To Offer or Not to Offer: The Small Business Case in Health Insurance
July 22, 2025 | Tags:
Any investment you make for your small business should always be carefully considered. One of the most significant decisions you’ll face is whether to offer a health insurance plan.
Employee sponsored insurance, also known as group plans, are purchased by employers and offered to eligible employees and their dependents. Even though small businesses under 50 employees aren’t legally required to offer health insurance, the decision to offer – or not offer – can have a lasting impact on you, your business and your employees.
Benefits of offering employee sponsored insurance
1. Improved employee wellbeing
Offering health insurance is a meaningful way to invest in your employees and show that their health and happiness are a priority. Including comprehensive benefits – like dental and vision – encourages preventive care that supports their overall health.
And with benefits like wellness programs and mental health resources that can be added at no extra cost, you’re helping to create a safe, supportive work environment where employees can thrive.
2. Increased productivity and employee loyalty
Providing health insurance helps build a company culture where employees feel supported and valued, giving them more incentive to stay. When people don’t have to worry about healthcare, they can focus more on their work and less on personal stress. This peace of mind not only motivates productivity but encourages employees to stay loyal to a business that invests in their well-being.
3. Maximized cost savings
Employee wellness plays a key role in keeping healthcare costs down. Access to preventive medical services allows employees to catch health issues early – often before they become serious or costly – helping reduce the need for expensive treatments. For those managing chronic conditions like diabetes or high blood pressure, wellness programs offer tools and support to improve their health, which can lead to fewer medicals claims and lower overall expenses for your business.
4. Compliance and tax advantages
Offering health insurance is a smart choice for both your employees and your business. Employer contributions toward premiums are tax-deductible, and employees can pay their share with pre-tax dollars. Eligible small businesses may also qualify for the Small Business Health Care Tax Credit, which can cover up to 50% of premium costs. Additionally, getting employees involved in managing their healthcare through health savings accounts (HSAs) or flexible spending accounts (FSAs) can lead to better healthcare spending and savings habits.
Drawbacks of not offering employer sponsored insurance
1. Higher costs out of your pocket
You might think you’ll save by not offering health insurance, but this decision could end up costing you more in the long run. If you yourself want coverage, you’ll be paying 100% of your premiums. Costs for individual plans aren’t shared with the business, but with group plans, you’ll only have to pay part of the premium.
2. Increased turnover
In a competitive job market, offering choices like health insurance can significantly benefit your business’ ability to recruit and retain top talent. Without this advantage, it may be harder to compete with other employers and could even make your company appear less supportive of employees, damaging your business’ brand reputation.
3. Possible tax penalties
In some states, businesses can face penalties for not providing coverage, though this mainly applies to larger employers under the Affordable Care Act (ACA). If your small business grows to or over 50 full-time or full-time equivalent employees, you’re considered an Applicable Large Employer (ALE) and are legally required to offer affordable healthcare benefits to at least 95% of your full-time staff. If at least one full-time employee receives a premium tax credit for purchasing individual coverage on the Marketplace, you can face penalties for non-compliance.
4. More complexity
Opting out of offering group health plans doesn’t simplify the process – it actually adds more to your plate. If you want coverage for yourself, you’re responsible for every step: researching plans, comparing options and pricing, remaining informed of changing regulations, handling enrollment and renewal logistics, and ensuring all applications are submitted accurately and timely. It’s a time-intensive process that pulls your focus away from running your business.
5. Risk of being uninsured
Emergencies are unpredictable, which is why having a group health insurance plan is essential to protect your business, support your employees and safeguard against financial risks.
Without coverage, unplanned health emergencies or delayed medical care can lead to higher out-of-pocket costs. In response, employees may seek individual coverage, which can be more expensive for them and your business.
Ready to get started with small group health plans?
If you’re interested in learning more about Medical Mutual’s small group employee health plans and how they can benefit your small business, contact your broker or request a sales consultation with a Medical Mutual representative today. Prefer visuals? View the key points shared above in one glance with our infographic!