I had a colleague describe health insurance as the BMW payment he made every month, just in case. Hopefully, you have similar luck with your health. But for many of us, purchasing health insurance is one of the most expensive and consequential financial decisions we make each year.
If you’re new to owning a company or being self-employed, this might be the first time you’ve faced open enrollment without the guidance of an HR department. Just reading that might be stressful.
TL;DR: I am hosting a live 90-minute webinar on self-employed and small business health insurance on Tuesday, November 12 at 11 AM PT / 2 PM ET. Cost is $27. Learn more and register here.
Evaluating your health insurance options can be overwhelming. In this article, we break down how to determine whether you qualify for an individual or corporate policy, and how to evaluate which options are right for you in 2025.
Terms and Vocabulary
If this all feels like acronym soup, start with our health insurance terms guide. We cover all the key terms you’ll encounter while shopping for and using your health insurance plans.
The Overall Market
Does the US have a public insurance option?
The US has two public insurance options for its citizens: Medicare (age 65+) and Medicaid (disabled, pregnant, or low-income).
If you are self-employed and do not qualify for one of these plans, you will need to source your own insurance through a marketplace or direct provider.
Am I required to have insurance? Or offer it to others?
As an individual person, you must have health insurance that meets minimum essential coverage (MEC) in California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia. If you do not maintain coverage, you will be charged a penalty amount when you file your taxes. (Vermont has an individual mandate but has chosen not to enforce it.)
If you live elsewhere, as an individual, you can skip coverage or buy a non-MEC plan based on your state’s insurance rules. That includes opting out of an employer’s plan.
As a small business owner, if you have fewer than 50 full-time US employees, you are not required to comply with the Affordable Care Act. You may voluntarily offer health insurance as a competitive hiring benefit, or because you believe it’s the right thing to do.
If you are a business owner who also needs health insurance, you may find that sponsoring a corporate plan is more cost-effective than purchasing an individual or family plan.
How do I know if I qualify for an individual or corporate plan?
The smallest possible corporate plan is you plus one employee who is not a family member or dependent. If you have just one employee, they must opt in to using your plan.
If your company only employs you, your dependents, or close family members, you will not qualify for a corporate policy. You will need to purchase an exchange plan or direct coverage from an insurer.
What plan types are available?
Your plan has two considerations: pricing structure and network access.
Pricing structure
In the ACA-compliant world, plan pricing structures are categorized as high-deductible (HDHP), Bronze, Silver, Gold, and Platinum.
High-deductible health plans appeal to the self-employed because they have the lowest monthly premiums. Consider these risk factors before choosing a high-deductible plan. You must choose a high-deductible plan if you want to use a health savings account (HSA). Discuss these options with your financial or tax advisor.
Bronze has the next lowest monthly cost but has high deductibles, co-pays, and out-of-pocket maximums. Silver and Gold have lower deductibles and co-pays and may have larger provider networks.
Platinum is the most expensive option and has no deductibles or co-pays. Paying your Platinum premiums guarantees unlimited access to medical care within your plan terms.
Network Access
Network access refers to which providers, clinics, and hospital facilities will accept your insurance. You may see plans called limited network, HMO, or PPO.
Limited networks are often local plans with a small list of providers or a single hospital system. Your insurance will only pay for your services if you choose a provider from their list, unless it’s an emergency.
HMOs are closed networks of providers within a state or provider system. Services are paid to in-network participants only, typically within a single state. An HMO may be a closed system, like Kaiser Permanente, or an insurance plan that’s restricted to in-network providers only, unless it’s an emergency.
PPOs have the widest provider options and include out-of-network payment structures. You will pay less if you choose in-network providers, but will have some coverage with participating out-of-network providers. If you have employees in more than one state, you’ll be required to use a PPO.
Individual Coverage
How do I get coverage as an individual?
If you’re a freelancer, solopreneur, or solo LLC / S-corp owner with no full-time W-2 employees, and you don’t qualify for Medicaid, you will purchase insurance on the individual market.
Your options are:
- Buy a plan from a state or federal exchange
- Join a non-MEC plan (in states without individual mandate)
- Purchase a plan directly from an insurance company or through a health insurance broker
Through 2025, the federal government is offering enhanced insurance subsidies (premium tax credits). Your credit is based on your family size and adjusted gross income (AGI), which is the number left after all your business deductions and retirement savings are taken out. Subsidies are available up to 400% of the federal poverty line. For single people, that’s about $64,000. For a family of four, it’s $124,800.
If you’d like to evaluate your subsidy, use this calculator from healthcare dot gov, which doesn’t require any personally identifying information.
If you are eligible for a subsidy, I recommend you explore exchange options first.
Healthcare Exchanges
Exchanges are marketplaces of ACA-compliant medical, dental, and vision plans. Your base medical premium includes annual preventative exams, pregnancy care, children’s well child exams plus dental and vision check-ups, and access to national emergency care. Providers cannot ask whether you have pre-existing conditions or differentiate premiums based on your gender. Cost is based solely on your age.
