How much does small business health insurance cost per employee?

How much does small business health insurance cost?

Small businesses typically pay several hundred dollars or more a month per employee for single coverage after the employee’s share, and well over $1,000 to $2,000 a month for family coverage. KFF’s 2025 Employer Health Benefits Survey puts the average national premium for 2025 at $9,325 a year for single coverage and $26,993 for family coverage. For firms with 10 to 199 workers, the average premiums are $9,211 and $26,054.

Those are total premiums, meaning they include both the employer and employee’s share. Your cost as an employer will be lower, depending on how much you cover. Workers contribute an average of $1,440 a year toward single coverage and $6,850 toward family coverage.  Subtract that, and the average employer pays about $657 a month per employee for single coverage, and about $1,679 for family coverage. 

And health insurance costs continue to rise. KFF’s research found the average premium rose 5% in 2025, while the family premium rose 6%. In a separate June 2026 survey, Morgan Health found a median self-reported premium increase of 18% among the 1,023 small and midsize employers that offer coverage and participated in the survey.

One caveat in this research: KFF surveys employers with 10 or more workers, and it stopped including firms with three to nine employees in 2025 because they were too hard to survey reliably. If your team is smaller, use these numbers as a reference point, not a quote.  

How the employer share works

What you pay is a function of two costs: the total premium, and how much your business chooses to pay. Employees typically pay their share through payroll deductions.  At firms with 10 to 199 workers, KFF’s survey found that workers pay 16% of single premiums, and 36% of the family premium. For firms with fewer than 50 employees, federal data show employers paying 79% of single premiums and 66% of family premiums. 

Family coverage is especially expensive for small-firm employers. At firms with 10 to 199 workers, 29% of workers pay more than half the family premium, versus 5% at larger firms. At the other end, 29% of covered workers at those same small firms have an employer paying the entire single premium. 

The math is simple: premium minus employee contribution = your cost. At KFF’s 2025 averages, that’s $9,325—$1,440 = $7,885 a year, or about $657 a month.

What the published averages actually measure

Average costs and the costs for your business may be quite different. Figures may be different due to firm size, and the dates. Health insurance premiums have risen in recent years and continue to rise. 

*Sources: 

KFF Employer Health Benefits 2025 Annual Survey

AHRQ, MEPS-IC Research Findings #54, December 2025
Congressional Budget Office, Health Insurance Options for Small Businesses, September 2026

Cost by business size

One employee. It is hard to find insurance for a business with one employee. The federal marketplace, Small Business Health Options Program (SHOP) for small businesses insurance, requires at least one employee on payroll, not counting the owner, business partner, or spouse of either. An owner plus one full-time employee can qualify. 

Two to nine employees. Health insurance for a small business with two employees or up to nine is priced per enrolled employee, and premiums vary by age, location, family size, and tobacco use. As with larger groups, employers decide how much of the premium they will pay. SHOP plans generally require 70% of eligible employees to enroll, and employees covered through a spouse, Medicare, or another job count toward that number. 

50 or more employees. The Affordable Care Act employer mandate applies if the business has 50 or more full-time equivalent (FTE) employees. Below that, you choose whether to offer coverage at all. SHOP and small-group plans generally cover employers with 50 or fewer FTEs, though some states, including California, Colorado, New York, and Vermont have different requirements that allow it to cover up to 100 employees. 

What moves price up or down

In plans regulated under the Affordable Care Act (ACA), premiums can vary only by age, location, family size, and tobacco use.  Other plans may also include employees’ health history. Here’s what the research shows, though we can’t rank these by weight. 

• Age of enrolled employees: Firms where at least 35% of workers are 50 or older average $9,599 for single coverage, versus $9,068 at other firms. 
• Location and the local provider market: Premiums run higher in the Northeast and lower in the South, and local provider prices and competition often play a role. 
• Plan type and network: PPOs average $9,819 single and $28,272 family, while high-deductible plans with a savings option average $8,620 and $25,379. 
• Deductible and out-of-pocket costs: Firms under 50 employees average a $2,474 single deductible, versus $2,007 at larger firms. 
• Fully insured or level-funded: Level-funded plans (which offer self-funding of medical expenses with a level premium payment) are experience-rated, so employees’ claim history affects what you pay. 
• Tobacco use: A rating factor in ACA-regulated small-group plans, along with family size. 

Cheaper ways to offer health benefits

Health benefits are expensive. Small business owners should shop around to find the plan that works best for their business, but shouldn’t expect rock-bottom prices on health coverage. 

