Health Benefits Without the Headache: What SMBs Need to Know

Offering health insurance is a big milestone for any small business—but it can also feel like stepping into a maze. Between plan types, confusing terminology, broker relationships, and compliance rules, it’s easy to feel overwhelmed.

If you’re asking yourself:

• What kind of health plan should I offer?
  
  
• Do I need a broker, or should I look at a PEO?
  
  
• How do I avoid getting in trouble with compliance?
  
  

You’re in the right place.

Let’s walk through what you actually need to know—without the jargon and headaches.

Step 1: Understand the Types of Health Plans

Choosing a plan starts with understanding your options. Here's a simplified breakdown of the most common health insurance plan types small businesses consider:

1. Traditional Group Health Plans

These are standard employer-sponsored plans offered through insurance carriers like Blue Cross, Cigna, or UnitedHealthcare. Employers typically pay a portion of the premium, and employees pay the rest.

Pros:

• Familiar to employees
  
  
• Wide provider networks
  
  
• Good for attracting and retaining talent
  
  

Cons:

• Can be expensive
  
  
• Must meet participation requirements (usually 70% of eligible employees must enroll)
  
  

2. High Deductible Health Plans (HDHPs) + HSAs

These plans have lower monthly premiums but higher deductibles. They can be paired with Health Savings Accounts (HSAs), which let employees save pre-tax dollars for medical expenses.

Pros:

• Lower cost to employer
  
  
• Employees can save tax-free
  
  
• Encourages thoughtful healthcare spending
  
  

Cons:

• Can create cost anxiety for employees without savings
  
  
• Less coverage upfront
  
  

3. Level-Funded or Self-Funded Plans

You pay a set amount each month to cover employee claims, plus stop-loss insurance in case expenses go above a certain threshold. If your group is healthy, you might get a refund.

Pros:

• Cost control and potential for savings
  
  
• More transparency in claims and spending
  
  

Cons:

• Riskier for small groups
  
  
• Requires careful financial planning
  
  

4. ICHRA (Individual Coverage HRA)

Rather than offering a group plan, you reimburse employees tax-free for individual health plans they choose on their own.

Pros:

• Flexible and customizable
  
  
• Employer controls the budget
  
  

Cons:

• Employees shop for their own coverage
  
  
• Less control over what plan features your team ends up with
  
  

Step 2: Broker vs. PEO—Who Should You Work With?

Once you know the type of plan you’re leaning toward, you’ll need to decide how you want to administer it.

What a Broker Does

A licensed health insurance broker helps you shop for, choose, and manage group health insurance plans. They can offer options from multiple carriers and help with renewals, claims questions, and compliance.

Good fit for you if:

• You want to keep full control of your business’s payroll and HR
  
  
• You’re offering benefits for the first time and need one-on-one guidance
  
  
• You’re not ready to hand off your back office to another company
  
  

What a PEO Does

A Professional Employer Organization (PEO) becomes a co-employer. That means they manage your HR, benefits, payroll, and compliance under their umbrella. In return, you get access to their larger health plans—often at better rates.

Good fit for you if:

• You want an all-in-one solution
  
  
• You’re struggling with HR, compliance, and payroll
  
  
• Your team is small, and you’re looking for cost-sharing benefits
  
  

But be careful:
 With a PEO, you lose some autonomy. You're not always in the driver’s seat with plan selection or service responsiveness.

Step 3: Stay Compliant (So You Can Sleep at Night)

Health insurance comes with rules—and even small businesses can get penalized if they’re not careful. Here are the big ones:

1. ACA Requirements

If you have 50 or more full-time employees (or equivalents), you're required to offer affordable health insurance that meets minimum value.

Tip: Even if you're under 50, offering health insurance helps you stay competitive—and reduces turnover.

2. ERISA Compliance

If you offer benefits, you’re likely subject to ERISA (Employee Retirement Income Security Act). That means creating Summary Plan Descriptions (SPDs), handling COBRA notifications properly, and following specific fiduciary responsibilities.

3. 5500 Filings

If you offer a group plan and have 100+ participants, you're likely required to file IRS Form 5500 annually.

4. State Laws

Each state has its own regulations around coverage, mandated benefits, and contribution rules. Make sure your broker or partner understands the laws in your state.

Bonus: What Your Employees Actually Want from Their Health Plan

As a small business, you don’t need to offer a gold-tier plan. You just need to offer something that feels:

• Simple to use – No mystery bills or vague coverage terms
  
  
• Accessible – A reasonable deductible and manageable premiums
  
  
• Communicated well – Don’t just “set it and forget it”; educate your team about what’s included
  
  

This is especially important if your employees aren’t used to having coverage or come from hourly/service backgrounds. Making it easy to use their plan makes it feel more valuable—even if it’s not the fanciest option out there.

Final Thoughts: You Can Offer Health Benefits Without Losing Sleep

Offering health insurance as a small business doesn't have to feel like a giant risk or burden. When you choose the right plan type, the right partner, and keep compliance in check, it becomes a powerful tool to attract and keep great people.