small business health care requirements

Health insurance for your business and employees

Sole proprietor or self-employed?  Find out more about your coverage options.

Learn about HRAs

You now have more ways to contribute to your employees’ health care costs — with Health Reimbursement Arrangements (HRAs). Use this guide to help you compare coverage options, like HRAs and group health plans.  Find out what’s right for your business.

Sell SHOP health insurance to small businesses

PK Google Amp Logo-1

  • What is an HRA?
  • What is an integrated HRA?
  • What is an ICHRA?
  • What is a QSEHRA?
  • What are employee stipends?
  • Become a Partner
  • Refer a Client


In this Article

Want to be notified when a new article gets published.

Subscribe to our blog.

Subscribe to our blog. 

Do small businesses have to offer health insurance?

Share on facebook

As a small business owner, you may wonder, "Do I have to provide health insurance to my employees?" Under the Affordable Care Act (ACA), or "Obamacare," applicable large employers (ALEs) with 50 or more full-time equivalent employees (FTEs) are required to offer affordable health benefits that meet minimum essential coverage (MEC) or be subject to a no-coverage penalty. But smaller businesses aren't under such obligations to offer insurance to employees.

In this article, we'll discuss employer health insurance requirements, such as determining if you're an ALE, calculating FTEs, and what the ACA-compliant health benefits are for employers with fewer than 50 employees.

Aren't sure if your business is required to offer health insurance? Find out in our reference chart

What is an applicable large employer (ALE)?

An ALE is any company that has at least 50 FTEs. According to the ACA, an FTE is someone who works at least 30 hours a week or 130 hours per month.

Your organization is defined as an ALE on a calendar year basis. For example, you could be an ALE in one year but not the following year if you lost some employees. Typically, if an employer has a monthly average of at least 50 full-time equivalent employees during a calendar year, the employer is considered an ALE for the next calendar year.

Your organization doesn't qualify as an ALE if:

  • On average, you employed fewer than 50 full-time employees during the previous calendar year.
  • Due to a seasonal workforce, you employed more than 50 full-time employees no more than 120 days during the previous calendar year.

Due to the employer mandate , ALEs must provide health coverage to employees who work full-time and their dependents. If not, they'll face a tax penalty.

Calculating full-time and part-time employees

To determine whether your organization is an ALE, you must include all full-time employees, plus the full-time equivalent of your part-time employees.

For the majority of organizations, the calculations are simple:

  • Full-time employees: Are defined as working an average of at least 30 hours per week in a given month. You'll need to count up all your full-time employees.
  • Full-time equivalents: To calculate the full-time equivalent of all your part-time workers, add the total number of hours worked by part-time employees in a given month, then divide the total by 120.

If the total is 50 or more after your calculations, your organization is classified as an ALE, and you'll need to follow the ACA mandate for offering health insurance benefits.

Small business health insurance requirements

The Affordable Care Act stipulates that small businesses with fewer than 50 FTEs are not required to offer health insurance benefits to their employees or pay a tax penalty. However, that doesn't mean they shouldn't provide health insurance benefits.

Here are some advantages:

  • Attracting employees and retaining top talent . Our 2022 Employee Benefits Survey Report found that 82% of employees believe the benefits package an employer offers is an important factor in whether or not they accept a job.
  • Helping your business stand out against the competition. Offering additional financial assistance through stipends or reimbursements can make for a competitive benefits package that sets you apart from competitors.
  • Building a healthier workforce. Having greater access to healthcare also boosts employee productivity. If employees can avoid needing extended periods of sick leave, your organization can be more effective and profitable.
  • Saving more money during tax season . Depending on the type of plan you offer, you can benefit from tax savings for offering the health plan, and employees can get tax savings by participating.

In most states, Small group health insurance is available to organizations with fewer than 50 employees. You can purchase a small group health plan directly from an insurance company or through a Small Business Health Options Program (SHOP) exchange. Getting a SHOP plan can qualify your organization for the small business health care tax credit .

The ACA doesn't specify which types of health insurance small businesses can offer their employees as long as it's affordable and meets MEC. Therefore, in addition to group health insurance coverage and small group insurance, employers can consider non-traditional health insurance options such as a health reimbursement arrangement (HRA) or health stipend .

Health reimbursement arrangements (HRAs)

HRAs are a better fit for many small businesses than traditional group health insurance because they give employees the option to choose the health plan options and services that work best for them. They can also be more budget-friendly for employers and have tax advantages.

Options such as the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA) are designed to allow employees to receive tax-free reimbursements for their health insurance premiums and other qualified medical expenses .

Health stipends

Your small business can also provide employee reimbursements for medical care expenses through a health stipend. These employee stipends work similarly to an HRA but with fewer regulations and restrictions. But, unlike an HRA, employers can’t ask for proof of insurance or receipts for IRS Publication 502 expenses.

