Quick answer
Businesses with fewer than 50 full-time equivalent employees don’t have to offer health insurance, but many do to hire and keep good workers. The main options are a small-group plan from an insurer, a level-funded plan, or a health reimbursement arrangement (QSEHRA or ICHRA) that pays employees back for individual coverage. Employer contributions are tax-deductible, and businesses with fewer than 25 employees may qualify for a tax credit.
Key takeaways
- Only employers with 50 or more full-time equivalent employees face the ACA’s coverage requirement.
- In most states, the small-group market covers employers with up to 50 employees (up to 100 in California, New York and Vermont).
- 59% of firms with 10 to 199 workers offered health benefits in 2025, according to KFF.
- Small-group plans can’t set premiums based on your employees’ health.
- HRAs let you give employees a set amount toward their own individual plans. See what is an ICHRA.
On this page
Options for small businesses
| Option | How it works | Good to know |
|---|---|---|
| Small-group plan | You buy a plan from an insurer for your employees | Insurers usually require a minimum employer contribution and share of employees enrolled |
| Level-funded plan | You pay a fixed monthly amount; the plan pays claims, with stop-loss protection | Can return money in a good year. 37% of covered workers at firms with 10 to 199 workers were in one in 2025 |
| QSEHRA | Reimburses employees for individual premiums and medical costs, up to IRS limits | Only for employers with fewer than 50 employees that don’t offer a group plan |
| ICHRA | Reimburses employees for individual coverage, with no dollar cap | Any size employer. Employees can’t get marketplace tax credits if the offer is affordable |
Level-funded plans are partly self-funded. See is self-funded health insurance right for you.
Rules for small-group plans
- No health questions. Premiums can’t be based on your employees’ medical history. They can vary by age (up to 3 to 1), location, tobacco use and family size.
- Essential benefits. Small-group plans must cover the 10 essential health benefits.
- Participation and contribution rules. Insurers often require you to pay a minimum share of employee premiums and to enroll a minimum share of eligible workers. From November 15 to December 15 each year, insurers must accept groups that don’t meet those rules.
- Waiting periods. Coverage must start within 90 days after an employee becomes eligible.
Tax breaks
- Deductible contributions. What the business pays toward employee premiums is generally a deductible business expense. See is health insurance tax deductible.
- Pre-tax employee share. Through a cafeteria (Section 125) plan, employees can pay their share before taxes.
- Small business health care tax credit. If you have fewer than 25 full-time equivalent employees with average wages under an inflation-adjusted limit, pay at least 50% of employee-only premiums and buy through the SHOP marketplace, you may get a credit of up to 50% of premiums (35% for tax-exempt employers) for two consecutive years.
What employees should know
If you’re offered a plan at work, you can usually still decline it, but then you generally can’t get marketplace tax credits if the offer is affordable. See can you drop your employer-sponsored health plan. If your employer doesn’t offer coverage, you can buy an individual plan and may qualify for a premium tax credit; see health insurance for the self-employed for owners without employees.
How to get started
- Decide how much you can contribute per employee each month.
- Get quotes for small-group and level-funded plans from a licensed broker or directly from insurers.
- Compare an HRA if a group plan doesn’t fit your budget or your workers live in different areas.
- Check whether you qualify for the tax credit.
- Explain the options clearly to employees at enrollment.
Comparing individual plans for yourself or your workers? See quotes by ZIP code.
Frequently asked questions
Are small businesses required to offer health insurance?
No. The ACA’s employer requirement applies only to businesses with 50 or more full-time equivalent employees.
How much do small businesses usually pay toward premiums?
Insurers often require employers to pay at least half of the employee-only premium. Many pay more to stay competitive.
Can a business with one employee get a group plan?
Rules vary by state. Many insurers require at least one employee who isn’t the owner or the owner’s spouse. A self-employed person with no employees usually buys an individual plan instead.
Sources
This article is general information, not tax, legal or insurance advice. Talk with a licensed broker or tax professional about your business. Last reviewed September 2026.