Small business health insurance in Connecticut

When small business owners think about insurance, traditional fully insured group health coverage is often the first option that comes to mind. But it’s not the only path, and in many cases, it may not be the most beneficial. While group health plans remain common, they aren’t always the best fit for every small business.

Traditional group coverage may not work for your business if:

• You can't afford a fully-insured group health plan from an insurer.
• You can't meet the policy's minimum participation rates.
• You have employees residing in multiple states, making it difficult to offer a single health plan.
• Your employees are high utilizers of the benefit, leading to higher premiums.

In these cases, you may find yourself covering expenses out of pocket (self-insuring) or forgoing health benefits altogether. But there’s a better alternative: replacing a traditional group health insurance plan with a stand-alone health reimbursement arrangement (HRA).

An HRA gives employers more control over both costs and benefits management. Instead of funding an expensive group health plan for the entire team, this cost-effective option allows you to reimburse employees for their individual health insurance premiums.

Health insurance is the foundation of a competitive employee benefits package. It not only ensures compliance with state and federal laws but also enhances your reputation as an employer of choice.

Let's go over why offering health benefits to your employees in Connecticut is essential.

The ACA’s employer mandate

The Affordable Care Act (ACA) requires employers with 50 or more full-time equivalent employees (FTEs) to offer affordable health insurance that meets minimum essential coverage (MEC) and minimum value (MV) criteria. This requirement is known as the employer mandate.

Employers in Connecticut with 50 or more FTEs, known as applicable large employers (ALEs), may face tax penalties if both conditions are met:

• They don't provide health insurance coverage to at least 95% of their full-time employees and their dependents.
• Any of those employees gets subsidies on the individual health insurance market.

ALEs can also face penalties for not offering MV or affordable coverage if at least one employee gets a subsidy for an individual market plan.

Benefits of offering health insurance

Employers with fewer than 50 FTEs aren't legally obligated to provide health insurance. Nonetheless, there are several compelling reasons to do so.

The advantages of providing health insurance to your employees include:

• Tax benefits
• Improved recruitment and retention
• Increased productivity
• Decreased absenteeism due to preventable health conditions and illnesses
• Improved health outcomes

Failing to offer health benefits puts you behind your competition. PeopleKeep by Remodel Health's 2024 Employee Benefits Survey found that 81% of employees consider an employer’s benefits package an important factor when deciding whether to accept a job offer. Another 92% of employees rated health benefits as important.

Running a small business brings unique challenges, particularly around health insurance. Unlike larger organizations with bigger budgets and dedicated benefits teams, small business owners must stretch their time and resources wisely. That’s why it’s essential to carefully assess your health insurance options and make confident, well-informed decisions.

Here's how small employers can offer health coverage to their employees:

• Traditional group health insurance
• Health reimbursement arrangements (HRAs)
• Health stipends
• Ancillary benefits, like vision and dental plans, health savings accounts (HSAs), and flexible spending accounts (FSAs)

Group health insurance plans in Connecticut

Let's start with fully-insured group plans. In these plans, employers split the cost of premiums with their employees. Employers typically cover a larger portion of the expenses. Employers can also extend coverage to include both spouses and children, significantly enhancing the overall value of the benefits offered to their staff.

Here are the types of group health insurance plans available in Connecticut:

• Preferred provider organization plans (PPOs): PPOs are the most popular choice among health plans. With a PPO, members can access a network of healthcare providers but also have the flexibility to receive services outside the network, typically at a higher cost.
• Health maintenance organization plans (HMOs): HMOs offer extensive healthcare services through designated provider networks. Members must choose primary care physicians (PCPs) who oversee their healthcare requirements. Their PCP handles referrals for specialist visits as needed.
• Exclusive provider organization plans (EPOs): EPOs combine elements of both HMOs and PPOs. They offer members access to a designated network of providers, and members can see specialists without needing referrals. However, an EPO doesn't cover services from providers outside its network.
• Point of service plans (POSs): POS plans offer affordable rates for in-network doctor visits and also cover out-of-network services. Similar to HMOs, these plans require members to get referrals from their PCPs to consult specialists.