Here are options to consider: 

Qualified small employer HRA (QSEHRA): A QSEHRA lets you reimburse employees tax-free for individual coverage instead of buying a group plan. It’s generally for employers with fewer than 50 employees who don’t offer a group plan. For 2026, the caps are $6,450 for self-only coverage and $13,100 for family coverage. 

Individual coverage HRA (ICHRA): An ICHRA works similarly, but employer contributions have no cap, and employers of any size can use one. Employees must enroll in individual coverage or Medicare to get the money, and you can set different allowances for different classes of employees. It fits teams with differing needs. The trade-off is that employees do the shopping. Small businesses also aren’t subject to the ICHRA reporting rules that larger employers face. 

Few use these options, though. Only 4% to 9% of firms in the KFF research gave employees funds for individual coverage. 

Level-funded plans. These pair a self-funded plan with stop-loss insurance. Employers fund medical claims but pay a level premium and are handled at the end of the year. Employers may get a partial refund if claims are lower than expected. Among covered workers at firms with 10 to 199 employees, 37% were level-funded plans. 

They are often a fit for groups with younger or healthier employees, who often pay less than in community-related plans. The trade-off is that higher claims can mean sharp increases in renewal rates. 

Professional employer organizations (PEOs): A PEO becomes your co-employer, runs payroll, taxes, and benefits, and enrolls your team in its large-group plans. It fits owners who want these administrative tasks handled, and who want to join a larger group. The trade-off is that PEOs can charge different employers different rates based on claims experience. 

SHOP: SHOP is the federal marketplace for employers with one to 50 FTEs. You choose your contribution, but in most states 70% of eligible employees must enroll. It’s generally the only route to the tax credit. The trade-off: you can’t enroll through HealthCare.gov, only through an insurer or a SHOP-registered broker, and CBO notes SHOP is not used often.

Many small employers are weighing different options: 68% say they’re reconsidering fully insured plans, but according to the Morgan Health survey, 77% say the disruption or uncertainty outweighs potential savings. 

The small business health care tax credit

Your business may qualify for the small business health care tax credit if you have fewer than 25 FTEs, pay average wages below an inflation-adjusted base, cover at least 50% of employee-only premiums, and buy through SHOP. The credit is worth up to 50% of your premium contribution (35% for tax-exempt employers) for two consecutive years. 

The credit starts phasing out if you have average wages above $34,100 for tax year 2026 ($33,300 for 2025). One FTE equals 2,080 hours per year, and owners and their family members aren’t counted. Few small businesses take advantage of the credit. 

Premiums you pay are deductible, though if you claim the credit, you reduce the deduction by the credit amount. Employee contributions through a cafeteria deduction (Section 125) plan are pre-tax, while employer payments are excluded from income and payroll taxes. 

Are small businesses required to offer health insurance?

Short answer on small business health insurance requirements: no. Federal law doesn’t require you to offer coverage if you have fewer than 50 full-time employees. At 50 or more, the employer mandate requires you to offer most full-time employees (those averaging 30 or more hours a week) coverage that meets minimum standards, or face a penalty. 

For 2026, the penalty amounts are $3,340 and $5,010, depending on the violation, and the required contribution percentage used to test affordability is 9.96%. 

State rules can have different requirements on top of federal ones. Hawaii, for example, doesn’t participate in SHOP and employers aren’t eligible for the small business tax credit. Check with your state insurance department. 

If you offer coverage, reporting may apply. Large employers report to the IRS on Forms 1094-C and 1095-C but small businesses aren’t subject to ICHRA reporting. 

Your own coverage works differently. If you can't join a group plan, you may be able to claim the self-employed health insurance deduction, but not for any month you’re eligible for an employer-subsidized plan, even if you don’t enroll. 

How to get a quote for small business health insurance

A quote starts with your employee census (ages and ZIP codes, since premiums vary by age and location). You can get quotes from a benefits broker, a SHOP-registered broker or insurer, carriers directly, or a PEO. Some payroll providers have benefits arms too: See Nav’s Gusto review and Paycheck Flex review. 

Brokers are usually paid by insurers, though fees vary: 34% of small and midsize employers in Morgan Health’s survey said they’d switch brokers for better pricing on broker fees. Ask how yours are paid. Health coverage is also just one piece of your small business employee benefits cost, so see fringe benefits examples for the rest of the budget. 

The bottom line

Finding affordable health insurance isn’t easy. As a business owner, it can be even more challenging when you’re looking for coverage for yourself, your family, and your employees. 

Understanding your options — including potential tax credits and tax deductions — can help you find a plan that works for your business. 

Health insurance isn’t the only insurance your business needs. For how health coverage fits beside your business policies, see Nav’s business insurance guide — and as you hire and grow, building strong business credit scores with Nav Prime can help. 

Frequently asked questions