There are no employee eligibility requirements or minimum monthly allowances with a health stipend. This allows organizations of all sizes to create a fully customizable health benefit that best fits their needs.

How do HRAs and health stipends compare?

Both HRAs and health stipends allow your employees to purchase their own individual healthcare coverage from a health insurance marketplace. Employees can then request a reimbursement for their monthly premium costs. This allows your employees to choose the individual health plans that work best for them.

The most significant difference between an HRA and a health stipend is its taxability . While HRAs are tax-free for both employers and employees, as long as the employee has MEC coverage, a health stipend is taxable. If you decide to offer a health stipend, your small business will pay payroll taxes on the reimbursement amount. Employees will have to pay income taxes on the amount received.

This makes HRAs a better option for most organizations. But, health stipends are an excellent option for organizations with employees who receive a premium tax credit , as a health stipend doesn't impact APTC eligibility

Affordable health insurance options for employees of small businesses

Currently, there is no penalty for individuals who don't work with an insurance carrier. However, if you're an employer that is not an ALE and isn't offering health insurance, your employees have the option of getting their own individual health insurance policy since they won't be eligible for employer-sponsored health coverage.

Employees can purchase their own type of plan, and you can set them up with an HRA or a health stipend as an added benefit bonus. Then, they can use that money toward their own health insurance plan, employee premiums, or other healthcare-related costs they may have.

Individuals who want their own health insurance policy can apply for coverage with help from the federal government through SHOP Marketplace. They can also go through a state exchange or a local insurance agent. Keep in mind the most convenient time for individuals to start any new type of health plan is during open enrollment .

However, there is some wiggle room when it comes to open enrollment. Suppose an employee experiences a qualifying life event , such as losing their current health coverage, getting married or divorced, having a baby, or changing their residence. In that case, they can qualify for a special enrollment period .

For small employers, it can be challenging to keep up with the rules and regulations of employee health insurance. While companies with 50+ employees need to offer qualified health coverage or potentially face a penalty, smaller companies aren't forced to do so.

However, offering health benefits is one of the best investments small business owners can make. Consider an HRA or health stipend if you're looking for a quality small business health benefits solution.

Let us help you customize the health benefits that are right for your team. Schedule a call now with a PeopleKeep personalized benefits advisor to get started!

This blog article was originally published on November 10, 2020. It was last updated on March 9, 2023.

Related Posts

Additional resources.

small business health care requirements

Health stipends vs. HRAs comparison...

small business health care requirements

How to set up personalized employee...

  • About PeopleKeep
  • HRA Overview
  • Resource Library
  • Case Studies

Help & Support

  • QSEHRA Support
  • ICHRA Support
  • Privacy Policy

Top Resources

  • Benefits Quiz
  • Eligible Expense Tool
  • Guide to QSEHRA
  • HRA comparison chart


Disclaimer: The information provided on this website is general in nature and does not apply to any specific U.S. state except where noted. Health insurance regulations differ in each state. See a licensed agent for detailed information on your state. PeopleKeep, Inc., does not sell health insurance.

Small Business Guide to Health Insurance

Table of contents.

small business health care requirements

  • Small business owners should focus on coverage, the number of employees, employee premiums and shopping when looking for an insurance provider.
  • Offering health insurance to employees can help to attract and retain top talent and provide tax benefits for your business.
  • There are several ways to find insurance, including contacting providers directly and using a broker.
  • This article is for small business owners who want to learn more about small business health insurance and how to get it for their own business.

Navigating small business health insurance can be one of the hardest parts of running your small business, as there are many options and rules to figure out, and if your small business doesn’t have a full human resources department, you’re left to work it out on your own. Use this guide to help you learn about how small business health insurance works, why you should offer it and what types of health insurance are available for small businesses.

How does small business health insurance work?

There are four main elements you, as a small business owner, should be aware of concerning small business health insurance: coverage, number of employees, employee premiums and shopping for coverage.

  • Coverage . First and foremost, if you are eligible for a small business health insurance plan, your coverage is generally guaranteed to be issued by the insurance company. This means that you, your employees and your dependents cannot be denied coverage based on pre-existing medical conditions, and that all eligible employees and their dependents can enroll in the new plan regardless of their medical condition(s).
  • Number of employees.  To qualify for small business health insurance coverage, you must have at least one employee on your payroll. However, some states allow you to count yourself as both the business owner and an employee.
  • Employee premiums.  You must pay at least 50% of the monthly health insurance premiums for your employees. The minimum percentage may vary depending on your state or insurance company.
  • Shopping for coverage.  As a small business owner, you can shop around for health insurance coverage at any time, without needing to wait for your current plan to expire or for a special open enrollment period. However, once you buy a plan, you are typically locked in for at least a year, during which you can add new employees and dependents or drop coverage for former employees. Once your contract is up, you have the option to renew or shop for a new plan.  [Read related article:  Open Enrollment: What Small Businesses Need to Know About the Affordable Care Act ]

Editor’s note: Looking for the right PEO service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Is a business owner required to provide health insurance?

