12 Mistakes Small Business Owners Make Buying Health Insurance

Key Takeaways

• Small businesses with fewer than 50 full-time-equivalent employees generally aren't federally required to offer health insurance, so owners can focus on their own coverage first.
• Marketplace enrollment is usually limited to Open Enrollment or a Special Enrollment Period after a qualifying life event, so missing the window can leave you uninsured for months.
• Compare total costs, not just monthly premiums: deductibles, copays, out-of-pocket maximums, networks, and prescription coverage can matter more than a low premium.
• Confirm your doctors, hospitals, and daily prescriptions are covered before enrolling, since network and formulary gaps are a common and costly surprise.
• Owners with employees may qualify for the Small Business Health Care Tax Credit, worth up to 50% of eligible premium costs, if they meet the size, wage, and SHOP requirements.
• Price out family coverage separately, since family deductibles and out-of-pocket limits work differently from individual plans and can change the total cost significantly.

Running a small business means wearing a dozen hats. You are the boss, the bookkeeper, the sales team, and, if we're being honest, the person who takes out the trash. With all that on your plate, it's easy to push health insurance to the bottom of the list. But it is also easy to get it wrong. So how do small business owners get health insurance without wasting money or missing out on coverage they need?

The good news is that you have real options. You can shop individual plans, look into small-group coverage if you have staff, or explore employer reimbursement arrangements. The not-so-good news is that a few common slip-ups can cost you thousands of dollars and plenty of stress. Don't worry, we've all been there. Let's walk through the 12 biggest mistakes so you can sidestep them with confidence.

First, a Quick Look at How Small Business Owners Get Coverage

Before we get into the mistakes, it helps to know the basic paths. Owners really face two separate decisions: how to insure themselves and their family, and whether to offer coverage to employees.

• Individual or family plans: Bought through the ACA Marketplace or through private insurers and licensed agents. This is the route most owners without employees take.
• Small-group plans: Offered to employees through an insurer, a broker, or the Small Business Health Options Program (SHOP) where available.
• Reimbursement arrangements: Options like a QSEHRA or an ICHRA let an employer reimburse employees for individual premiums. Rules apply, so check with a benefits or tax pro.

If you want a deeper look at each path, our guide on small business owner health insurance options for 2026 breaks them down nicely. At Baker Health Solutions, Austin Baker focuses on helping owners and their families compare individual and family coverage, both Marketplace and private plans, side by side.

12 Health Insurance Mistakes Small Business Owners Make

1. Assuming You Have to Offer Group Coverage

Many new owners panic and think they must offer health insurance. Not so. Businesses with fewer than 50 full-time-equivalent employees generally are not required by federal law to offer coverage. Larger employers, called Applicable Large Employers, may face penalties if they don't offer qualifying coverage.

That means if you're a solo owner or have a small crew, you have breathing room. You can focus on getting your own coverage first and think about group benefits later.

2. Ignoring the Individual Market Altogether

Some owners believe group coverage is the only "real" option. In truth, an owner without employees can usually buy individual or family coverage through the Marketplace or through an insurer or agent. For many households, this is the simplest and most flexible route.

It's worth knowing that individual plans come in a few flavors, and they are not all alike. Our post on Marketplace vs. private plans for sole proprietors explains how to tell them apart.

3. Missing Your Enrollment Window

This one stings. Marketplace enrollment is generally limited to the annual Open Enrollment period and to Special Enrollment Periods triggered by qualifying life events. Miss the window, and you may be stuck without coverage for months.

Mark your calendar early. If you want to plan ahead, check out 7 key dates for open enrollment for health insurance 2027. And if something big changes in your life, such as a move, a marriage, or a new baby, see whether you qualify using this list of qualifying life events for health insurance.

4. Shopping Only by Monthly Premium

A low monthly bill looks great until you need care. A plan with a tiny premium often comes with a big deductible and a high out-of-pocket maximum. That can leave you paying thousands before coverage really helps.

Look at the whole picture instead. Compare these pieces side by side:

• Monthly premium
• Deductible
• Copays and coinsurance
• Out-of-pocket maximum
• Prescription drug coverage

Not sure how to pick a deductible that fits your budget? These tips for picking a good health insurance deductible can help, and so can understanding your out-of-pocket maximum.

5. Skipping the Doctor and Prescription Check

Here's a heartbreaker: you pick a plan, then find out your favorite doctor isn't in the network. Or your daily medication isn't on the formulary. Always confirm your doctors, hospitals, and prescriptions before you enroll.

A quick check now can save you from a nasty surprise later. This is also where a licensed agent earns their keep, since they can help you compare networks across plans.

6. Leaving Out Your Family

Business owners often shop for themselves and forget to price out the whole household. Family coverage works differently than single coverage, especially when it comes to deductibles and out-of-pocket limits. Compare how the family deductible differs from the individual one before you commit.

If you have a spouse and kids, you'll want to understand what drives the price. Our breakdown of the factors that decide how much family health insurance costs is a good place to start, and you can also read about family deductible vs. individual deductible.

7. Not Checking Premium Tax Credit Eligibility

Some owners assume they earn too much to get any help with premiums, so they never even check. Premium tax credit eligibility depends on household income and other coverage circumstances, and it can change from year to year. It's worth running the numbers rather than guessing.

Tax treatment and subsidies depend on your personal situation, so it's smart to talk with a qualified tax professional too. You can also explore Healthcare.gov to see what the Marketplace offers in your state.

8. Confusing Business Structure With Coverage Rules

Are you a sole proprietor, an LLC owner, or an S corporation owner? Your structure can change how you approach coverage and how things get reported for tax purposes. Many owners don't realize this until tax season rolls around.

