Looking for health insurance for small business with one employee in 2025? You're going to want to find the best small business health insurance option to cover your health needs and those of your small team. There's a few routes small business owners can go here, but make sure you choose a health coverage option that helps you from a tax standpoint and is budget-friendly. Let's check out the best options for health insurance for small business with one employee.
Whether you're a freelancer, consultant, independent contractor, or other self-employed worker who doesn’t have any full time employees, you'll need to add health insurance coverage to that long list of "to dos" you have as a business owner.
More than ever, small businesses are a fundamental building block of the US economy. And they are, as the name says, small!
Out of the 33.2 million small businesses in the country today, 27.1 million are run by a single owner and have no employees. 16% of small businesses have between 1 and 19 employees.
The point is, in 2025, you're in good company. And what pain point do all small business owners have in common? Health benefits for small business.
Since you're self-employed, you're likely either a sole proprietor or a single-member LLC. Sole Proprietorships are awesome because, well, you’re doing your own thing! It can get a little tricky though because there’s no separation between you and your business in the eyes of the IRS (i.e., you’re a “pass-through entity” or “disregard entity”) and owners are generally not considered to be employees even if you’re working for your company full-time. This includes Sole Proprietorships and Single-Member LLCs that did not elect corporate taxation.
Even if we're just talking about health insurance for you as a self-employed individual, it's incredibly important to play your cards right from a tax perspective, find a plan that will work for your budget, and to set yourself up for growth if you add members to your team moving forward.
If you're looking into health insurance companies or shop plans for your one person small business, it's important to weigh your health care options. Here are your choices in 2025 for healthcare for business owners:
We're going to cover those last couple points in more detail.
This seems a littler counterintuitive if you are a one-man or one-woman show looking to sign up for a group plan. But some states require that insurance companies offer guaranteed-issue group health polices to self-employed business owners with no employees. This chart from Kaiser Family Foundation shows states where a self-employed group of one can buy a guaranteed-issue group health policy.
These health insurance coverage plans are well known, tax-free, with solid product options but they also come at a high price, with very little flexibility, and with unpredictable year over year changes - all things that are tough for small businesses to accommodate. But don't worry, they aren't the only option for your health care.
According to a 2023 Bureau of Labor Statistics Report, roughly 16.2 million out of 266 million (6%) Americans are self-employed.
While an individual plan or a group plan for one are both options to consider, we believe there's a better way, thanks to recent regulatory rule updates that increase the accessibility of health reimbursement arrangements. As advocates of small businesses of all kinds (we are a small business as well!), we like to help fellow business owners sort out the best health insurance option for them and cut through all the jargon and confusion.
The best strategy for your health coverage actually depends on whether or not you're married (bet you didn't expect that!). If you are self-employed and are single, just take the self-employed tax deduction and purchase an individual health plan (or you may qualify for a group plan in certain states).
If you are a sole proprietor and work for yourself and have no plans to hire, and you are married, then we can explore a few more options. Recall that HRAs only work for employees. Although as a proprietor you generally are not eligible for an HRA because you’re not an employee, your spouse can be an employee and eligible for an HRA and health plan that covers you.
Here’s the strategy if you’re a sole proprietor with no employees and you’re married:
This strategy only works if you don’t hire any other W-2 employees that would be eligible for either the QSEHRA and assumes that you and your spouse don’t own any other businesses that have employees (common ownership rules would likely apply and the plan would fail to meet Section 105 requirements). You’ll need to keep good records, too. This sounds like a loop-hole and it is, but it’s held up in tax court. The main case was Shellito v. Commissioner.
You're probably wondering what all of this HRA business is about. Let us explain. As a self-employed individual, you can reimburse premiums and medical expenses with an HRA. The reimbursement model (sometimes called a “defined contribution”) gives you a greater ability to control costs and provides more options to choose from. This is very different from the current model of group insurance (sometimes called a “defined benefit”) where you choose a plan and are limited to the options that fit.
Many small business owners like you are opting for the new reimbursement model instead (aka an HRA), which offers benefits galore, helps with budget control, and is more predictable.
There are two types we are going to talk about here: QSEHRAs and ICHRAs. (Sorry in advance for more acronyms coming your way).
First up is QSEHRA (pronounced “Q-Sarah” for fun), a more efficient way for small businesses to offer health insurance. To cut quickly through the insurance jargon (it stands for “Qualified Small Employer Health Reimbursement Arrangement” by the way), a QSEHRA allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free.
QSEHRA benefits include:
If you've read through some of the limitations of QSEHRA and feel they're not the right fit, there's another HRA available. The individual coverage HRA (ICHRA) has a few benefits that might make it more appealing.
Pro-tip: Note that with an ICHRA, if you're on your spouse's plan and planning to reimburse premiums with the HRA, it won't work if your spouse is on a group plan. It only works if they've purchased a plan on the individual market.
While we always advise our clients to speak with their CPA before jumping in, we are ready to chat on our website if you have any specific questions about your business and how HRAs could help. Setting up a small business HRA or setting up an ICHRA is simple and quick, and our team is here to help if you need it.
And remember, what's best for one company isn't necessarily best for another. It is important to consider your company's unique makeup and your local market conditions to determine what the best plan will be for your company benefits.
This post has been updated to reflect the latest regulatory and policy changes for 2025.