Small businesses with fewer than 50 employees are not legally required to offer health insurance to employees under the Affordable Care Act (ACA). Of course, that means businesses with 50 or more employees are legally required to provide affordable health insurance.

For the health insurance to be considered “affordable,” the employee’s annual cost must be no higher than 9.12 percent of their annual income. Not offering health insurance subjects you to a penalty of $2,880 per full-time employee, excluding the first 30 employees.

Why should you offer small business health insurance?

Starting and running a small business is expensive and it can be easy to dismiss health insurance as an unnecessary cost to help stay within your budget. However, health insurance is a vital part of running a successful business that people want to work for.

Here are a few reasons why you should offer health insurance to your employees:

1. Group coverage may cost less and cover more.

Whereas an individual plan offers coverage for only you or your family, group health insurance is insurance that businesses purchase and offer to eligible employees and their dependents. Group insurance offers certain advantages over individual health insurance, including generally being more affordable and offering more extensive coverage.

2. You may qualify for a tax credit.

The purchase of health insurance for yourself and your employees can help you qualify for tax credits if you purchase a plan through the Small Business Health Options Program (SHOP) Exchange , an insurance portal created by the ACA. You must meet the following requirements:

  • Have fewer than 25 full-time employees.
  • Offer health insurance to all full-time employees.
  • Pay salaries of less than $50,000 per full-time employee, on average, each year.
  • Front at least 50 percent of the premium cost.

As a small employer, you can receive up to 50 percent of your contributions toward employee premiums, which can significantly reduce the costs of providing health benefits to your employees.

3. It can increase job satisfaction and recruiting success.

Offering a health insurance option can greatly increase your chances of attracting and retaining top talent , as it shows that you care for and value your employees.

Healthy employees are productive employees, and the best way to ensure your employees remain so is to provide comprehensive health insurance. Employees without insurance are less likely to receive annual checkups or visit the doctor when they’re sick, which can cause them to become sicker and take time off work.

If you’re self-employed with no employees, health insurance is a necessity that can help you protect yourself, your dependents and your business against a potentially disastrous illness.

Average cost of health insurance for small businesses

Because the costs of health insurance depend on your specific business, it can be difficult to estimate how much health insurance will cost. According to the Society for Human Resource Management (SHRM), healthcare insurance costs are expected to rise about 5.6 percent per employee in 2023. For reference, last year the average employer health insurance premium per employee in California was $8,083 for single coverage and $22,818 for family coverage.

When choosing health insurance for your employees, it’s important to consider the financial cost but also the work that goes into selecting benefits, educating your team on their options, and administrative work to support the plan.

Monetary costs

The monetary costs of providing health insurance depend on the type and number of benefits you plan on providing, who you are covering (employees only, or employees plus dependents) and the percentage of the monthly premium that you are going to cover as your employer contribution. If you plan to use a broker, a professional employer organization (PEO) or another third party to find health insurance coverage options for your business, prepare to factor in those fees as well.

PEOs manage payroll and benefits administration on your behalf. Technically, a PEO service employs your teams on its own books, shifting the burden of administration away from your business so you can focus on operations.

Time costs are often not considered, but they are an important part of finding a health insurance plan. You will be spending a considerable amount of time searching for providers, understanding your employees’ needs, setting up the insurance carrier plan, educating your employees about the plan options, looking over your health insurance plan every year for open enrollment, and ensuring it’s properly maintained.

Health insurance costs for employees

On the employee side of things, insurance costs will look substantially different. For the most part, these costs can be split into three categories: premiums, deductions and out-of-pocket costs.

Premiums are the regular payments made to the insurance company. For employee health insurance, premiums are typically deducted from every paycheck. This is a fixed price that does not depend on how much the employee works or earns. It is easy to think of premiums as a monthly subscription cost for being on the insurance plan.

Deductions are where things get complicated. Every policy has a deductible. This is the amount of money the employee pays for medical expenses before insurance benefits kick in. To make things more complicated, every policy has exceptions to this rule. For example, it’s normal for a policy to include a free annual check-up that doesn’t require the deductible to be met.

When large medical expenses crop up, however, the deductible can be a little bit easier to understand. Say the deductible is $5,000. If an employee incurs a $10,000 medical bill, they will have to pay $5,000 toward the bill from their own pocket before the insurance will pay. After the deductible is met, the insurance coverage will pay for bills as outlined in the policy — usually a percentage of the total bill.

