Best Health Insurance for Businesses with Less Than 10 Employees

Let's get one thing straight:

No — you're not legally required to offer health insurance if your company has fewer than 50 Full-Time Equivalent (FTE) employees.

But you're reading this post anyway, which is awesome. 

Remember, employee healthcare is more than just an item in your compliance checklist. It will also help your business compete in the job market, attract the best talent, and keep your workforce in tip-top shape. 

The question is, what is the best healthcare plan for small businesses? 

How can you be sure that it won't break your bank? 

These are just some of the questions we'll answer in this post. 

Let's dive right in. 

Health Insurance Options for Small Businesses (≤10 Employees)

Here are the employee health insurance options that can offer the flexibility, affordability, and coverage that small businesses need:

1. Individual Coverage Health Reimbursement Arrangement (ICHRA) 

ICHRA is a type of Custom Health Option and Individual Care Expense (CHOICE) Arrangement, which enables employers to set fixed monthly contribution amounts while giving employees the autonomy to choose their own individual plan.   

It is hands-down one of the best healthcare options for micro businesses.

With the help of benefits platforms like SimplyHRA, employers can easily set up their ICHRA plan by defining employee classes, setting monthly reimbursement allowances, managing onboarding, and tracking approvals — all in one dashboard.

Benefits of ICHRA for Small Businesses 

• No Contribution Minimums or Maximums — One of the most attractive characteristics of ICHRA for micro businesses is that there's no minimum contribution amount. This makes it easy to set employee reimbursement allowances that fit your budget.
• Employee Choice — Under ICHRA, employees have the power to shop the entire individual marketplace for the carrier, deductible, network, and add-ons they need. Employers can also pre-approve a list of qualified medical expenses that can be reimbursed, such as dental, copays, and vision care. 
• Tax Advantages — Not only are ICHRA contributions considered tax-deductible, reimbursements paid out through your plan are also tax-free. This ensures both employers and employees can make the most out of their healthcare dollars.

A great way to learn more about ICHRA is to explore modern, tailor-made benefits platforms like SimplyHRA. Get started by booking a personal demo here. 

2. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) 

Similar to ICHRA, QSEHRA also falls under the CHOICE Arrangement umbrella. 

In it, employees also get to choose their own health insurance. Employers also retain control over employees' monthly reimbursement allowances.

A key difference, however, is that QSEHRA requires employers to provide the same reimbursement amount to all eligible employees. Furthermore, yearly QSEHRA contributions are capped at limits specified by the IRS. 

Finally, QSEHRA is only available for employers with fewer than 50 FTE employees, whereas ICHRA has no lower or upper limits in terms of employer size. 

Benefits of QSEHRA for Small Businesses 

• No Required Minimum Contribution — Although QSEHRA comes with maximum contribution limits, there's no minimum contribution requirement. This guarantees the predictability of your employee healthcare costs, which is huge for small businesses with tight budgets. 
• Tax Advantages — QSEHRA also comes packaged with the tax advantages that ICHRA offers. That means monthly contributions are tax-deductible while reimbursements are 100% tax-free. 
• Simple Administration — Not only does employee choice relieve some of the administrative burdens of managing healthcare, QSEHRA is also built around uniformity. This makes it easier to set up and manage than other types of CHOICE Arrangement plans.

Learn more about QSEHRA — its features, eligibility requirements, and advantages — by reading this post. 

3. SHOP Fully-Insured Small Group Plan

The Small Business Health Options Program (SHOP) is a health insurance marketplace designed specifically for companies with 50 or fewer employees. It offers group health insurance and group dental insurance, which can provide blanket coverage to enrolled, eligible employees. 

While traditional group plans may be inaccessible to small businesses, SHOP's fully-insured small group plans are different. 

For one, SHOP group health plans are guaranteed-issue. That means carriers are not allowed to deny coverage (if you're eligible) or increase your rates within an active plan year. 

SHOP group health plans can also provide Small Business Health Care Tax Credits to businesses with fewer than 25 FTE employees. This can cover up to 50% of your company's health insurance costs. 

Benefits of SHOP Fully-Insured Small Group Plans for Small Businesses

• Surefire Coverage Regardless of Employee Health — As guaranteed-issue healthcare, carriers aren't allowed to modify the price of your premiums. In other words, they can't use your company's claims history or your team's current health conditions to jack up your rates.
• Easy Enrollment — In certain states, businesses can use the online SHOP portal to pick and purchase healthcare. SHOP group health plans are all ACA-compliant right out of the box. 
• Predictable Costs — SHOP group health plans offload the risk of covering claims to the carrier. Pricing is also community-rated based on clear-cut factors like age and location. 

The main drawback of SHOP group health plans is the participation rate requirement, which means 70-75% of employees (depending on your state) should be enrolled. Employee choices are also limited to the plans their employer selected for them, unlike CHOICE Arrangements where flexibility is key.

4. Taxable Health Stipends

Remember, you're not legally required to offer health insurance if your employee count is 10 or fewer. 

And with a small team, it's sometimes more practical to simply include a fixed dollar amount in each employee's paycheck for healthcare. 

This is where health stipends step in. No paperwork, no compliance filings, no contracts with carriers — just extra dollars straight to your employees, which they can use for health insurance premiums and out-of-pocket medical expenses. 

Benefits of Health Stipends for Small Businesses

• Easy Setup and Administration — Health stipends are a straightforward solution for small businesses looking to keep employees healthy, motivated, and feeling valued. All you have to do is decide on a dollar figure that can adequately and reasonably cover your employees' healthcare needs. 
• Predictable and Customizable — Employers have full control over the stipend amount that employees receive for healthcare. They can also easily tailor stipends to match the specific working conditions of each individual employee.
• Employee Flexibility — While employers are in charge of setting stipend amounts, employees ultimately decide how they want to spend it. This can be a net positive for employee satisfaction, depending on the stipend's value and implementation.

While health stipends look great and straightforward on paper, it's not always simple in practice. 

For one, employers don't control whether or not employees actually spend their stipend on healthcare. As such, a generous stipend can quickly turn into an expensive lesson in the event of a medical emergency. 

In addition, health stipends are considered taxable income, which usually eats up to 30-40% of the amount. 

Employee Health Insurance Tips for Micro Businesses

Knowing the feasible health insurance options for your small business is just the first step.

You need a strategic roadmap to ensure your employee healthcare strategy is built on solid ground.

Below are five tips to help you achieve this: 

• Start with Your Employees — Sit down with them, ask about their needs, get to know their health profile, and create a set of criteria for selecting a plan that best suits them. 
• Prioritize Price Predictability — Before you look into plan designs, start defining what your company can afford in the long-term.
• Pick the Right Software — Research benefits platforms and healthcare stipend management systems to make sure you're getting exactly what you need without paying for unnecessary features.
• Reevaluate Your Plan Each Year — Do an annual review of your health benefits strategy to make sure it adapts as your company grows.
• Pay Attention to Administrative Burdens — Factor in the amount of time, work, and money that goes into managing traditional health plans before making the final call. 

Implement Your ICHRA Plan with SimplyHRA

Comparing health insurance types side by side, ICHRA has the clear advantage, especially for businesses with 10 or fewer employees. 

Predictable healthcare costs? Check. 

Employee choice? Check. 

Taxes? None. 

Easy administration? Absolutely. 

The best part is, getting your ICHRA plan up and running is effortless with modern benefits platforms like SimplyHRA. Just set your plan allowances, onboard employees, and let us do the rest — including compliance and tax-related paperwork.

Schedule a demo here to find out more.