You’ll use Healthcare.gov or your state’s exchange. Before you start, you’ll need to know your expected 2025 adjusted gross income (AGI) and other income sources for your household. Your expected income will be used to pre-qualify you for a premium subsidy or your state’s Medicaid plan.
Once you know your subsidy status, you’ll see a variety of plan selections. Compare coverage, providers, premiums, networks, and additional out-of-pocket cost levels to help you choose the right plan for you. 2025 out-of-pocket maximum for Marketplace plans is $9,200 for an individual and $18,400 for a family of any size.
Healthcare.gov’s 2024 open enrollment runs November 1 – January 15. (You’ll need to enroll, choose a plan, and make the first payment by 11:59 PM December 15 to start on January 1.) State-specific exchanges may have shorter or longer enrollment windows. Make sure you know your marketplace and deadlines.
Non-MEC plans
In states without an individual mandate, you can purchase plans that do not meet ACA requirements. These plans can be designed to include or exclude whatever they want, now or in the future. They may exclude coverage for pre-existing conditions, pregnancy, preventative care, or specific medications. Some have very high deductibles or only cover catastrophic emergency care.
If you are young or in generally good health and have no possibility of pregnancy or related complications, a non-MEC plan can save a lot of money. Be sure to read the fine print and understand when you could be denied coverage. Plans may be offered by groups like fraternal orders, alumni associations, and life insurance providers. One of my trusted partners for non-MEC plans is Dr. Noor Ali. Learn more and book a free consultation with her team here.
Direct Market
If you don’t like your exchange options, you can try the direct market. Some insurance companies and HMOs offer plans directly to individuals. For example, you can buy directly from Kaiser Permanente at the same prices you would get through an exchange. In states without an individual mandate, you may have non-MEC plan options provided directly from insurers. Visit the website of the specific insurance company you want to use. Look for “individual and family” coverage options.
You can also engage a health insurance broker who knows your local market and can help you access direct plans.
If you’re working with an insurance broker, give them your preferred parameters and carriers. Brokers are paid by the company where you buy your insurance. Your premiums will be the same whether you do the work or the broker does, so if this is overwhelming, engage a qualified health insurance broker.
Remember, direct purchase plans may not be MEC- or ACA-compliant. If it matters to you, ask. If you’re not planning to get pregnant or are a cis man and don’t have pre-existing conditions, you can roll the dice and potentially save some money. Remember that direct plans are not subject to the out-of-pocket maximums mandated in Marketplace plans.
How to pay
If you’re self-employed, your company can pay your health insurance premiums, including those for your spouse and kids up to age 26. Health care premiums are tax-deductible business expenses. Simply set up the recurring payment from your business bank account.
Corporate Coverage
While you can initiate corporate coverage at any time during the year, most of us do it in January. If you want to start coverage for January 1, you’ll need to choose your approach in November and complete your plan design no later than December 1.
If you want to offer some type of corporate health insurance, first, you’ll need to know if your business qualifies. Then, you can evaluate what coverage option is right for you. From there, you’ll set your policies and design your plan, and open it to your team for enrollment.
Group Plan Design
Do I qualify?
The first question is whether you’ll qualify for a group policy. For medical insurance, you must have at least one full-time W-2 employee who is not a member of your family. (Some PEOs and plans have higher requirements, but one employee is the legal threshold.)
Corporate dental policies typically require at least three participants.
Can I make it affordable?
As a corporate plan sponsor, the ACA requires you to pay 50% or more of the employee’s premium for the lowest priced plan you offer. Two more considerations are participation and competitiveness.
Participation: If you don’t get enough employees to sign up, you won’t be able to take this plan for yourself, either. So consider whether two-thirds of your team can afford and opt into the plan you want to offer.
ALE competitiveness: If you want to hire talent away from larger companies, you may want to pay more than 50%. ALEs must meet an affordability standard that does not exceed 9.02% of the lowest paid full-time employee’s gross pay. For 2025, that’s at least $113.20 per month. Many ALEs also offer spousal and dependent subsidies. Once you set your coverage amounts in your plan, they are locked for the year.
Is my remote team covered?
Do you have employees across the US? Most small group plans haven’t caught up. They’re designed for your home operating state, with everyone else “out of network” or “PPO network” for their care.
Ask your broker or carrier how employees outside your home state will access plans and medical providers. A strong provider in your home state – such as Kaiser in California or Oxford in New Jersey – may not exist in other places. Does the plan have a national network of providers? How will your remote employees access care? Most multistate employers must use a PPO plan. If you need a truly national plan, consider joining a PEO (more below).
How much support do I want to provide?
If you provide the insurance, your team will consider you, the owner and CEO, as the HR department and plan administration expert. Do you want to talk to them about their colonoscopies? About the co-pay for mental health or substance abuse counseling? About coverage for that out-of-state abortion? These are real questions I’ve gotten as the “HR department” for my clients.