Out-of-pocket expenses

Out-of-pocket expenses are expenses not covered by insurance. The employee is on their own to pay these expenses, which can include deductibles. They can also include copays, which is where matters again can be complicated. With a copay, the insurance policy sets a specific price that comes out of the patient’s pocket for a given service or medication. For example, an eye insurance policy might have $10 copays for eye appointments. The $10 refers to the out-of-pocket expense the employee pays toward the appointment. The rest of the visit may be covered by the insurance company.

Types of health insurance for small businesses

There are four main types of health insurance that small businesses can choose from: PPO plans, HMO plans, HSA-qualified plans and indemnity plans. Here are some of the pros and cons of each type of plan.

1. PPO (preferred provider organization) plans

PPO plans are the most common type of health insurance. Employees covered under a PPO plan can choose either in-network or out-of-network doctors and hospitals, but selecting from the insurance company’s list of preferred (in-network) providers means the insurance company covers a larger percentage of each claim.

  • A PPO plan allows participants to seek care from doctors, hospitals and specialists both within and outside the network. Participants are not required to choose a primary care physician (PCP).
  • PPOs cover a wide range of services, including preventive care, hospitalization and emergency care, medications, outpatient surgery, and specialist treatments. These plans follow participants wherever they go, meaning they can seek medical care even if they’re traveling and be covered.
  • With a PPO plan, participants are responsible for a copayment of around $10 to $15 any time they visit an in-network doctor, and copays are higher if they visit a doctor outside the network. For some categories of service, participants must also meet an annual deductible before the plan pays for those services.
  • Plan participants are responsible for filing their own claim paperwork if they visit a doctor outside their network, which can be a hassle.

2. HMO (health maintenance organization) plans

HMO plans offer a wide range of healthcare services through a network of providers that are exclusively contracted with the HMO or that agree to provide services to members. Employees who are on this type of plan generally must select a primary care physician who will provide the majority of their care and will refer them to a specialist if needed.

  • A primary care physician can be an excellent medical resource, since they get to know the plan participant, their medical history and their health goals through consistent care.
  • HMOs tend to offer lower-cost healthcare because they only cover in-network treatment and can negotiate lower prices with their provider networks.
  • Participants must choose doctors and facilities within the HMO network.
  • Participants must get a referral from their primary care physician before they see another doctor, even for routine care. (Emergency healthcare is an exception.)

3. HSA-qualified plans

HSA-qualified plans are PPO plans designed specifically to be used with health savings accounts (HSAs). An HSA is a bank account that allows participants to save pretax money specifically to be used for future medical expenses.

  • The No. 1 advantage of an HSA is its triple tax benefits: Participants contribute to their HSA with pretax dollars, pay medical expenses with pretax dollars, and earn compound profits tax-free.
  • Any unused balance in an HSA automatically rolls over year to year, so participants don’t lose their money if they don’t use it in a given year.
  • To be eligible for an HSA, participants must have a high deductible health plan (HDHP) with a deductible of at least $1,350 for single coverage or $2,700 for group coverage.
  • The high deductible of HSAs may lead participants to not seek medical care when they need it.

4. Indemnity plans

Indemnity plans allow members to direct their own healthcare and visit any doctor or hospital they want. The insurance company pays a set portion of the total medical charges. Employees may be required to pay for some services upfront and then apply for reimbursement from the insurance company.

Some indemnity plans may include additional wellness benefits, such as telemedicine, so that members can access medical care 24/7 at no additional cost.

  • Members with preexisting conditions likely won’t be covered within the first 12 months of coverage.
  • Indemnity plan benefits are tied to particular incidents, such as admission to the hospital or a doctor visit, so they don’t provide comprehensive coverage.

Where can you find affordable small business health insurance?

Shopping for small business health insurance is a tough and time-consuming process, but there are many ways you can accomplish your goal of providing health insurance to your employees. Keep in mind that you can outsource much of the process to third parties, but that will eat into your business’s budget.

If you have between two and 50 full-time employees, there are five main ways to find insurance coverage: 

1. Contact health insurance companies directly.

If you have already done your research and have a good idea of which insurance companies and plans best fit your business’s needs, then you can contact those providers directly. Some insurance companies may work only through brokers, but some, such as Aetna and United Healthcare, work directly with business owners.

Going directly to the companies may help you get better rates than going through a third party. You can use consumer review sites, such as the National Committee for Quality Assurance , to find companies you are eligible for.

2. Hire an insurance broker.

Hiring an insurance broker may be an expense, but it can save you significant amounts of time and effort in searching for an insurance plan that works for you and your business. An insurance broker will help you with paperwork, ensure your business is compliant with relevant laws, get you plans with up-to-date policies, and help with implementation and renewals.

