Small businesses that have only one employee are allowed (although not required) to provide health insurance for their employees. But there are some unique requirements for enrolling in group health insurance on such a small scale, which you should be aware of before you sign up. The better you understand how many employees you truly have, how small business health insurance works, and what policy options are available for the smallest entities, the easier it is to provide quality coverage for everyone in your workplace. Here’s a guide on how to get health insurance for a small business with one employee.

Is it possible to enroll in Group Health Insurance with a single employee?

Enrolling in Group Health Insurance with just one employee is possible and can be a strategic decision for small business owners. Typically, group health insurance is designed for businesses with multiple employees, but certain insurance providers and states allow “groups” to be as small as two people, which can include the business owner and one employee. This scenario is particularly relevant for small businesses and sole proprietorships looking to offer health benefits.

Group health insurance plans for small businesses often come with benefits like potentially lower premiums compared to individual plans, broader coverage options, and tax advantages. They can also be a key factor in attracting and retaining talented employees, as health benefits are a significant part of an employee’s compensation package.

Additionally, offering group health insurance can enhance the overall well-being of the workforce, contributing to higher productivity and job satisfaction. For small business owners, exploring group health insurance options, even with just one employee, is an important consideration in building a competitive and attractive business model.

Benefits of Group Health Insurance

While group health insurance isn’t the only way to give an employee some healthcare benefits, it’s one of the most popular. Providing a group health insurance plan has several benefits for your business and

your employee, such as:

• Tax Credit: Offering SHOP group health insurance qualifies for the Small Business Health Care Tax Credit as long as your business has 1-25 employees. Your employee needs to earn an annual salary of $56,000 or less, and you must pay at least half of the premiums. Both employer and employee may deduct the premiums paid.
• Affordability: Group health plans tend to be more affordable than individual health plans, which is the most common health insurance alternative to a group plan.
• Flexibility: Group health plans must meet federal requirements, but they’re otherwise quite flexible. There are many deductible, copay, coinsurance, and other coverage options.
• Employee loyalty: If you provide quality health insurance for your employees, you give them an added incentive to stay loyal to your company. The employees will sense that staying with your company is the best way to obtain quality care, encouraging them to remain loyal and do their jobs well.
• Tailored coverage: With a group health insurance plan, you can ensure the specific treatments and preventive services that are covered match the unique risks of your business. So, you and your employee are prepared financially for dangers that may arise on the job.

Who is considered a small business employee?

Before learning how a small business can get group insurance for yourself and your sole employee, you need to make sure that individual is considered an employee and that you don’t have any others.  There is a strict definition of “employee” that insurance companies go by when approving small businesses for group health insurance. As such, you must have a legitimate small business, and your worker must be a legitimate employee.

Make sure your business is incorporated, operates under the required licenses, and regularly pays taxes as needed. Small businesses have fewer than 50 employees for the purposes of health insurance, but this is a non-issue if you have only one.

According to the IRS, someone who works for you is considered a common-law small business employee if you can exercise enough control over their work, so they’re not classified as a contractor. This is true even if you don’t supervise them while they work. As long as you manage both the worker’s production process and the finished product, the person is your small business employee. This definition rules out most contractors because while your business may specify what these individuals are producing for you, by IRS standards, you typically don’t have any oversight over how they do the job.

Employees must also be legally able to work in the United States, and they should be formally hired by your business. Lastly, employees should be working at least 30 hours per week.

The common-law definition of “small business employee” specifically excludes spouses, even if they fulfill a similar role in your business to that of an employee. So, if you own a business and your spouse is the only one who works for you, you will likely not qualify for small business group health insurance. In most cases, this does not apply to other family members.

Options for health insurance for small businesses with one employee

Small Business Health Options Program (SHOP) Plans

If your business has a single employee, group health insurance is available through the Small Business Health Options Program (SHOP). This government-sponsored program makes small business health insurance plans available to small businesses with fewer than 50 employees.

The SHOP group health insurance program is designed to be simple and flexible. It also qualifies for the Small Business Health Care Tax Credit.

An agent or broker can help you compare different SHOP plans that provide group health insurance for a small business with one employee. You can select a plan that works for your business’s budget, location, and desired coverage.