To learn more, read about how health insurance for LLC owners really works and how it works for S corporation owners. Then run your specific situation by a tax adviser.

9. Overlooking the Small Business Tax Credit

If you do have employees, you may miss out on a valuable credit. The Small Business Health Care Tax Credit can be worth up to 50% of eligible employer premium costs, or up to 35% for eligible tax-exempt employers. It generally applies to employers with fewer than 25 full-time-equivalent employees who pay at least 50% of premium costs and offer coverage through SHOP.

The average-wage limit changes over time, with current HealthCare.gov guidance giving an approximate threshold of $65,000 per employee. Always confirm current details before you plan around it.

10. Underestimating What Group Coverage Really Costs

Offering a plan to your team is a wonderful perk, but it's not cheap. According to the KFF 2025 Employer Health Benefits Survey, average annual employer-sponsored premiums were $9,325 for single coverage and $26,993 for family coverage. Covered workers contributed an average of $6,850 toward family premiums.

Those figures also keep climbing. Family premiums rose 26% from 2020 to 2025 and 53% from 2015 to 2025. Build a realistic budget before you promise anything to your staff.

11. Not Knowing the Difference Between Plan Types

Marketplace plans are ACA-compliant and cover pre-existing conditions. Private plans can look different. Some are medically underwritten, which may involve health questions, eligibility restrictions, and benefit limitations. They are not identical to Marketplace coverage, and neither type is automatically "better." It depends on your health, your budget, and your goals.

That's why a side-by-side comparison matters so much. Our overview of how the Health Insurance Marketplace works in 2026 can help you understand one side of that comparison.

12. Going It Alone Without Guidance

Finally, many owners try to figure it all out in the few spare minutes between customers and invoices. Plan names blur together, jargon piles up, and decisions get made in a rush. You don't have to do this by yourself.

A licensed independent agent can explain your options in plain English and compare plans for you. Austin Baker at Baker Health Solutions does exactly that, from the first call through enrollment and beyond. You can visit us on Google — Baker Health Solutions to see what others have shared about working with the team.

A Quick Comparison of Your Main Options

How to Get Started: A Simple 5-Step Plan

Feeling a little overwhelmed? Here is an easy path to follow. Take it one step at a time, and you'll be in good shape.

1. Decide who needs coverage. Just you? You and a spouse? The whole family? Do you have employees?
2. List your must-haves. Write down your doctors, prescriptions, and the care you expect to use this year.
3. Set a realistic budget. Think about both the monthly premium and what you could afford if you needed care.
4. Compare plans side by side. Look at premiums, deductibles, out-of-pocket maximums, networks, and drug coverage together.
5. Confirm your enrollment timing. Check whether you are in Open Enrollment or have a qualifying life event, then enroll before the deadline.

If you'd like help with step four, you can start with a free online quote or see how the process works before you reach out.

Where Baker Health Solutions Fits In

Baker Health Solutions is an independent health insurance agency led by Austin Baker, licensed in 28 states. Austin works with self-employed people, small business owners, families, and people facing COBRA or high Marketplace premiums. He compares private and Marketplace options side by side and explains everything in plain language, with no pressure.

A quick note on scope: Austin focuses on individual and family coverage for business owners and their households, plus dental and vision options. He does not offer Medicare services, and he can't promise specific rates, approvals, or savings. What he can do is walk you through your choices so you feel confident. You can read more about Austin and check the licensing page to confirm your state is covered.

If you're self-employed or just getting started, these resources may also help: 5 health insurance tips for self-employed people and how to compare self-employed health insurance plans.

Take the Stress Out of Choosing Coverage

Getting health insurance as a small business owner doesn't have to feel like a maze. Avoid the mistakes above, know your enrollment dates, compare more than just the premium, and don't be shy about asking for help. Your health, and your family's health, are the foundation your business is built on.

Ready to see your options? Get a quote today or reach out to Austin for a short, friendly conversation. No pressure, just clear answers.

FAQs

Q: How can a small business owner get health insurance for themselves?

A: Most owners without employees shop for individual or family coverage through the ACA Marketplace or through a licensed agent who can also show private plan options. Just keep in mind that Marketplace enrollment is generally limited to Open Enrollment or a Special Enrollment Period. A friendly side-by-side comparison can help you pick what fits your budget and health needs.

Q: Does a small business have to provide health insurance to employees?

A: Generally, no. Businesses with fewer than 50 full-time-equivalent employees are not federally required to offer health insurance. Larger employers, known as Applicable Large Employers, may face requirements if they don't offer qualifying coverage, so it's wise to confirm your status with a benefits or tax professional.

Q: Can a small business get a tax credit for offering health insurance?

A: Possibly! The Small Business Health Care Tax Credit can be worth up to 50% of eligible premium costs (35% for eligible tax-exempt employers). It generally requires fewer than 25 full-time-equivalent employees, average wages below an adjusted limit, paying at least 50% of premiums, and offering SHOP coverage. Check current rules with HealthCare.gov and a tax professional.

Q: What is the difference between individual and small-group health insurance?

A: Individual insurance is bought by a person or family for their own coverage, while small-group insurance is purchased by an employer for a team of employees. Group plans may have participation and contribution rules, while individual plans are tied to your own household and enrollment window. Which one works best depends on whether you have employees and what you want to offer.

Q: When can a small business owner enroll in health insurance?

A: For individual Marketplace plans, you can generally enroll during the annual Open Enrollment period or during a Special Enrollment Period after a qualifying life event. SHOP-eligible employers can generally start group coverage at any time of year, subject to plan and state requirements. Always double-check the dates for your state so you don't miss a deadline.