Brokers will earn a commission once they find a plan that works for you, but they should not ask for money upfront; avoid any brokers that do.

3. Partner with purchasing alliances or associations.

Also referred to as private health exchanges, purchasing alliances are miniature marketplaces that bring small businesses together and allow them to purchase health insurance as a group, which decreases costs for everyone. This option allows you to offer your employees multiple choices, rather than a single one-size-fits-all plan.

While purchasing alliances can be great for providing employees with more options, you as the business owner will not reap the benefits of wide selection and tax credits that come from purchasing insurance through SHOP, the government’s health exchange.

4. Use a PEO service.

PEOs are similar to purchasing alliances in that they also group together multiple businesses to decrease costs. However, PEOs are different because in addition to health insurance, they tend to offer other services, such as payroll, recruiting and tax filing services. With a PEO, you’re likely to get a better rate than if you were to go directly to a broker or an insurance company.

Interested in working with a PEO service? Check out our picks for the best PEO services out there, including those that excel at benefits administration such as health insurance plans.

5. Use SHOP.

The Small Business Health Options Program (SHOP) is the federal health insurance exchange database. It can help you get healthcare tax credits of up to 50 percent of premiums, which can save your business a lot of money on health insurance.

You can use a SHOP plan to locate health insurance in your state and choose from several tiered plans, with easy-to-use comparison charts and standard benefits such as coverage for medications and hospital stays.

Health insurance requirements are an important consideration

If you are a small business owner with 30 full-time employees or more, you are obligated under federal law to offer health insurance benefits that meet certain regulatory standards. Failure to do so can result in fines, and lack of benefits can also carry other consequences like low employee morale and high employee turnover. Choosing a health insurance benefits plan doesn’t have to be difficult, though. You can work with a PEO service to outsource the task, or you can hire an insurance broker to find you the best plan for your team. Health insurance can be a daunting subject, but with these tools and partnerships, your business can offer benefits to your employees with ease.

Tejas Vemparala contributed to this article. 

article img

Building Better Businesses

Insights on business strategy and culture, right to your inbox. Part of the network.

U.S. flag

An official website of the United States government

Here’s how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( Lock A locked padlock ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

As a small business owner, am I required to offer health insurance to my employees?

If your business qualifies as small (fewer than 50 full-time employees and full-time equivalents FTEs), you are not required to offer coverage.

If you’re  self-employed , you can sign up for coverage for yourself (and family members) through the Health Insurance Marketplace®.

Small business owners who want to offer health insurance coverage have options such as:

  • Small Business Health Options Program (SHOP)
  • Health reimbursement arrangements (HRAs)
  • Health Savings Accounts and health plans with tax-saving benefits

Learn more about SHOP and other ways to offer health insurance to your employees

Have questions about SHOP coverage for businesses with 50 or fewer employees?  Contact the SHOP Call Center at 1-800-706-7893 (TTY users can call 1-888-201-6445).

Hours: Monday through Friday, 9 a.m. to 5 p.m. EST.

Note: Businesses with over 50 employees may have to make what’s called a Shared Responsibility Payment . This payment may be required if they do not offer coverage that meets certain standards.

  • HR + Payroll Software
  • Talent Management

Workforce Management

  • Employee Experience
  • Benefits Administration

Payroll Software

Expense management software, hr software, recruiting software, onboarding software, talent development, compensation planning, automated talent sourcing, time + attendance software, scheduling software, pulse surveys, learning management system, career management software, benefits advisor, aca reporting software, workers’ compensation, compliance overview, talent acquisition, payroll / business tax credits, workforce benefits, regulatory compliance, data & security.

small business health care requirements

Transform Frontline Managers into Effective Leaders

small business health care requirements

Simplify Compliance Management With Paycor

  • By Industry

Professional Services

Manufacturing, restaurants, 1-9 employees, 10–49 employees, 50-250 employees, 250-1,000+ employees, transform frontline managers into effective leaders.

  • Product Technology Partners
  • Retirement Services
  • Franchisor Opportunities
  • Private Equity

man and woman sitting together looking at a laptop


Guides + white papers.