Health Reimbursement Arrangements (HRAs)

With an HRA, you give your employee (and maybe yourself) a regular stipend that’s untaxed as long as it’s used for healthcare expenses. Employees can use this stipend to pay insurance premiums, providers, or other acceptable healthcare costs.

An HRA is less comprehensive than some group health insurance policies but can be more flexible. You might offer an HRA if you want to limit your business expenses. An HRA may also be suitable if you want to provide some health coverage benefit for an employee who already has coverage through their spouse or parent’s policy.

High-Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs)

High-Deductible Health Plans (HDHPs) paired with Health Savings Accounts (HSAs) offer a cost-effective solution for small businesses considering group health insurance. HDHPs typically feature lower monthly premiums with higher deductibles, shifting the initial healthcare costs to the employee. However, when combined with an HSA—a tax-advantaged account used to save and pay for qualified medical expenses—this setup can provide benefits comparable to traditional health plans. Contributions to HSAs can be made by both employers and employees, are tax-deductible, and can accumulate and earn interest tax-free over time.

This combination not only allows for potential savings but also encourages employees to be more engaged and responsible for their healthcare spending. For small businesses, HDHPs with HSAs represent a flexible and financially prudent way to offer significant health benefits to their employees.

Association Health Plans (AHPs)

Association Health Plans (AHPs) are group health plans that allow small businesses and self-employed individuals to band together based on commonalities like industry or geography to purchase health insurance. AHPs enable these smaller entities to access the health insurance market in a similar way to larger employers, potentially leading to lower insurance premiums due to the larger pool of insured individuals.

Benefits of AHPs:

• Cost Reduction: By pooling together, small businesses and individuals can leverage greater buying power, often resulting in reduced insurance costs compared to purchasing individual plans.
• Expanded Coverage Options: AHPs can offer a broader range of coverage options, which might not be as accessible or affordable to small businesses on their own.
• Flexibility: These plans can provide more flexibility in terms of plan design and coverage options, catering to the specific needs of the members.

Potential Drawbacks of AHPs:

• Varied Regulations: AHPs are subject to state and federal regulations, which can vary and affect their availability and the extent of their coverage.
• Risk Pooling: As with any group plan, the risk is pooled. If the group has a higher usage of healthcare services, it could lead to higher premiums over time.
• Limited Scope for Some Industries: Certain industries might find it more challenging to form AHPs due to diverse healthcare needs or regulatory constraints.

Insurance Buying Cooperatives

Insurance Buying Cooperatives are collaborative groups that small businesses, including those with only one employee, can join to access group-like health insurance plans. By pooling together, these cooperatives leverage the collective bargaining power of their members to negotiate better terms and rates for health insurance, similar to what larger organizations can achieve.

Joining an insurance buying cooperative can offer several benefits for small businesses:

• Access to Group Rates: Even a business with just one other employee can access the more competitive group rates typically reserved for larger organizations. These group rates are often more affordable than individual plans, leading to potential cost savings.
• Expanded Plan Options: Cooperatives can provide access to a wider variety of plan options. This variety gives small businesses the opportunity to choose plans that better suit their specific needs and those of their employees.
• Shared Risk: Being part of a larger group helps in spreading out the risk among all the members of the cooperative. This shared risk can result in more stable premiums over time, as opposed to the potentially volatile rates of individual health insurance plans.
• Administrative Support: Some cooperatives offer additional administrative support, simplifying the process of managing health insurance plans for small businesses.
• Community and Network Building: Participating in a cooperative can also foster a sense of community and network-building among similar small businesses, providing a platform for sharing resources and information.

Professional Employer Organizations (PEOs)

Professional Employer Organizations (PEOs) offer a unique solution for micro-businesses seeking comprehensive health insurance coverage. By entering into a co-employment arrangement, where the PEO becomes the employer of record for HR purposes, small businesses can gain access to group health insurance plans typically available to larger companies. This arrangement allows PEOs to pool employees from multiple client businesses, achieving economies of scale that can lead to better benefits and lower premiums than those attainable by individual businesses. For micro-businesses, partnering with a PEO not only facilitates access to high-quality health insurance but also helps in managing other HR tasks, enhancing their ability to attract and retain skilled employees while ensuring compliance with labor laws. This setup makes PEOs an attractive option for small business owners looking to provide comprehensive health benefits to their workforce.

