Health Insurance for Small Business Owners: What Rising Costs Mean in 2026

ByBNW TEAM

Health insurance for small business owners covers two decisions: how you insure yourself, and whether you offer coverage to your team. The main options are a small group plan, an individual coverage HRA (ICHRA), or private individual plans. With premiums rising again, the right structure can make a real difference to your budget.

Health costs are climbing faster than many small business budgets. KFF’s 2025 Employer Health Benefits Survey found that average family premiums rose 6% in one year to $26,993, while single coverage rose 5% to $9,325.

For a company with a handful of employees, that increase can mean thousands of extra dollars a year. Yet health benefits remain one of the strongest tools for hiring and keeping good people.

Key takeaways

  • Premiums are rising, so reviewing your plan every year matters.
  • Smaller firms are far less likely to offer benefits than large ones.
  • ICHRAs give owners a fixed, predictable benefit budget.
  • Owners need to plan their own coverage, not just their team’s.

Why are small businesses falling behind on health benefits?

Large companies almost always offer health insurance. Smaller ones often do not. According to the same KFF survey, 59% of firms with 10 to 199 workers offer health benefits, compared with 97% of firms with 200 or more.

That gap matters when you compete for talent. A candidate choosing between your company and a larger competitor will often weigh benefits as heavily as salary.

The main reasons small firms hold back:

  • Cost uncertainty from year-to-year premium increases.
  • Administrative work with no dedicated HR team.
  • Participation rules that can be hard to meet with a small staff.

What are the health insurance options for small business owners?

Most small businesses choose one of three structures.

  1. Small group health plan. The traditional route. You choose a plan from a carrier such as Blue Cross Blue Shield, UnitedHealthcare, Aetna, Cigna or Humana, and contribute toward employee premiums. Group plans often offer strong PPO networks.
  2. Individual Coverage HRA (ICHRA). You set a fixed monthly allowance, and employees buy their own individual plans. You reimburse them tax-free up to that amount. Adoption is still early: KFF reports that 4% of firms offering health benefits used an ICHRA in 2025.
  3. Private individual plans for owners only. If you are a solo owner or not ready to cover a team, you can buy your own private PPO or HMO plan. Self-employed owners may qualify for a tax deduction on premiums using IRS Form 7206.

Group plan or ICHRA: which is better for a small business?

A small group plan is familiar and simple for employees. You choose one or a few plans for the whole team, and the admin work is moderate. The downside is cost control, because premiums can rise each year. It suits teams that want one shared, rich PPO.

An ICHRA gives you a fixed allowance you set, so your budget stays predictable. Each employee picks their own plan, which means more choice but also more decisions for them. The admin work is light to moderate. It suits owners who want cost certainty above all.

There is no single right answer. A five-person design agency and a 30-person construction firm usually need different structures.

How much does health insurance cost a small business?

Your real cost depends on how many people you cover, their ages, your location and how much of the premium you pay. The KFF national averages above give a useful benchmark, but quotes can vary widely by carrier and region.

To estimate your budget:

  1. Decide your contribution. Many employers pay a set percentage of employee-only premiums.
  2. Choose the plan level. Lower deductibles mean higher premiums.
  3. Factor in tax savings. Employer contributions are generally a deductible business expense.
  4. Get multiple quotes. Prices for the same coverage can differ sharply between carriers.

How can small business owners control rising premiums?

You cannot stop premiums from rising, but you can limit the damage:

  • Review your plan every renewal instead of auto-renewing.
  • Compare carriers each year, since pricing shifts from year to year.
  • Consider a defined budget through an ICHRA if unpredictability is the main pain.
  • Offer plan tiers, so employees can trade a higher deductible for a lower premium.
  • Do not forget yourself. Many owners insure their team and leave their own coverage unplanned.

What should small business owners do before renewal?

Your renewal notice usually arrives 30 to 60 days before your plan year ends. That is a short window, so start early.

  1. Pull last year’s numbers. Note what you paid in premiums and how many employees enrolled.
  2. Ask your team what matters. Some value low deductibles, others want specific doctors in-network.
  3. Request quotes from several carriers at least 60 days out.
  4. Compare total cost, not just premiums. A cheaper plan with a high deductible can cost employees more.
  5. Decide on structure. If costs jumped sharply, compare your group plan against an ICHRA.

Owners who follow this routine rarely get surprised by a renewal they cannot afford.

Should small business owners work with a broker?

A licensed broker compares group plans, ICHRAs and individual options across carriers, and you typically pay the same premium as buying direct. Brokers are paid by carriers, so the guidance costs your business nothing extra.

A broker also handles renewals, employee questions and plan changes, which saves real time for owners without an HR department.

In Texas, Custom Health Plans has advised small businesses, self-employed owners and families for more than 30 years. Their team compares coverage from Blue Cross Blue Shield, UnitedHealthcare, Aetna, Cigna and Humana, so owners can see every option side by side before renewal.

The bottom line

  • Premiums rose 5 to 6% in 2025, so annual reviews matter.
  • Group plans offer simplicity and strong PPO networks.
  • ICHRAs give a fixed, predictable budget.
  • Owners need a plan for their own coverage too.

Choosing health insurance for small business owners is no longer a once-and-done decision. Review your options each year, compare carriers, and you can offer benefits that help you hire well without losing control of costs.

This article is educational and not legal, tax or medical advice. Plan rules and prices vary by state and carrier.