Is small business health insurance cheaper than individual? Small business health insurance is generally cheaper than individual health insurance in the United States. On average, small business group plans cost about 10% to 20% less than individual policies.
Additionally, small businesses often receive tax credits and can negotiate better rates due to the collective bargaining power of the group.
However, premiums differ widely based on factors such as employee age, plan type, coverage level, location, and employer contributions.
Introduction
This article breaks down the costs, benefits, and nuances of each option, backed by credible data, to help U.S. small business owners and workers make informed decisions.
Why Is Small Business Health Insurance Typically Cheaper?
Small business health insurance is often less expensive because it is a form of group health insurance. Group plans pool the risk among several people, which lowers the overall premium cost for each member.
According to a 2018 eHealth report, small group health insurance rates typically have lower deductibles (31% lower on average) and premiums than comparable individual plans.
The collective risk sharing means insurance carriers face less uncertainty than when insuring individuals alone, leading to more competitive pricing.
For example, the average monthly premium for group health insurance in 2023 was around $703 for single coverage, compared to individual plans that often exceed this amount, depending on the coverage level.
Small businesses with as few as 34 employees can qualify for group plans, which makes this option accessible and cost effective. Business size, employee demographics, and coverage options influence the exact costs.
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Factors Affecting Small Business Health Insurance Costs
Several factors influence the cost of small business health insurance, including:
Employee Age:
Younger employees usually lower the overall risk, resulting in lower premiums.
Plan Type:
HMOs generally have the lowest premiums, while PPOs and POS plans provide more flexibility at higher costs.
Location:
Health care costs vary widely across states and regions, affecting premiums.
Employer Contribution:
Many employers pay at least 50% of premiums, sometimes more, reducing the employee’s cost burden.
Number of Employees:
Very small businesses (29 employees) tend to face higher per person costs than larger small businesses, but still typically benefit from group rates.
Comparing Small Business and Individual Health Insurance Costs
Data shows that individual health insurance can be significantly more expensive due to the lack of risk pooling and smaller scale bargaining power.
The average monthly premium for an ACA individual health plan is roughly $590, with silver plans costing about $618 per month in 2025. These costs can add up quickly without employer contributions or tax advantages.
Small business plans often come with tax credits that can reduce employer costs, which further improves their affordability. Employers also have the opportunity to negotiate with insurers as a group, which individual purchasers cannot do.
Benefits Beyond Cost
Besides cost savings, small business health insurance plans often provide more comprehensive benefits and better employee retention. They avoid waiting times for appointments and can improve workforce health and productivity. Offering group health insurance is also a competitive advantage in attracting talent.
Conclusion
Small business health insurance in the U.S. tends to be cheaper than individual health insurance plans due to shared risk, collective bargaining power, and potential tax benefits. While premiums vary based on several factors, group plans generally offer lower monthly premiums and deductibles than comparable individual insurance.
For small business owners looking to balance cost with quality coverage, group health insurance is often the smarter, more affordable choice. Understanding the nuances can empower both employers and employees to make better healthcare decisions that safeguard finances and wellbeing.
By focusing on the specific needs of staff and exploring plan options, small businesses can capitalize on the relative cost advantage of group health insurance to provide valuable benefits without breaking the bank.
This clear advantage for small business owners not only helps control expenses but also supports a healthier, more secure workforce.
FAQs
1. Is small business health insurance cheaper than individual insurance?
Yes, small business health insurance typically costs about 10% to 20% less than individual health insurance due to pooled risk and employer contributions.
2. Why is group health insurance generally less expensive than individual plans?
Group insurance spreads risk among multiple employees, lowering premiums per person, whereas individual plans bear all risk on the single policyholder.
3. Are there tax advantages to having small business health insurance?
Yes, small businesses often get tax deductions or credits for providing health insurance, which lowers the net cost for the employer.
4. How does the size of the business affect small business health insurance costs?
Smaller businesses (under 10 employees) may pay higher per person premiums than slightly larger small businesses, but group plans are still generally cheaper than individual coverage.
5. Can employees choose their own doctors with small business health plans?
Yes, but it depends on the plan type. PPOs offer broader networks while HMOs may be more restrictive; generally, small business plans tend to have bigger networks than individual plans.[5]
6. Are individual health insurance subsidies a better option for some people?
Low income individuals earning less than about $48,000 per year might qualify for government subsidies, making individual plans potentially more affordable than group plans.
7. What types of small business health insurance options are there?
Common options include traditional group insurance, Qualified Small Employer HRAs (QSEHRAs), individual coverage HRAs (ICHRA), self-funded plans, and association health plans.
8. Can a self-employed person get small business health insurance?
Yes, but eligibility varies by state. Many self-employed individuals might only qualify for individual or family coverage unless they have employees.
9. Is it easier to renew or change plans with small business insurance or individual insurance?
Individual insurance plans renew during the open enrollment period and allow changes then, whereas small business plans might have different renewal periods but offer collective bargaining benefits.
10. Does offering group health insurance help with employee retention?
Yes, small business health insurance can increase employee satisfaction and retention by providing better coverage options and reducing financial stress on employees.