employers pay or reimburse medical care expenses, including health insurance premiums, for eligible employees and their family members. Only the employer funds it, and you can't also offer a group health plan. For 2026, reimbursement limits are $6,450 for self-only coverage and $13,100 for family coverage.
• CHOICE Arrangement: Formerly called an individual coverage HRA, or ICHRA, this option is generally open to employers of any size that have at least one employee who isn't a self-employed owner or an owner's spouse. It has no annual minimum or maximum contribution. Employees need their own individual health insurance to use reimbursements.

For 2026 plans, your CHOICE offer counts as affordable if the employee's monthly cost for the self-only, lowest cost Silver plan in their area, after your reimbursement, is less than 9.96% of 1/12 of their yearly household income. An affordable offer blocks Marketplace premium tax credits for the employee and household members, even if unused. Have an adviser explain the effect on employees' Marketplace savings.

How much does small business health insurance cost?

KFF's 2025 averages for firms with 10 to 199 workers describe full yearly premiums, not quotes for your business:

• Single coverage: $9,211.
• Family coverage: $26,054.
• Workers' share of family coverage: $8,889 annually.

The worker share is included in the full premium. Employers pay the remaining share. Your contribution choice affects both your budget and employees' costs. Smaller firms aren't in these averages.

How do you choose and get started?

If you have no employees, use the individual Marketplace. Otherwise, compare a group plan's premium contribution with an HRA reimbursement budget.

Offering coverage brings responsibilities: offer it to all eligible employees and provide a Summary of Benefits and Coverage explaining benefits and costs. Under Department of Labor guidance, COBRA generally requires group health plans from employers with 20 or more employees in the prior year to offer employees and their families a temporary extension of coverage in certain cases where it would otherwise end.

Ask a licensed agent about eligibility, administration and employee costs. When you're ready, compare small business health insurance quotes alongside your reimbursement options.