  • Case Studies
  • HR Glossary

small business health care requirements


  • News + Press
  • Plans + Pricing
  • Take a guided Tour
  • Watch a Demo
  • Solution Finder

Call Us Today:

small business health care requirements

Exclusive Access to Select Products

  • HR + Payroll Software Payroll Software Expense Management Software HR Software Analytics
  • Talent Management Recruiting Software Onboarding Software Talent Development Compensation Planning Automated Talent Sourcing
  • Workforce Management Time + Attendance Software Scheduling Software
  • Employee Experience Pulse Surveys Learning Management System Career Management Software
  • Benefits Administration Benefits Advisor ACA Reporting Software Workers’ Compensation
  • By Industry Healthcare Professional Services Manufacturing Nonprofits Restaurants Education Retail Technology
  • By Role Finance HR Payroll
  • By Size 1-9 Employees 10–49 Employees 50-250 Employees 250-1,000+ Employees
  • Call Us Today: 855-752-8564

2023 Small Business Health Insurance Requirements

Last Updated: January 20, 2023 | Read Time: 6 min

One Minute Takeaway

  • Providing health insurance can boost engagement and morale to employees
  • Employer-sponsored health coverage must now not exceed 9.12% of an employee’s income if it is to satisfy ACA affordability requirements for 2023
  • Employers should be aware of state laws in addition to federal laws related to requirements.

Small business owners tend to wear a lot of hats. That includes insurance experts. The problem is, many business leaders who are in charge of evaluating benefits packages are in the dark about the myriad compliance requirements surrounding health insurance coverage. If your company plans to provide health insurance for employees, it’s important that you understand your choices and the laws around them.

5 Important Requirements to Know

  • Small businesses with fewer than 50 full-time employees don’t have to provide health insurance under the ACA (Affordable Care Act).
  • Companies with more than 50 full-time employees (or full-time equivalent employees) in the previously reported calendar year may be subject to the employer shared responsibility provisions of the ACA. This means that the employer must provide essential coverage to their employees (and families) or make a comparable payment to the IRS.
  • Employers are required to provide employees with a summary of benefits and coverage explaining health plan coverage and costs.
  • Coverage costs of an employer-sponsored group health insurance plan must be reported by employers on their employee’s W-2.
  • Small businesses offering health insurance must offer it to all eligible employees when they become eligible for coverage, and that eligibility period should not extend beyond 90 days.

5 Health Insurance Options to Consider in 202 3

If a small business is not directly offering employees a health care coverage plan, the business owner still has several alternative ways to assist employees with their health care needs.

  • QSEHRA – A Qualified Small Employer Health Reimbursement Arrangement or QSEHRA (pronounced Q-Sara) is a benefits option that has been beneficial for the small businesses that are aware it even exists. Small business owners can put aside a set amount of money each month to be used for employee premiums and medical expenses. Employees are responsible for paying their own medical bills or insurance premiums, but the employer then reimburses the submitted expenses with those saved pre-tax dollars.
  • ICHRA – An ICHRA or Individual Coverage Health Reimbursement Arrangement allows employers to provide a monthly tax-free allowance to their employees for individual health coverage expenses. This enables employees to shop for insurance outside of an employer’s group health plan or when an employer does not offer health insurance at all.
  • Traditional Group Health Insurance – This is the standard group health coverage that everyone’s familiar with. Businesses either work with an insurance company directly or use an insurance broker to purchase group health plan coverage for all of their employees.
  • Group Coverage HRA – Often known as a GCHRA, this is an employer-funded medical expense reimbursement plan. It allows a business to reimburse its employees tax-free for eligible out-of-pocket expenses and health insurance premiums. It’s most often paired with a high-deductible health plan (HDHP).
  • Association Health Plan – This plan shows that there is strength in numbers. Several small businesses (those that are either in geographic proximity or in the same industry) can band together and gain the purchasing power needed to buy large group coverage.


Rule Changes for Larger Businesses in 2023

If your business employs fifty or more employees, you need to be aware of recent changes to health plan cost-sharing limits. Employer-sponsored health coverage must not exceed 9.12% of an employee’s income if it is to satisfy ACA affordability requirements for 2023. This is down from 9.61% in 2022. Make sure this change hasn’t pushed your plan into ‘unaffordable’ territory.

State Health Insurance Laws

When it comes to compliance when offering insurance, not only do businesses with 50 or more employees need to concern themselves with federal laws around health programs, they also have to be familiar with laws of the states they operate in.

Pro Tip: familiarize yourself with your state’s Department of Insurance to remain compliant.

Paycor Can Help

If your company decides it’s ready to provide health insurance for your employees, We can make the task much easier. Paycor’s Benefits Administration Software is the more efficient way to get all of your people on board so you can get back to focusing on your HR strategy.

Discover How Paycor Can Help Make A Difference - Take a Tour

Related Resources

Read Time: 18 min

Employee Recognition Ideas for Part Time & Hourly Workers 

Unleash the power of appreciation and watch your hourly workers thrive. Discover how to recognize and reward their contributions for unstoppable success.

Read Time: 8 min

Tips to Reduce Restaurant Turnover and Increase Employee Retention Rates

When it comes to turnover rates, few industries are hit harder than restaurants. Get the tips you need to curb the turnover epidemic.

