What is health insurance?
Health insurance is an employee benefit that helps cover the cost of medical care, including doctor visits, hospital stays, prescription drugs, preventive screenings, and more. It is one of the most valuable and expected benefits in today’s workforce—especially for full-time employees.
For small businesses, offering health insurance can be a game-changer when it comes to attracting talent, retaining staff, and maintaining a healthy, productive team. It also carries important compliance responsibilities under federal and state laws. That’s why tools like Homebase are essential for organizing benefits documentation, managing eligibility, and staying up to date with evolving HR compliance requirements.
Why health insurance matters for small businesses
Providing health insurance isn’t just about checking a box—it can impact nearly every part of your business:
- Boosts recruitment and retention – Health insurance is one of the top benefits job seekers look for, especially among full-time or salaried roles.
- Increases employee wellbeing – Regular access to medical care means fewer sick days, better morale, and stronger long-term productivity.
- Supports compliance – Depending on your size and location, you may be required to offer coverage under laws like the Affordable Care Act (ACA).
- Can offer tax benefits – Businesses that provide coverage may qualify for the Small Business Health Care Tax Credit or other deductions.
Offering health insurance signals that you value your team—not just as workers, but as people.
Types of health insurance plans
Small businesses typically offer one or more of the following:
1. Group health insurance plans
- Offered through a provider or insurance broker
- Premiums are often shared between employer and employee
- Covers essential health benefits under the ACA
- Available through the Small Business Health Options Program (SHOP) marketplace for eligible employers
2. Health Maintenance Organization (HMO) plans
- Require employees to use a specific network of doctors
- Often lower cost, but less flexibility in choosing providers
3. Preferred Provider Organization (PPO) plans
- Offer broader provider options
- Typically higher premiums but more flexibility
4. High-Deductible Health Plans (HDHPs)
- Lower monthly premiums with higher out-of-pocket costs
- Often paired with Health Savings Accounts (HSAs) for tax-free medical spending
5. Health Reimbursement Arrangements (HRAs)
- Employer-funded accounts that reimburse employees for qualified medical expenses
- Can be standalone or offered alongside a group plan
Legal requirements and compliance
1. Affordable Care Act (ACA)
Under the ACA:
- Employers with 50 or more full-time equivalent (FTE) employees must offer health insurance that meets minimum standards or face penalties.
- Coverage must be “affordable” and provide “minimum essential coverage.”
2. State mandates
Some states—like California, Massachusetts, and New Jersey—require individuals to have health insurance, and businesses may have reporting responsibilities.
3. Reporting and documentation
Employers may need to:
- File IRS forms 1094-C and 1095-C
- Distribute summary plan descriptions (SPDs)
- Maintain written plan documents
- Provide COBRA continuation coverage for eligible employees
Failing to comply can result in steep fines or lawsuits, making compliance a critical part of health insurance administration.
Offering health insurance as a small business
Even if you’re not legally required to offer health insurance, doing so can offer competitive and cultural advantages. Here are a few tips:
- Evaluate your budget – Decide how much of the premium you can cover.
- Work with a broker or PEO – These partners can help you find the right plan mix.
- Explore SHOP marketplace options – If you have fewer than 50 employees, you may qualify for small business plans and tax credits.
- Communicate clearly with employees – Provide easy-to-understand plan summaries, deadlines, and enrollment support.
If you’re offering health insurance for the first time, plan ahead and consider onboarding support to streamline the rollout.
How Homebase helps with health insurance compliance and tracking
Homebase makes it easier for small businesses to stay on top of health insurance responsibilities—especially if you’re growing or managing a mix of hourly and salaried staff.
With Homebase, you can:
- Digitally collect and store benefit enrollment forms and employee acknowledgments
- Track employee eligibility based on average hours worked
- Manage new hire paperwork and benefit waiting periods
- Stay organized with secure documentation and compliance alerts
- Coordinate benefit changes alongside scheduling, payroll, and time tracking
You don’t need an HR department to stay compliant—you just need the right tools in place.
Explore Homebase HR & Compliance to simplify benefits management, track eligibility, and protect your business from costly mistakes.