Small Business Medical Benefits: 2025 Employer Guide

Health benefits shouldn’t be a burden, but for small businesses in the United States (U.S.), rising costs and complex regulations are making it harder than ever to offer meaningful coverage. Traditional employer-sponsored health insurance plans continue to grow more expensive, leaving many employers stuck choosing between affordability and access.

According to the annual Employer Health Benefits Survey by KFF, a nonprofit health policy organization, the average cost of employer-provided health insurance increased by 7% for family plans and by 6% for individuals in 2024. Rising healthcare costs, combined with the financial pressure of remaining compliant with healthcare laws such as the Affordable Care Act (ACA), are making it challenging for smaller businesses to maintain affordability in offering small business medical benefits in 2025.

But there’s good news! Innovative, flexible models like Individual Coverage Health Reimbursement Arrangements (ICHRAs), Qualified Small Employer HRAs (QSEHRA), and Direct Primary Care (DPC) are helping small businesses rethink what’s possible, offering real healthcare solutions that are easier to manage and actually serve the needs of today’s workforce.

In this article, we’ll discuss how options like ICHRAs and QSEHRAs can be integrated with Direct Primary Care (DPC) to give your employees better healthcare while protecting your budget. Whether you’re a business owner or an HR leader, we'll walk you through practical solutions for offering affordable small business medical benefits that make sense, helping you find the right approach that works for your company and team.

In this article, we’ll cover:

• Compliance requirements for businesses of different sizes under current healthcare laws and potential penalties for non-compliance.
• Comparisons of traditional group plans versus newer alternatives like HRAs (i.e., ICHRA, QSEHRA) in terms of costs, flexibility, and small business medical benefits.
• Innovative HRA models integrated with Direct Primary Care (DPC) that now offer a comprehensive, cost-effective solution for small businesses and employee benefits.

Small Business Health Insurance: What Are You Legally Required to Offer?

When are companies legally required to provide employee health benefits? The answer will depend on the company’s size. Based on current ACA requirements, if your business has an average of 50 or more full-time or full-time equivalent (FTE) employees in the previous calendar year, you are likely considered an Applicable Large Employer (ALE).

On the other hand, small businesses that have fewer than 50 full-time employees do not qualify as an ALE and are not legally required to provide health insurance under the ACA. However, this doesn’t mean you shouldn’t offer small business medical benefits. As many as 96% of working Americans believe it is important for a job to offer health insurance, according to a 2022 survey conducted by the U.S. Chamber of Commerce.

Employers must remember that a well-rounded benefits package is often the key to attracting and retaining top-performing talent, while boosting job satisfaction and work productivity. These benefits translate to lower employee turnover and potentially higher profits and cost savings over time. Simply put, even if your small business isn’t legally required to offer employee health benefits, not doing so may actually cost you in the long run. This is why more non-ALE companies are choosing to offer small business medical benefits in 2025.

Small Business Medical Insurance Options for 2025

Let's look at the different ways you can provide small business medical insurance to your employees in 2025. Here are the top four approaches to providing employee benefits that can work for your small business.

1. Traditional Small Group Health Insurance Plans

These are employer-sponsored health plans where the company purchases small group health coverage from an insurance carrier for their employees. Employers typically share the premium costs with employees, generally as a pre-tax paycheck deduction.

2. Self-Funded Insurance Models

In this insurance model, employers set aside funds to directly pay for their employees’ healthcare claims instead of paying this amount as premiums to an insurance carrier. In case claims are higher than expected in a year, employers also have to purchase stop-loss insurance.

3. Health Reimbursement Arrangements (HRAs)

Health Reimbursement Arrangements (HRAs) are tax-advantaged accounts funded by employers to reimburse employees for qualified healthcare expenses. Two of the most popular HRA options for small business benefits are the ICHRA and QSEHRA. Below, we’ll compare how each one works and help you determine which is the best fit for your team.