According to a 2025 KFF report, the average annual health insurance premium for small firms was:
- $9,211 for single coverage. With employers contributing $7,857 per employee.
- $26,054 for family coverage. With employers contributing $20,143 per family.
The report defined “small firms” as those having from three to 199 employees. "Family coverage" is a plan for a family of four.
Businesses with fewer than 50 employees are not legally required to offer health insurance, though 52.1% did so from 2020 to 2022, according to the U.S. Census Bureau.
While it can be costly, offering health insurance to your employees can help you stay competitive as a business, retain workers and take advantage of tax benefits. Here’s what to know.
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How does small-group health insurance work?
Businesses with fewer than 50 full-time equivalent employees may choose to provide health insurance to their employees using small-group health insurance plans.
Small-group insurance providers assess risk for a pool of employees rather than one individual. This allows them to offer lower premiums than many employees would be able to get if they purchased health insurance independently.
You can shop for small-group coverage at any time of the year. You don't have to wait for an open enrollment period.
Costs depend on how much of the premium you pay, your employees' demographic profiles, what type of plan you pick and whether you can claim any tax credits.
Employer contributions
Most insurers require employers to pay at least half the insurance premium for their employees. Paying 50% of employee premiums is also a requirement if you want to claim the federal small-business healthcare tax credit.
You can use that 50% requirement as a quick way to estimate how much it will cost you to offer health insurance. For example, the average annual cost of health insurance for an individual at a small firm is $9,211. You would have to pay about $4,605 to claim the tax credit.
You could reduce your costs by requiring employees to pay a larger portion of their health insurance premiums. But most states require that at least 70% of employees participate in a group health plan. So if your plan feels too expensive and too many employees decline, you may not be able to offer the policy.
Employee profile
Under the Affordable Care Act, employees’ medical history and pre-existing conditions cannot affect the cost of small-group insurance premiums.
Only the following factors can affect premiums:
- The age of your employees and their dependents.
- Employees’ tobacco usage habits.
- Where your employees live.
For example, the average premium for single coverage at a small firm in 2025 was $9,211. But at firms where at least 35% of employees were age 50 or older, the average premium was $9,676.
The type of plan you pick
The ACA divides insurance plans into four tiers: platinum, gold, silver and bronze. These tiers are based on how much the insurer contributes to the plan, not the quality of care.
With a platinum plan, the insurer would pay an average of 90% of the cost of care and the employee would pay 10%. With a bronze plan, the insurer would pay 60% on average while the employee would pay 40%.
Small businesses can also offer employees the option to pick from multiple tiers instead of providing just one — while keeping the per-employee cost the same.
The metal tiers apply to common types of health insurance plans, such as preferred provider organizations and health maintenance organizations. PPOs tend to be more expensive than HMOs, but they also provide access to a larger network of doctors.
Location
Premiums are more costly in some areas than others. According to KFF, the average total cost for single coverage broke down this way in 2025:
- Northeast: $9,950.
- Midwest: $9,280.
- South: $8,887.
- West: $9,103.
Healthcare costs can also fluctuate from year to year, so your employer contribution may not be consistent long term.
Save up to 30% on business insurance
NerdWallet Small Business helps you get real-time quotes from 30+ insurers, and instant access to your Certificate of Insurance (COI) through our partner, Coverdash.
Where can you buy small-group health insurance?
You can purchase small-group health insurance for your employees in the following ways:
- Directly from an insurance provider. You'd find one in your state.
- Using an insurance broker. The broker will shop for policies tailored to your business. They’ll charge a commission (typically a percentage of the premium) and may also charge a broker’s fee. Some payroll products, such as Gusto and QuickBooks Workforce, allow you to buy health insurance from brokers on their platforms.
- Using the Small Business Health Options Program. SHOP is the federal government's insurance option for businesses with fewer than 50 full-time equivalent employees (up to 100 in some states). Most states require at least 70% of your eligible employees to participate in the SHOP health plan you offer. Businesses with fewer than 25 employees may qualify for a small-business healthcare tax credit worth up to 50% of premium costs.
- Using a Professional Employer Organization. A PEO is a company you can hire to administer benefits on your behalf. PEOs can legally become the co-employer of your employees. By serving as co-employer for multiple small companies, PEOs have a combined employee pool equivalent to that of a larger company. This gives them access to more competitive insurance rates than small businesses can typically get on their own.
- Qualify for QSEHRA. This is an arrangement for small businesses that offer employee reimbursement for qualified health expenses. Employees are not allowed to contribute through their paychecks, and employer contribution terms to each employee’s QSEHRA must be the same.
🤓 Nerdy Tip
Some Chambers of Commerce offer cooperative group health insurance plans for their member businesses. This can be a great choice for small businesses with few employees, since coverage generally gets cheaper as the pool gets larger. When you shop for a small-group health plan for your employees, the insurance provider will give you quotes based on the state your business is located in and the number of full-time equivalent employees you have. You can calculate the number of full-time equivalent employees you have using this HealthCare.gov calculator.
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- 1. KFF. 2025 Employer Health Benefits Survey. Accessed Apr 24, 2026.
- 2. United States Census Bureau. https://www.census.gov/library/stories/2024/02/health-care-costs.html. Accessed Apr 24, 2026.
- 3. Internal Revenue Service. Small Business Health Care Tax Credit and the SHOP Marketplace. Accessed Apr 24, 2026.
- 4. KFF. Premiums and Worker Contributions Among Workers Covered by Employer-Sponsored Coverage, 1999-2025. Accessed Apr 24, 2026.
