Small Business Guide To Health Insurance For One Employee

Legally speaking, you are not required to purchase health insurance for one employee, but there are still great reasons for you as a small business owner to provide health benefits. Their happiness and health are even more important if you run a larger business with more employees.

Plus, health insurance for your one employee may not be as expensive as you think!

Read on for a quick rundown on purchasing health insurance for yourself and your employee.

What Is Small Business Health Insurance?

Small business health insurance is medical coverage that helps you pay for general medical care, routine physicals and health exams, surgeries, and medical emergencies.

Each health insurance plan is a unique combination of options: deductibles or no deductibles, copays or no copays, and choices about medical providers.

Is Health Insurance Legally Required For Small Businesses?

Since you only have one employee, you are not legally required to provide health insurance.

Here’s a breakdown of the major health insurance laws and what they mean for your small business.

In 2010, the Federal Government passed the Affordable Care Act (ACA), and through that healthcare mandate, over twenty-million Americans were granted access to health insurance who previously had none. Many of those people were sole proprietors, independent contractors, and small business owners. Better known as “Obamacare,” the ACA extended to employers and required businesses of a certain size to provide health insurance.

So, what exactly does the ACA mandate? If your business is considered an Applicable Large Employer (ALE) with 50 or more full-time employees for more than six months out of the year, then you will need to provide your employees with health insurance as a legal requirement of the ACA.

If your business is not an ALE, then supplying health care for your employees is a choice, not a requirement. 

So as a small business owner with only one employee, you are not required to provide health insurance. But, just because you don’t have to doesn’t mean you should overlook health insurance as an option. Providing health care is not only a morally sound choice but also a wise investment in the happiness and well-being of your employees, and the government offers tax credits to businesses with fewer than 25 full-time employees who supply health coverage.

Can You Have Health Insurance For One Employee?

Can you provide health insurance for your small business if you only have one other employee? Yes! You can!

If your business consists of you and one other person, you can offer health coverage in several ways. However, before shopping for plans, you must understand what plans will be available and what materials you’ll need to start the process.

What Constitutes An Employee?

Insurance companies have a specific definition of an employee. If you are looking into acquiring group health insurance for you and your one employee, you’ll have to prove that you have a single employee while filling out applications.

According to the definitions, a common law employee cannot be you (the business owner) or your spouse. An employee is defined as someone who works at least 30 hours a week and whose workload you control, both in what that work is and how that work is performed. An independent contractor cannot be considered an employee.

Group health insurance isn’t an option if you do not have a qualifying employee. Don’t let that discourage you from finding coverage, however. There are many independent and family plans available during open-enrollment periods.

Can I Enroll In Group Health Insurance With One Employee?

If you have one employee as defined above (a person whose workload you control, who puts in at least 30 hours a week, and who is not your spouse), then you can enroll in group health insurance. If you have between 1-50 employees, the government’s Small Business Health Options Program (SHOP) group health plans are available.

SHOP will walk you through the process of determining eligibility, send you to your state’s group health plan, or help you compare and shop available plans in your area. After that, you can sign-up directly through the insurance platforms offered in your state or work with a SHOP broker who can walk you through the process.

The Benefits Of Group Health Insurance

Even though group insurance isn’t your only option, it has many benefits. Here are some of the reasons why group health insurance is a worthwhile consideration:

• Tax Credits: Under the guidelines of the ACA and the tax codes for 2023, you may be eligible for a tax credit if you enroll your business in group coverage and have between 1-25 employees.
• Lower Costs Than Individual Plans: Prior to the group health plans offered for small businesses with one employee, the alternative was to purchase individual plans. However, the cost per policy lowers with each new person added to a group plan.
• Coverage Designed For You: Group health insurance broadens the plans and providers you can choose from, whereas, with independent insurance, you get what you get. With group health insurance, you and your employee can discuss health options and choose a group health plan that fits your needs. The opportunity to choose the deductibles and copays you want is one valuable reason to go through a group insurance provider.
• Better For Your Business: Three-quarters of job-seekers say that health insurance and benefits are one of the key factors they are looking for in a job. In 2023, this is especially true.

How To Enroll In Group Health Insurance

Here are the steps you’ll need to go through to fully enroll you and your employee with a group health insurance program:

Step #1: Set A Budget

Examine your business’s budget and ask yourself: How much money should I allot to health insurance? How much will I contribute per employee? You want to choose a plan that offers good coverage to your employee, but that also fits within your business’s budget. This will play a large role in which business health insurance plan you choose. It’s vital to know exactly what you are paying for and what you might be asking your employee to pay for.

Step #2: Know What Plan & Benefits You Need

What kind of coverage are you hoping to offer? Go prepared for your first meeting with a provider or broker with an idea of what kind of policy would benefit your employee the most. Decide if you are going to include ancillary insurance options like dental and vision in the policy.

Step #3: Gather The Proper Documents

You’ll need to provide some numbers and documentation to receive an accurate health insurance quote from an insurance broker. Before you call an agent or a broker, make sure you have gathered and prepared the proper documents. Most often, you’ll need to provide your:

• Business address
• Employee information
• Business name
• Tax ID

Step #4: Start Shopping

Whether you pass along your information to a broker or head to the SHOP site or other online sites for your state, now you’re ready to actually start shopping. Decide if you want to choose the broker approach or head out on your own. (If you decide to outsource to a Professional Employer Organization, they will take it from here!)

Step #5: Compare Quotes

Study the numbers and look at the plans. Sometimes the cheapest plan may not be in your best interest as a small business owner. Examine what you can afford and how the plans work for your employees. Don’t be afraid to ask questions, push for numbers, and run scenarios with the experts. When comparing quotes and choosing the right health provider, do your research.

Finding The Right Health Insurance Plan

Health insurance is a complicated issue and can feel overwhelming. So, how do small business owners (with all their extra free time, sarcasm intended) navigate the system and find the perfect health insurance plan? Start with understanding your needs as an employer; make sure you know the basic terms (co-pay, deductibles, co-insurance, out-of-pocket expenses), decide how much you can afford, and compare different networks.

There are several ways you can compare and contrast providers and plans. Healthcare.gov offers ratings of health plans. You can plug a network’s name into the system and see availability and ranking. You can then sit down with the list of providers in your area and look at their rankings.

See our longer post on small business health insurance for more factors to consider as you make your choice.

How Much Does Small Business Health Insurance Cost For One Employee?

The biggest factor for small business owners when determining whether or not to provide health insurance to their employee(s) is how much it is going to cost. You can have the best intentions in the world and still not be able to afford the plan you think your employee deserves.

The actual cost of a health insurance plan (be it group or individual) is going to depend mainly on what type of plan you choose and which insurer you decide to purchase your plan from. Other factors that can impact your overall cost are your location and the age of yourself and your employee.

A study published by the Kaiser Family Foundation in 2021 reports that the average monthly premium for small businesses (3 to 199 employees) was $651 for single coverage and $1,817 for family coverage.

Getting Started

If you can demonstrate you have one employee, then you are set to explore group health options for your small business. The Small Business Health Options Program (SHOP) group health plans are the best place to start. Cruise around their site, enter your information and see what options are available for you and your employee.

Health insurance is not a trivial purchase. You and your employees work harder and better when you feel protected and healthy. Now, with the addition of tax benefits and expanded options for group coverage, it’s easy to finally make it happen. Go forth and claim your health coverage!

Health Insurance For One Employee FAQs