Read Time: 9 min

How HR Leaders Can Prepare for Salary and Benefit Negotiations

Equip HR leaders with strategies to negotiate competitive salaries and benefits, ensuring fair compensation for employees and organizational success.


Small Businesses

  • Individuals & Families
  • Living with a Disability/Visually Impaired
  • 65 and Older
  • Young Adults

small business health care requirements

There are many reasons you may provide health insurance to your employees. Businesses with 50 or more employees must offer health insurance under the Affordable Care Act . However, even if it is not required, offering health insurance can have many benefits such as:

  • Tax benefits for you, including tax deductions and credits. Tax credits are only available through the NY State of Health Marketplace .
  • Tax benefits for workers when they pay a portion of their insurance with pre-tax salary deductions
  • Better employee retention and healthier workers

Download small business health insurance fact sheets:

Are you Interested in Offering Health Insurance to Your Employees?

The Small Business Health Care Tax Credit

How to Apply

Applying for health insurance is easier than ever, and small businesses have many options.

  • NY State of Health Small Business Marketplace : If you have 100 or fewer than employees, you can offer employees a choice of plans through the NY State of Health Small Business Marketplace. The Small Business Marketplace is open all year round. Note that sole proprietors enroll through the NY State of Health Individual Marketplace .  Get help to apply .
  • Directly with Plans: You can shop for and purchase health insurance outside of the NY State of Health Marketplace. Remember, tax credits are only available through the NY State of Health. Compare plans on the federal Plan Finder website .
  • Private Exchanges: You can shop for and purchase health insurance on a private exchange. Some private exchanges charge additional fees. HealthPass New York NY Health Alliance
  • Healthy NY : If you employ lower wage workers and haven't offered insurance in the last year, you may be able to get lower cost health insurance through Healthy NY.

Helpful Links

COVID-19 Updates and Resources Access HRA NY State of Health Small Business Marketplace NYC Small Business Services How the Affordable Care Act affects small businesses

An official website of the United States government Here’s how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( lock ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.


  • Physician Fee Schedule
  • Local Coverage Determination
  • Medically Unlikely Edits

Small Business Health Options Program (SHOP)

The Small Business Health Options Program (SHOP) helps businesses provide health coverage to their employees.

SHOP insurance is generally available to employers with 1-50 full-time equivalent employees (FTEs). If you have fewer than 25 employees, you may qualify for the Small Business Health Care Tax Credit, if you buy SHOP insurance. Learn more about SHOP eligibility rules and the Small Business Health Care Tax Credit .

If you're a sole proprietor or self-employed with no employees, you can get individual coverage through the Health Insurance Marketplace . 

Enrolling in SHOP insurance

Employers have two options for enrolling in SHOP insurance:

  • Through an insurance company
  • With the assistance of a SHOP-registered agent or broker

To learn more about SHOP visit .

Benefits of the SHOP Insurance

  • You control the coverage you offer and how much you pay toward employee premiums.
  • You can choose from high-quality private health insurance plans that meet the needs of your business and employees.
  • You can choose to offer health only, dental only, or both health and dental coverage. If offering dependent coverage and an employee enrolls, the employee’s dependents can enroll in health only, dental only, or both health and dental coverage.
  • You can start coverage any time of the year.
  • If you have fewer than 25 employees, you may qualify for a Small Business Health Care Tax Credit worth up to 50% of your premium costs (up to 35% for tax exempt/non-profit employers). You can still deduct from your taxes the rest of your premium costs not covered by the tax credit.  The tax credit is generally available only when an employer offers SHOP plans . Use the Small Business Health Care Tax Credit Estimator to find out if you may qualify and how much you may save.

 How to know if you qualify for SHOP 

SHOP insurance is available to employers with 1-50 full-time equivalent (FTE) employees in most states (in some states, employers with 1-100 employees qualify). Use our FTE Employee Calculator to find out if you qualify to use SHOP.

You must offer SHOP coverage to all of your full-time employees – generally those working 30 or more hours per week on average.

In many states, at least 70% of employees offered coverage must accept the offer, or be covered by another form of coverage, for the employer to participate. (Employers who apply for or renew SHOP coverage between November 15 and December 15 each year can enroll without meeting this requirement.) For help calculating the SHOP minimum participation rate in your state, visit the MPR Calculator .

You must have an office or employee work site within the state whose SHOP you want to use.

Get more details on SHOP eligibility rules .

Preview plans and prices now

Browse health and dental plan information right now. See the available plans and sample prices based on the number and ages of employees and their dependents.