State-Sponsored Programs

Some states offer specific programs or initiatives to assist small businesses in providing health insurance coverage to their employees. These state-sponsored programs often include financial aids like subsidies or tax credits to help with the costs of premiums, along with access to specialized health insurance pools or exchanges created for small businesses. For instance, under the Affordable Care Act, some states have established SHOP (Small Business Health Options Program) exchanges, offering a marketplace for health plan comparison and purchase.

Additionally, these programs provide valuable guidance and resources to simplify the complexities of health insurance for small business owners, such as selecting appropriate plans and understanding legal obligations. This support is crucial in enabling small businesses to offer health insurance that benefits their employees’ well-being and the health of the business. Business owners are encouraged to explore these options within their state to leverage the available resources and make health insurance more accessible and beneficial for their workforce.

Private health insurance brokers

Private health insurance brokers or agents can be instrumental for micro-businesses in finding and selecting appropriate health insurance plans. These professionals have extensive knowledge of the health insurance market and access to a wide range of insurance products, enabling them to present options that might not be easily accessible otherwise. They offer personalized guidance, tailoring their recommendations to the specific needs and financial capabilities of a micro-business, and assist in navigating the complexities of insurance policies, including understanding premiums, deductibles, and coverage benefits. This individualized approach not only simplifies the process for business owners but also ensures that the chosen health insurance plan is cost-effective and meets the healthcare requirements of their employees.

Additionally, brokers provide ongoing support and can help adjust policies as the business’s needs evolve, making them a valuable resource for small businesses seeking comprehensive and suitable health insurance coverage.

Choosing the right health insurance for a small business with one employee

Choosing the right health insurance plan for your small business requires careful consideration of several key factors to ensure that it meets both your business’s and employees’ needs. Here are some tips to guide you in selecting the appropriate plan:

• Assess Employee Needs: Understand the healthcare needs of your employees. Consider factors like age, health conditions, and whether they would benefit more from lower premiums or lower out-of-pocket costs.
• Budget Considerations: Determine your budget for health insurance. Decide how much of the premium costs your business can afford to cover and how much will be passed on to employees.
• Compare Plan Types: Explore different types of health insurance plans, such as HMOs, PPOs, and HDHPs with HSAs. Each has its own advantages and limitations in terms of cost, coverage, and provider networks.
• Review Network of Providers: Check the network of providers for each plan. Ensure that it includes a sufficient variety of primary care physicians, specialists, and healthcare facilities that are conveniently located for your employees.
• Understand Coverage Details: Carefully review what each plan covers, including preventive services, emergency care, prescription drugs, and any exclusions or limitations.
• Consider Additional Benefits: Look into plans that offer additional benefits, like dental, vision, or wellness programs, which can be valuable to employees.
• Seek Professional Advice: Consult with a health insurance broker or agent who can provide expert insights, compare different plans for you, and explain complex insurance terms and conditions.
• Employee Feedback: If possible, involve your employees in the decision-making process. Their feedback can be invaluable in selecting a plan that meets their needs.
• Review and Adjust Annually: Health insurance needs can change over time. Review and possibly adjust your plan choice annually to ensure it continues to meet your business’s and employees’ needs.
• Compliance with Laws: Ensure that the plan you choose complies with state and federal laws, including the Affordable Care Act (ACA) requirements.

For assistance with finding a small business group health insurance that works for your business, use eHealth to explore plan options. eHealth’s easy-to-use platform grants you access to many SHOP and non-SHOP plans, ensuring you can quickly identify the best health insurance.

It’s effortless to check what your business is eligible for, compare and contrast plan features, and select which plan you want to use. So, if you want to provide company health insurance for one employee, the eHealth team is here to help.

FAQs about offering health insurance for small businesses with one employee

Do I have to offer health insurance if I have only one employee?

