What are the health insurance options for small business owners?

Health insurance options for small business owners depend on whether you have employees and how many. Sole proprietors shop the individual marketplace; employers with 1–50 full-time-equivalent employees can use the ACA's Small Business Health Options Program (SHOP), a private insurer, or an alternative like an Individual Coverage HRA. HealthCare.gov for employers summarizes all paths.

Option 1: SHOP (Small Business Health Options Program)

The ACA's SHOP marketplace lets employers with 1–50 FTE employees offer ACA-certified group coverage. Employers with 25 or fewer FTEs with average wages below $56,000 may qualify for the Small Business Health Care Tax Credit — up to 50% of the employer's premium contribution (35% for tax-exempt employers) for two consecutive tax years. HealthCare.gov SHOP provides eligibility details.

Option 2: Individual Coverage HRA (ICHRA)

An ICHRA allows employers of any size to reimburse employees for individual health insurance premiums tax-free — up to any amount the employer sets (no IRS cap). Employees choose their own marketplace plan; the employer reimburses premiums. This is more flexible than SHOP and works for businesses with part-time or geographically dispersed workers. IRS Notice 2019-45 and IRS regulations cover ICHRA rules.

Option 3: Sole proprietor / ACA marketplace

If you have no W-2 employees, you shop the individual ACA marketplace like any self-employed person. You can deduct 100% of your health insurance premiums as an adjustment to income (not just an itemized deduction). Income-based premium tax credits may further reduce costs. See the IRS self-employed health insurance deduction page.