  • Full-time Equivalent (FTE) Employee Calculator
  • Small Business Health Care Tax Credit Estimator
  • Minimum Participation Rate (MPR) Calculator
  • See Plans and Prices
  • SHOP Eligibility Determination Form

SHOP regulations and guidance:

For additional resources, please visit  

Contact the SHOP Call Center at 1-800-706-7893 (TTY: 1-888-201-6445)

Resources for Agents and Brokers

  • Resources for Agents and Brokers in the Health Insurance Marketplaces
  • General Resources
  • Annual Open Enrollment
  • Marketplace Registration and Training
  • Direct Enrollment/Enhanced Direct Enrollment
  • Help On Demand
  • Video Learning Center


  • Issuer and DE Partner Directory
  • Agent/Broker FAQs
  • Agent/Broker Help Desks
  • Registration Completion List
  • Agent/Broker Marketplace Registration Tracker
  • Registration Termination List
  • Find Local Help
  • March 5, 2020 Information Related to COVID–19 Individual and Small Group Market Insurance Coverage
  • March 12, 2020 FAQs on Essential Health Benefits Coverage and the Coronavirus (COVID-19)
  • March 18, 2020 FAQs on Catastrophic Plan Coverage and the Coronavirus Disease 2019 (COVID-19)
  • March 24, 2020 FAQs on Availability and Usage of Telehealth Services through Private Health Insurance Coverage in Response to Coronavirus Disease 2019 (COVID-19)
  • March 24, 2020 Payment and Grace Period Flexibilities Associated with the COVID-19 National Emergency
  • March 24, 2020 FAQs on Prescription Drugs and the Coronavirus Disease 2019 (COVID-19) for Issuers Offering Health Insurance Coverage in the Individual and Small Group Markets
  • April 11, 2020 FAQs about Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act Implementation *This document was updated on April 15, 2020, to correct an error in footnote 10 regarding the current end date of the public health emergency related to COVID 19.
  • April 13, 2020 Postponement of 2019 Benefit Year HHS-operated Risk Adjustment Data Validation (HHS-RADV)


  1. Health care reform for Small Businesses

    small business health care requirements

  2. Health care reform for Small Businesses

    small business health care requirements

  3. Small Business Employer Health Insurance Requirements

    small business health care requirements

  4. PPT

    small business health care requirements

  5. More Small Business Health Insurance Basics In Texas

    small business health care requirements

  6. A Guide to Small Business Health Insurance Requirements

    small business health care requirements


  1. What Are the Health Requirements at Hospice Care Facilities?

    If you or someone you love has been diagnosed with a terminal illness, it’s natural to worry and wonder about what kind of medical care will be needed in the final months of life. Depending on the illness and the estimated time remaining, h...

  2. What Is the Impact of Informatics in Health Care?

    Technology is rapidly improving and changing every aspect of the world, including health care. The same changes that led to huge improvements in fields like business or the sciences have also made treating patients easier and more effective...

  3. Legal Considerations for Executing a NY State Health Care Proxy Form

    In the state of New York, individuals have the opportunity to make important decisions regarding their healthcare in advance through a document known as a health care proxy form. To execute a valid NY state health care proxy form, certain r...

  4. Small Business and the Affordable Care Act (ACA)

    Insurance companies must generally spend at least 80% of premium dollars on medical care. Insurance companies that don't meet this requirement must provide

  5. Health Insurance Requirements for Small Businesses

    Small business employers are required to offer full-time employees the health coverage. Full-time means the employee works on average at least

  6. Small Business Health Options Program

    Use this guide to help you compare coverage options, like HRAs and group health plans.

  7. Do small businesses have to offer health insurance?

    The Affordable Care Act stipulates that small businesses with fewer than 50 FTEs are not required to offer health insurance benefits to

  8. Guide to Small Business Health Insurance

    Small businesses with fewer than 50 employees are not legally required to offer health insurance to employees under the Affordable Care Act

  9. As a small business owner, am I required to offer health insurance to

    If your business qualifies as small (fewer than 50 full-time employees and full-time equivalents FTEs), you are not required to offer coverage.

  10. A Guide to Small Business Health Insurance Requirements

    Small businesses that have fewer than 50 full-time employees (or the equivalent in part-time workers) do not have to provide health insurance under the ACA

  11. 2023 Small Business Health Insurance Requirements

    Employer-sponsored health coverage must not exceed 9.12% of an employee's income if it is to satisfy ACA affordability requirements for 2023.

  12. Are Employers Required to Offer Health Insurance?

    If your business has 50 full-time employees or fewer,1 you are classified by the Affordable Care Act (ACA) as a small business and are not required to provide

  13. Small Businesses

    How to Apply · NY State of Health Small Business Marketplace: If you have 100 or fewer than employees, you can offer employees a choice of plans through the NY

  14. Small Business Health Options Program (SHOP)

    If you have fewer than 25 employees, you may qualify for a Small Business Health Care Tax Credit worth up to 50% of your premium costs (up to 35% for tax exempt