If highly personal conversations are not your cup of tea, consider using a healthcare reimbursement plan or investing in an outsourced HR solution.
How do I make this a big win with my team?
If you’re new to offering corporate benefits, you can add them at any time of year. But please be respectful of the time, tax, and financial impacts on your employees. When you add benefits outside of an annual calendar cycle, you can really mess your team up financially by resetting their annual deductibles. Something that you expected to be a big win might turn into an angry all-hands pretty darn fast.
Also, please plan your offerings by November 1. If you will be offering any amount of healthcare support, clearly tell your employees by October 31. It’s a huge pain to roll back or change an exchange plan. Many companies will not return the first month’s premium, which could cost your employee thousands of dollars.
Now that I know I’m qualified, what are my options?
You have three ways to offer small business corporate benefits: health reimbursement plan, company-sponsored group plan, or PEO.
HRA / QSEHRA
If plan design and underwriting feel like too much, or your employees all want different things, a Health Reimbursement Account (HRA) can be a great option. The most common is called a QSEHRA (pronounced cue-SARA), for Qualified Small Employer Health Reimbursement Account.
A QSEHRA is an IRS-approved program in which you reimburse your employees for plans and expenses of their choice, tax-free to both sides.
How it works: You choose the reimbursement amount, anywhere from $1 to the current maximum of $529.16 per month for an individual or $1,070.83 per month for families. (Maximums change annually in October.) You also choose whether the reimbursement is insurance only, or if it includes qualified healthcare expenses.
Your employees choose individual plans and provide proof of MEC-compliant insurance to the QSEHRA administrator. The administrator manages the reimbursement amounts and sends you a monthly summary to add back to payroll. Your team will provide your QSEHRA administrator with their receipts, so you never see any details of their healthcare choices. You only pay out for the actual expenses your employees submit.
You pay the administrator a fee (typically $50-$100 per month) plus a small amount per enrolled employee. They provide you and your employees the documentation needed annually to recognize these costs as pre-tax expenses.
As a beneficial owner (over 2%), you cannot participate in a QSEHRA. But you can still pay your own healthcare premiums pre-tax through the company. See above in the individual section.
We use Take Command Health as our administrator. If a QSEHRA intrigues you, learn more here.
Company-sponsored group health plan
A group health plan is what you had at any job that offered health insurance. The company sponsors the plan, makes the monthly payments, and collects premium payments from its participating employees via payroll deductions. Through an exchange, direct buy, or insurance broker, you can choose an ACA-compliant plan for yourself and your team. Check out sample SHOP plans from Healthcare.gov.
How it works: While the legal standard is one W-2 employee, some carriers or plans may require more participants. You must pay at least 50% of the employee’s base premium, based on their age. At your discretion, you can pay up to 100% of the premium for your employees and their dependents. Depending on your industry or local market, you may need to cover more costs or provide a higher tier of plan to be competitive. (See above on affordability.)
Note, if you have fewer than 25 employees and meet average wage standards, you may qualify for a Small Business Healthcare Tax Credit. All premiums paid are qualified business expenses and will be deductions to your taxable income.
Corporate plans typically offer more services at a lower cost than the individual market. Many include mental health and alternative practitioners like acupuncturists and chiropractors. You may also be able to add coverage for fertility treatments.
Note that if you qualify with one W-2 employee and that person leaves or is let go, you get to keep the corporate plan for the rest of the calendar year.
Professional Employer Organization (PEO)
A PEO is a specialized HR company that can bundle many small businesses together for insurance buying power. Most offer national health plans from one or more major carriers. If you want to offer multiple plans or compete with the Fortune 500 (and get their scale discounts), a PEO will often be your best access option.
PEO packages may include perks like concierge medical, no-cost telemedicine, and coverage of fertility treatments. Please note that PEOs are NOT required to follow ACA-compliant underwriting. If you have a heavily female workforce of reproductive age, you may pay a lot more for a PEO.
How it works: A PEO acts as a “co-employer” with some rights over your management policies and procedures. To access PEO health insurance, you’ll need to sign up for their payroll and compliance services. You’ll be charged a monthly fee per employee, in addition to at least 50% of your employees’ base level health insurance premiums.
If you’d like to start your benefits on January 1, 2025, you should choose a PEO as soon as possible for open enrollment before December 10. Two PEOs to consider are JustWorks and Insperity. Learn more.
In conclusion: why is this so hard?
Health benefits are one of the most confusing, expensive, and complex things you will do as an American small business owner. Until you can step back from your role as medical insurance provider in favor of a public option (vote!), we’re here to help you align your benefits to your culture, strategic growth plan, and budget.
And if you’re from outside the US, bless your heart for your curiosity. Yes, this is how we do health insurance in America, and you will too if you decide to employ people here. We know this is hard. Each month, we take live questions in our Ask Me Anything (AMA) sessions with Jill James. You can ask about health insurance, HR, hiring, or anything else related to your company. Access is exclusively for our list subscribers. Sign up to receive our next invite.
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