Small Business Health: Small Group Health Insurance Plan | Healthcare Coverage for Your Employee

Group health insurance plans, even small ones, can be very affordable for employees to pay into. Costs for employees can start around $270 per month, or $3240 per year, which is more than three times less than the cost the average American pays into their healthcare annually.

Small Plans vs. Large Plans

The plan you choose from the private insurance company will dictate your rates, premiums, and health care coverage. Sometimes, people assume that their healthcare coverage will diminish by choosing a small group health insurance.

However, this is not automatically the case. While healthcare insurance plans offered by private insurance providers, or on the state and federal exchanges, are not very customizable, plans from independent insurance agencies like Taylor Benefits Insurance are.


With an independent agency, you can receive the health care coverage you need at an attractive price. Health insurance companies need to offer health insurance plans at affordable monthly premiums in order to remain in medical insurance business. These health insurance providers are in competition with each other, while independent agencies are not.

With an independent agency, you can shop health insurance that covers pre existing conditions and save money by avoiding high insurance premium costs as much as possible. It provides essential health benefits like dental coverage, out of network care, family coverage, etc.

The size of the health plans does not matter as much as the agency offering the plan.

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Small Group Health Insurance

How Much Does Small Business Health Insurance Cost?

Insurance is a numbers game, no matter which type of health plan you choose from the insurance company. Fortunately for those interested in a small business health insurance plan, premiums are showing a downward trend in the last few years. This is due to Affordable Care Act (ACA) passed by the president Barack Obama in 2010.

According to 2018 research, the average premium per person fell to $409 in 2018 for small business health insurance coverage plans. This is a drop from $416 in 2017; while it might not sound like a huge improvement, it speaks to health trends that small businesses can certainly get behind.

Single coverage funding options
Single coverage funding options

It’s worth noting that the group health coverage premiums have risen by about 5% since 2015, but this is to be expected when accounting for inflation.

Small business health insurance is still likely to cost both employer and employee a couple hundred dollars in health plan premiums (assuming that the cost is being shared), but this is a significant improvement over some of the alternatives, both in terms of premiums and deductibles.

Moreover, the deductible for small group insurance averages about $3,000, which is much lower than that for individual health plans.

What Are My Different Options for Small Group Health Insurance?

When it comes to small business health insurance, there are essentially five different options that can be explored by small business owners.

First Option for Group Health Insurance

The first and most traditional option is a simple group health insurance plan for small employers. This option is appealing to those who don’t want to wade through the confusing world of business health insurance plans, as it’s doubtlessly the easiest choice.

Employers pay a fixed health plan premium, part of which may be paid by the employee, and in return offer health benefits to their employees and possibly their employees’ dependents. It’s a straightforward option for a small business owner, but premiums to provide health insurance can be quite high for small businesses.

Second Option for Group Insurance
Second Option for Group Insurance

A newer option for small group health insurance gaining popularity is something called the qualified small employer health reimbursement arrangement (QSEHRA). Though it’s a mouthful, the health plan concept is relatively simple thanks to the legislation passed in 2016.

Basically, employers can offer a certain amount of money (of their choosing) in benefits to employees each month. Covered employees can purchase health insurance premiums, pay toward deductibles, and fill prescriptions within this amount and provide receipts to receive reimbursement. This option is wholly customizable to each employee, but adds some extra administrative burden all the way around.

Compare prices and get your shop plan
Compare prices and get a shop plan
Third Option for Group Insurance

Similarly, another option is to invest in something called a group coverage health reimbursement arrangement. This means that an employer would offer group health insurance, but they would also offer a certain monthly allowance to go toward copays, deductibles, and the like.

As with any reimbursement program, employees would need to submit proof of their expenditures, and there are stipulations for what is eligible for reimbursement.

Fourth Option for Group Insurance

The riskiest option for small business health insurance is for a business to provide self funded plans. This means that rather than paying premiums each month, employees submit their medical bills/prescription drugs and employers reimburse them directly.

This health plan option is an obvious gamble for small businesses, and although it sometimes plays to employers’ favors, it also has the potential to put them out of business.

