Health Insurance For One Employee: Why & How You Should You Offer It

Health insurance for small business is a specialty field and one of the more complicated types of business insurance. Health insurance for a small business with one employee is even more complex. If you fall into that subset, what are your options?

For starters, a business with one employee is not legally required to offer health insurance. Under the Affordable Care Act, the threshold for requiring health insurance is 50 or more employees. However, a small business with one employee might have good reasons for wanting to offer health insurance.

Health insurance is a useful perk that can help you attract and retain talented employees. If you offer health care to your single employee, you and your family can join the same health care plan, too. And because health care premiums typically are a business write-off, providing health care benefits not only you and your employee but also your business overall.

Read on for a quick rundown on the best way to offer health insurance for yourself and your employee.

What Is Small Business Health Insurance?

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

Each health insurance plan is a unique combination of options, including deductible amounts, copayments, annual limits, and choices about medical providers.

Is Health Insurance Legally Required For Small Businesses?

In 2010, the Federal Government passed the Affordable Care Act (ACA). Commonly known as “Obamacare,” the ACA required businesses of a certain size to provide health insurance. Under the ACA, 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, you are legally required to provide your employees with health insurance.

With just one employee, you are not legally required to provide health care. In that case, supplying health care is a choice, not a requirement.

Keep in mind the government offers tax credits to businesses that have fewer than 25 full-time employees and offer health insurance. According to HealthCare.gov, the Small Business Health Care Tax Credit could return up to 50% of the costs you pay for employees’ health care premiums.

To qualify for this tax credit, your business must enroll in a Small Business Health Options Program (SHOP), and you must meet all of the following conditions:

• You have fewer than 25 full-time equivalent employees (FTE)
• Your average employee salary is about $56,000/year
• You pay at least 50% of your full-time employees’ premium costs
• You offer SHOP coverage to all full-time employees

Can You Have Health Insurance For One Employee?

Can you provide health insurance for your small business if you only have only one employee? The answer is a definite Yes.

First, we need to understand a critical definition. What is considered an employee, for insurance purposes?

Insurance companies have a specific definition of an employee. A common law employee must be someone other than 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 is not considered an employee.

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

You can also consider offering a health savings account (HSA) or health reimbursement arrangement (HRA) rather than health insurance. Done right, HSAs and HRAs allow small-business employees to set aside pre-tax dollars for health-related expenses. The business can even contribute (subject to IRS contribution limits) as a set amount or matching contributions.

Both HSAs and HRAs offer significant benefits. Consult with an accountant or a legal or tax advisor to determine if these are good options for your small business.

How To Enroll In Group Health Insurance With One Employee

Anyone can sign up for an individual health insurance plan. Group health insurance is a little different.

Group health insurance is offered by a small business to employees and their dependents. To qualify for group health insurance, a business must have a minimum of two employees. The good news is that the business owner counts as an employee in this case. So, once you hire your first true employee, you’re eligible for a group health insurance plan, which usually costs less than an individual plan would.

Remember that an employee is defined as a person whose workload you control, who puts in at least 30 hours a week, and who is not your spouse. If you have between 1-50 employees, the government’s Small Business Health Options Program (SHOP) group health plans are a great place to start your search.

SHOP will walk you through the process of determining eligibility, send you to your state’s group health plan, or help you compare 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: The cost per policy drops with each new person added to a group plan.
• Bespoke Coverage: Group health insurance broadens the pool of plans and providers. You and your employee can discuss health options and choose a group health plan that fits your needs, choosing the deductibles and copays you want.

How To Enroll In Group Health Insurance

Here are the steps to enrolling yourself and your employee in a group health insurance program:

• Set A Budget: How much money you can put toward health insurance? How much will your business contribute per employee? Determine exactly what you can pay for and what you might ask your employee to contribute.
• Know The Benefits You Need: What kind of policy would suit your employee best? Will you include ancillary insurance options like dental and vision? Know the answers before you speak to a broker or insurance provider.
• Gather The Proper Documents: Before you call an agent or a broker, be prepared to provide your business name, address, tax ID, and some employee information
• Start Shopping: Whether you pass along your information to a broker or head to SHOP another online site, you’re ready to start looking. You can also outsource this to a Professional Employer Organization and let them take it from here!
• Compare Quotes: Think about how the plans will work for your employee. Ask questions, push for numbers, and run scenarios with the experts. When comparing quotes and choosing the right health provider, it pays to do your research.

If you’re still feeling overwhelmed, here’s a valuable tip. Healthcare.gov offers ratings of health plans. Simply plug a network’s name into the system to see availability and ranking. You can then sit down with the list of providers in your area and look at their rankings.

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 the cost. Can you afford to offer the health insurance plan your employee deserves?

The actual cost of a group or individual health insurance plan depends mainly on what type of plan you choose and which insurer you purchase your plan from. Other factors that can impact your overall cost are your location, your age, and your employee’s age.

For reference, the average monthly premium for coverage on an Affordable Care Act (ACA) plan without subsidies is $438. If you’re receiving quotes that far surpass that, you may do better to look into alternatives, such as HSAs and HRAs, instead of an employer-based health care plan.

The Bottom Line On Health Care For One Employee

Health insurance is not a trivial purchase. However, the benefits of offering healthcare to your employees (even if you have only one) are significant. Employees work harder and feel better when they feel healthy and appreciated. And they are more likely to stay on your payroll when they enjoy the benefits of employer-sponsored healthcare.

Keep in mind, the tax benefits and expanded options associated with group coverage can deliver significant benefits for your business, too.

The Small Business Health Options Program (SHOP) group health plans offer a great place to start your search for health insurance. Cruise around the site, enter your information, and see what options are available for you and your employee.

Health Insurance For One Employee FAQs