Finding the Best Health Insurance for a Small Business with One Employee

If you’re a solo entrepreneur, you wear every hat, from sales to bookkeeping, and yes, health insurance. The good news: you have solid options. The right path depends on whether you truly have no common-law employees yet, or you’ve hired at least one W-2 employee (not your spouse). Below is a guide to choosing between individual coverage, small-group plans (when eligible), and health reimbursement arrangements like Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and Individual Coverage Health Reimbursement Arrangement (ICHRA), plus the tax angles that matter.

First fork in the road: are you self-employed with no employees?

If you don’t have any common-law employees, you’re considered self-employed for health insurance purposes and you’ll typically buy an individual (Marketplace or off-exchange) plan for yourself and your family. Businesses with no employees other than the owner or spouse aren’t eligible for the Small-Business Health Options Program (SHOP) small-group coverage. (healthcare.gov)

Exception: Some states allow “groups of one” outside SHOP. It’s uncommon and varies by state. Check your state’s Department of Insurance or contact Veritas Risk Management to confirm availability in your state.

Tax note for solos

Self-employed individuals may be able to take the Self-Employed Health Insurance Deduction for premiums they pay (subject to Internal Revenue Service (IRS) rules and limits). The IRS rolled this into Form 7206 beginning with the 2023 tax year and it continues in 2025.

If you have at least one common-law W-2 employee (not an owner or spouse)

You may qualify as a small employer and can explore SHOP or private small-group plans. Eligibility generally requires 1–50 full-time equivalent (FTE) employees with at least one employee who isn’t an owner, partner, or family member. (healthcare.gov)

Small Business Health Care Tax Credit

Qualifying small employers may claim up to 50% of the employer premium contribution (35% for tax-exempt employers) for two consecutive tax years, calculated on IRS Form 8941. (healthcare.gov)

Health Reimbursement Arrangement (HRA) options that work for solos and small employers

Health Reimbursement Arrangements (HRAs) are employer-funded accounts that reimburse employees for eligible medical expenses, often including individual plan premiums. Two common options:

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

• For employers with fewer than 50 full-time equivalent (FTE) employees that do not offer a group plan.
• Reimburses premiums and other eligible expenses tax-free if employees maintain minimum essential coverage (MEC).
• QSEHRA is not a group health plan (lighter compliance burden). (healthcare.gov)
  
  

Individual Coverage Health Reimbursement Arrangement (ICHRA)

• Available to employers of any size; can replace or be offered instead of a traditional group plan by employee class.
• Employees must be enrolled in individual health insurance (on- or off-exchange) or Medicare to receive reimbursements. Employers provide a required advance notice and must obtain/maintain substantiation of enrollment.
  (dol.gov)

Practical tip: ICHRA classes (e.g., full-time vs. part-time, salaried vs. hourly, location) allow you to tailor benefits while meeting the “same terms to the class” rule.

Choose your plan:

Choose an Individual Plan if:

• You have no common-law employees (just you and possibly your spouse).
• You want to control benefits personally and potentially use the self-employed deduction.
• For help, reach out to Veritas Risk Management via our Individuals & Family insurance page.

Choose Small-Group if:

• You have ≥1 W-2 employee (not an owner/spouse)
• You want a traditional plan and potential SHOP tax credit for two years.
• Start on our Business & Professional insurance page.
  
  

Choose QSEHRA if:

• You have <50 full-time equivalent (FTE) employees, don’t offer group coverage, and want a budget-predictable benefit that works with employees’ individual plans.
• We can help you set up a custom HRA program at Veritas Risk Management tailored to your business.
  
  

Choose ICHRA if:

• You want maximum flexibility by reimbursing individual plan premiums by employee class, and you’re comfortable with the notice/substantiation requirements.
• Let Veritas Risk Management guide you with advanced employee benefits solutions.
  
  

Frequently asked questions (solo & micro-employers)

Can a one-person business buy a small-group plan?
Usually not unless your state allows “group of one.” The Small-Business Health Options Program (SHOP) specifically requires at least one non-owner, non-spouse employee.
(healthcare.gov)

Are employer premiums tax-deductible?
In general, employer-paid group premiums are deductible to the business, and S-corporations (S-corps) have special rules when covering greater than 2 percent shareholder-employees (W-2 inclusion; income-taxable but FICA-exempt). Consult with your certified public accountant (CPA).
(irs.gov)

Can I combine a group plan and an ICHRA?
Not for the same employee class. An employer can offer a traditional group plan to one class and ICHRA to a different, properly defined class, but you cannot give an employee the choice between the two for the same class. (See Department of Labor (DOL) / IRS / Health & Human Services (HHS) final rules.)
(dol.gov)

How Veritas Risk Management can help

Since we serve the Tri-Cities region, Northeast Tennessee, and Southwest Virginia, we bring local expertise and partner with major carriers to ensure you’re covered.

Visit our Contact Us page or call us at (423) 292-4142.

About Andrew

Andrew has advised clients since 1997 and founded his agency in 2009. He holds Certified Business Insurance Advisor (CBIA), Certified Insurance Counselor (CIC), Certified Risk Manager (CRM), and Accredited Adviser in Insurance (AAI) designations and focuses on clear guidance that ties real-world examples to practical coverage decisions for solo and small employers.
For more of Andrew’s story, see Meet the Founder.