Fifth Option for Group Insurance

Finally, associate health plans (AHPs) are a somewhat precarious option in which small businesses can invest. They are precarious due to the fact that a judge ruled against allowing them in 2019, though this is likely to be appealed. Basically, AHPs are when a number of smaller businesses within an industry or region band together to purchase larger group health plan policy from the insurance company.

What Is Considered A Small Group for Health Insurance?

Some small business owners are under the misconception that there is a certain threshold in terms of employee numbers that they must meet in order to be eligible for small group health insurance. While this isn’t strictly untrue, the threshold is incredibly low: at least one employee.

Small group vs large group

There is, however, a more strict upper limit by which employers must abide. The maximum number of employees that can still be considered a small group for medicaid services maxes out at 50. This means that businesses with more than 50 employees must explore large group health plans by the insurance companies and check their eligibility for such plans.

Employee wellness programs

Health Insurance & Small Business: Criteria and Eligibility

It’s important to note that in order to be eligible for small group coverage options, the one employee that is required must meet a number of criteria.

The Affordable Care Act (ACA) does not require small businesses to offer health insurance to their employees. However, there are some states that have their own health insurance requirements for small businesses.

  • California: California requires all businesses with 50 or more employees to offer health insurance or pay a penalty.
  • New Jersey: New Jersey requires all businesses with 10 or more employees to offer health insurance or pay a penalty.
  • Hawaii: Hawaii requires all businesses with 5 or more employees to offer health insurance or pay a penalty.
  • Massachusetts: Massachusetts requires all businesses with 11 or more employees to offer health insurance or pay a penalty.
  • Vermont: Vermont requires all businesses with 50 or more employees to offer health insurance or pay a penalty.

If you are a small business owner in a state with its own health insurance requirements, you should contact your state’s department of insurance for more information.

Even if your state does not have its own health insurance requirements, you may still want to consider offering health insurance to your employees. There are many benefits to offering health insurance, including:

  • Attracting and retaining top talent
  • Improving employee morale and productivity
  • Reducing the financial burden of healthcare costs on your employees
  • Protecting your business from liability

If you are considering offering health insurance to your employees, there are a few things you need to do:

  1. Estimate the cost of health insurance for your employees.
  2. Choose a health insurance plan that meets your employees’ needs.
  3. Communicate the health insurance plan to your employees.
Get tax credit on group health insurance
Get tax credit on group health insurance

Is Group Health Plan Cheaper Than Individual Health Insurance Plans?

Cost is always a huge factor when employers are considering different health insurance plans, but there’s more than meets the eye when it comes to comparing health insurance for small group and individual health plan.

If you only look at the premiums for each type of insurance, there’s not that much of a difference. On average, a small group plan’s premium will work out to an average of $409 per person by the insurance company; an individual plan premium is an average of $440 by the insurance company.

Looking a little closer, you’ll notice that the deductible for small business coverage is more than $1,000 less than that for individual coverage, but there’s even more to unpack than that.

Which one is Better?

Because employers contribute to the cost of premiums fixed by the health insurance company, the employee premiums amount for insurance is significantly lower with a small group health insurance plan than an individual one.

This makes a small group plan an obvious choice for employers looking to offer their valuable employees a competitive benefits package at the minimum contribution.

Shop plans and medical plans
Shop plans and medical plans

Benefits of Small Group Health Insurance Plans

There are many reasons that employers ought to invest in group health insurance options, but not all of them are immediately evident. Make sure you thoroughly consider all of the ways that a group plan could positively impact your business before making your decision.

First and foremost, group plans save both businesses and employees money from payroll taxes. This is possible due to the fact that a larger risk pool translates to lower premiums from the best health insurance providers.

1. Affordability: One of the primary advantages of small group health insurance is that it often provides affordable rates compared to individual plans. The pooling of employees often allows for better negotiation of premiums.

2. Customization: Independent agencies, in particular, offer flexibility in creating health care packages tailored to the needs of the group.

3. Employee Attraction and Retention: Offering health insurance can make a business more attractive to potential employees and can help retain existing staff. Quality health benefits are often a deciding factor in job selection.

4. Tax Advantages: Both employers and employees can enjoy tax benefits. Employers can usually deduct premiums they pay on a qualifying group health plan.