No, if you have only one employee, you are not legally required to offer health insurance under the Affordable Care Act (ACA). The ACA mandates that only employers with 50 or more full-time equivalent employees must provide health insurance. Small businesses with fewer than 50 employees are exempt from this requirement, though offering health insurance can be a valuable benefit to attract and retain employees.

What’s the difference between individual and group health insurance?

Individual health insurance is a policy purchased by an individual directly from the insurance provider for themselves or their family. This type of insurance is typically chosen by self-employed individuals or those whose employers do not offer group coverage. Group health insurance, on the other hand, is a plan selected by an employer and offered to eligible employees and sometimes their dependents. Group insurance plans often have lower premiums and more extensive coverage compared to individual plans due to the risk being spread over a larger number of participants.

Can I offer health insurance to my employee and not to myself as the owner?

Yes, as a business owner, you can offer health insurance to your employees and choose not to participate in the plan yourself. This might occur if you already have coverage through another source like a spouse’s plan or Medicare. When setting up a group health insurance plan, you have the flexibility to define the eligibility criteria for participation, which can exclude the business owner if other coverage is already in place.

How do I handle health insurance if my business is seasonal or my employee is part-time?

For seasonal or part-time employees, offering health insurance can be more complex. Generally, under the ACA, employees need to work at least 30 hours per week or 130 hours per month to be considered full-time and therefore eligible for health insurance benefits. For seasonal employees, you are not required to provide health insurance if they work for less than 120 days during the year. However, if you wish to offer coverage, you can seek out specific group plans that cater to part-time or seasonal workers. It’s important to clearly communicate any available health insurance options and eligibility requirements to your employees.

How to enroll in Group Health Insurance for a small business

Small businesses can purchase single-employee health insurance through SHOP or on the private market. There are many single-employee health insurance plans available.

Enrolling in Group Health Insurance for a small business with one employee involves several steps, and it’s important to be aware of the timing to ensure seamless coverage for your employee(s). Here’s a guide on how to enroll and the best time to do it:

1. Research and Choose a Plan: Start by researching various group health insurance plans. Compare coverage options, premiums, deductibles, and provider networks. Consulting with a health insurance broker can be helpful in this process.
2. Application Process: Once you’ve selected a plan, you’ll need to complete an application. This typically involves providing details about your business and the employees who will be covered. The insurer may require documentation regarding your business and its eligibility for group coverage.
3. Employee Enrollment: Inform your employees about the available health insurance options. They will need to fill out enrollment forms, choosing their preferred plan if multiple options are offered, and providing necessary personal information.
4. Determine Contribution Levels: Decide how much of the premium costs your business will cover and how much will be the employees’ responsibility. This information should be clearly communicated to your employees.
5. Submit Application and Employee Enrollment Forms: Submit the completed application and enrollment forms to the insurance provider. Ensure that all the information is accurate to avoid delays in processing.
6. Confirmation and Policy Issuance: After processing your application, the insurance company will issue a policy and provide insurance cards and a benefits summary to distribute to your employees.
7. Open Enrollment Period: Most group health insurance plans have an annual open enrollment period, during which you can make changes to your plan or switch to a new provider. This period typically occurs once a year, often a few months before the plan year starts.
8. Special Enrollment Periods: If you’re starting a new business or want to offer health insurance outside of the open enrollment period, you may qualify for a special enrollment period. Certain life events (like hiring new employees) can also trigger a special enrollment period.
9. Stay Informed on Compliance: Ensure that your group health insurance plan complies with state and federal laws, including the Affordable Care Act.
10. Ongoing Management: Once enrolled, manage your health insurance plan by keeping track of renewal dates, staying informed about any changes in laws or regulations, and regularly assessing if the plan still meets the needs of your business and employees.

To confirm group health insurance eligibility and enroll in a plan, you’ll need to know basic information about your business and its employees, including:

• Your business name and official address
• Employer identification number (EIN)
• The number of employees you’re insuring (1 or 2, if including yourself)
• Employee ages, number of dependents, zip code

The following documents may also help you get approved for small business group health insurance:

• Current business license
• Articles of incorporation
• Recent full business tax return

With this information, you can compare SHOP policies that provide group health insurance for a small business with one employee. Check premiums, networks, coverages, and other details as you look at the policies offering small business group health insurance.