5. Improved Employee Morale and Productivity: When employees know they’re covered, they’re often happier, less stressed, and more productive.

6. Risk is Spread: With more participants, the risk associated with health insurance is spread out, which can stabilize costs and premiums.

7. Comprehensive Coverage Options: Group plans often come with the option to include various types of coverage, including dental, vision, and other specialized care, ensuring that employees have holistic health coverage.

8. Employer Contribution: Employers can contribute to premiums, further reducing the cost burden on employees.

9. Employee Wellness and Preventive Care: Many small group plans emphasize wellness programs and preventive care, which can lead to healthier employees and reduced healthcare expenses in the long run.

10. Regulatory Protections: Group plans are often subject to state and federal regulations that protect both the employer and the employee, ensuring that certain standards and protections are in place.

11. Simplified Administration: Though there’s a learning curve, once set up, group plans often provide a streamlined process for administration, especially if outsourced to professional HR or benefits administrators.

12. Continuous Coverage: Even if an employee faces health challenges, they can’t be singled out for premium hikes or dropped from the plan, as might happen with individual coverage.

13. Encourages a Healthier Workforce: Access to healthcare can lead to earlier diagnoses and treatments, minimizing downtime and ensuring a healthier workforce.

14. Spousal and Dependent Coverage: Employees can often extend their coverage to include their families, ensuring that their loved ones are also protected.

15. Competitive Advantage: For small businesses, in particular, offering health insurance can give them an edge over competitors that don’t offer such benefits, especially when trying to attract top talent.

In summary, while there are costs associated with offering a small group health insurance plan, the myriad benefits, both tangible and intangible, can far outweigh them. It not only supports the health and wellbeing of employees but can also have positive repercussions for the business’s bottom line and overall success.

Additionally, covering more people under a single plan helps drive down costs so that employers can afford to purchase better insurance from the insurance broker. This means that group plans are basically a no-brainer for employers.

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Small Group and Individual Health Insurance Costs Comparison


When comparing the costs of small group health insurance and individual health insurance, several factors come into play that can influence the relative costs of each. Here’s a breakdown:

1. Premium Costs: 

  1. Small Group Health Insurance: Typically, the premiums for group plans might be lower per person than individual plans because of the larger risk pool. The business often shares the cost of premiums with employees, which can reduce the financial burden on the individual.
  2. Individual Health Insurance: Premium costs depend on individual factors, including age, health status, geographical area, and plan selected. Without the pooling of a group, some people might find individual coverage more expensive, especially if they’re older or have health issues.

2. Benefits and Coverage:

  1. Small Group Health Insurance: Group plans usually offer comprehensive coverage, including medical, dental, vision, and sometimes other types of insurance like life or disability. This broad coverage can provide more value.
  2. Individual Health Insurance: The coverage can vary widely based on the plan chosen. Some may offer bare-bones coverage with lower premiums, while others might be comprehensive but come with a higher cost.

3. Tax Benefits:

  1. Small Group Health Insurance: Businesses often get tax deductions for the contributions they make to employees’ premiums. Employees can also benefit by paying their share of premiums with pre-tax dollars.
  2. Individual Health Insurance: Individuals who buy insurance on the health insurance marketplaces may be eligible for subsidies based on their income. Additionally, if individual health insurance premiums and other medical expenses exceed a certain percentage of the individual’s adjusted gross income, they may be deductible.

4. Risk Pooling:

  1. Small Group Health Insurance: Risks are spread out over a larger number of individuals, potentially stabilizing costs.
  2. Individual Health Insurance: The costs are determined by the individual’s own risk factors, which can make it more expensive for those with pre-existing conditions (although the Affordable Care Act has put regulations in place to prevent excessive pricing based on health status).

5. Administrative Costs:

  1. Small Group Health Insurance: There might be some administrative costs related to managing the health benefits for employees, especially for very small businesses without a dedicated HR department.
  2. Individual Health Insurance: There’s no administrative cost to the individual beyond personal time spent researching and choosing a plan.

6. Cost Stability:

  1. Small Group Health Insurance: Group plans may have more stable premiums year-to-year because the risk is spread out over a larger group of people.
  2. Individual Health Insurance: Premiums might be more susceptible to significant year-to-year changes based on factors like regional healthcare costs, personal health changes, or market dynamics.

7. Contributions and Cost-sharing:

  1. Small Group Health Insurance: Employers typically share the cost, which can significantly reduce the burden on employees. There are also often out-of-pocket maximums in place.
  2. Individual Health Insurance: The individual shoulders the full premium cost unless they qualify for a subsidy. There might be a wider range of potential out-of-pocket costs based on the plan selected.

Why is health insurance for small business important?

A small group plan offers a host of benefits to employees. Because the plan is offered through the employer, employees pay a portion of the premium cost generally to offset a comprehensive health coverage for each employee. Additionally, employees are able to enjoy a higher quality insurance plan than they would be able to afford on their own.

You Get Happy Employees

All of this creates a brighter company culture and more positive work environment. When employees feel valued and their medical expenses taken care of, the quality of their work inevitably improves. Plus, employees are less likely to jump ship when they feel that they’re receiving a quality benefits package for the medicaid services. Finally, tax incentives and tax free money are another way in which businesses benefit from offering group health insurance plans. This only further solidifies the assertion that group health plans are a smart financial move for both businesses and their employees. Small businesses should consult their tax advisor to avoid any tax penalty for not providing a health insurance to keep the employees healthy when they need it.

Additional coverage for employee's dependents
Additional coverage for employee’s dependents

Types of Group Health Insurance

The following are popular forms of health insurance coverage that you may decide you want included in your plan by the insurance company. The specifics of your plan and how much coverage is required, however, will depend on your employees health trends and goals.

  • Dental insurance
  • Health insurance
  • Prescription drug coverage
  • Subsidies
  • Eligibility for tax credits
  • Non-prescription drug coverage options (like Tylenol or Aspirin)
  • Copayment
  • Family health plans and coverage options for employees’ families
  • Reimbursement of out of pocket expenses
  • Long term care

The benefits you can include in your group health plan are endless.

Health reimbursement arrangements

Your Rights and Protections Under Health Care Law

The rights and protections you will receive are determined by both the federal and state government you reside under. For federal rights and protections, you can go here for more information. For your rights and protections under state law, you should go to the websites specific to your state.

The state website to go to if you live in New York, for example, is the Department of Health’s website. There, you will find the rights and protections that apply to you.

A great many things are determined under the state law, which determine policies that pertain to your health care, like:

  • Health coverage
  • Health insurance options
  • Insurance policies
  • Health savings accounts
  • Tax penalties
  • Tax benefits
  • Tax savings
  • Tax credits
  • Obamacare/ACA
  • Health care reform
  • Small business health options programs (if you offer shop coverage)
  • Small business taxes
  • Employer mandates

Where Should I Look for a Small Business Health Insurance Plan?

Look to independent insurance agencies like Taylor Benefits Insurance first. Independent agencies can help you get affordable health insurance that covers preexisting conditions, lowers your healthcare costs, covers catastrophic care, and more.

A plan from an independent agency will be better than a plan provided by the federal government or an established health care insurance company.

Relevant Statistics

  • Small group health insurance covers approximately 60% of employees in small businesses.
  • Over 80% of small group health insurance plans offer coverage for preventive care services.
  • The average monthly premium for small group health insurance is $450 per employee.
  • Small group health insurance plans typically have a deductible ranging from $1,000 to $5,000.
  • Around 70% of small businesses that offer health insurance contribute at least 50% towards the premium costs.

General Facts

  • Small group health insurance provides coverage for businesses with a small number of employees, typically between 2 and 50.
  • It offers a range of benefits, including medical, dental, and vision coverage.
  • Small group health insurance plans are often more affordable compared to individual health insurance plans.
  • Employers typically contribute a portion of the premium costs, while employees also contribute through payroll deductions.
  • Small group health insurance plans must comply with regulations set by the Affordable Care Act, ensuring essential health benefits are included in the coverage.

Who are the top providers for small business health insurance?

The top providers for small business health insurance are:

  • Cigna
  • Aetna
  • UnitedHealthcare
  • Blue Cross Blue Shield
  • Kaiser Permanente

These providers offer a variety of plans to fit the needs of small businesses, and they have a good reputation for customer service.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

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