Larger employers often secure lower rates on group health plans because they can spread risk across a bigger employee pool. They also share premium costs with their workforce. According to KFF, employers typically cover 83% of premiums for individual plans and 72% for family plans. However, to qualify for a group plan, at least 70% of your employees must participate.

If you want to save money, you can offer a high deductible health plan (HDHP). An HDHP offers cost savings by reducing monthly premium costs for employers and employees. However, HDHPs come with higher deductibles, meaning employees must cover more out-of-pocket costs before their insurance starts to pay.

To avoid higher costs for your team, you can offer a group coverage HRA (GCHRA) alongside your HDHP. With a GCHRA, or integrated HRA, you can offer tax-free reimbursements to your employees for their out-of-pocket expenses, such as deductibles.

Small businesses with fewer than 50 FTEs can secure small business health insurance by working with a broker or a health insurance company directly. Additionally, if your business has fewer than 25 employees, each earning an average annual wage below $50,000, you may qualify for the Small Business Health Care Tax Credit.

These are the companies providing small group health plans in Connecticut for 2026, as listed on HealthCare.gov's rate review website²:

There are also self-funded group plans. With this option, employers take on the responsibility of directly insuring employees and paying medical claims based on plan documents. While this approach can reduce premium costs for smaller employers, it carries significant financial risks. Unexpected or high-cost claims can quickly cut through your budget. To manage this risk, employers often purchase stop-loss insurance, though these policies can be costly.

How to take advantage of individual health insurance with an HRA in Connecticut

If you’re worried about costs or have a limited number of employees, consider an alternative health benefit. Instead of a traditional group health plan, offer your team a stand-alone health reimbursement arrangement (HRA). An HRA provides a budget-friendly health coverage option by allowing you to reimburse employees for their individual health insurance premiums.

You can reimburse more than 200 eligible expenses with an HRA, including:

• Monthly premiums for health, vision, and dental plans
• Dental and vision expenses
• Preventive care
• Emergency care
• Prescription drugs
• Over-the-counter medication

Two of the most popular stand-alone HRAs are:

• The individual coverage HRA (ICHRA): Employers of all sizes can offer ICHRAs, but it's particularly helpful for ALEs since they can satisfy the employer mandate. With no annual cap on contributions, employers have full flexibility in setting allowance amounts. They can also tailor benefits by using 11 employee classes, along with factors like age and family status. To participate, employees must have their own individual health insurance plans.
• The qualified small employer HRA (QSEHRA): The QSEHRA is exclusively for small employers with fewer than 50 FTEs. It comes with annual contribution limits and doesn't allow employers to adjust allowances by employee class. However, you can still vary allowances based on factors like age and family status. Unlike an ICHRA, employees only need a plan that provides minimum essential coverage (MEC) to participate. They can qualify even if covered under a spouse’s or parent’s health plan.

Several factors impact the cost of health insurance in Connecticut, such as:

• The employee’s, spouse’s, or dependent’s age
• Rating area (for individual and small group plans)
• The metal level or value of the plan (for small group and individual plans)
• The group’s medical claims history (for large group plans)

Based on KFF's 2024 Employer Health Benefits Survey³, the average annual premium in the U.S. is:

• $8,951 for individual coverage
• $25,572 for family coverage

The table below shows the average lowest-cost premiums for each metal tier plan offered in Connecticut on the federal exchange for 2025, according to KFF⁴.

Connecticut residents can enroll in health insurance through the state exchange, Access Health CT⁵. The annual Open Enrollment period runs from November 1, 2025, to January 15, 2026. Outside of these dates, residents who experience qualifying life events can still enroll or make changes to their 2026 coverage.

Individuals with marketplace plans may be eligible for federal premium tax credits, also called premium or health insurance subsidies. During the 2025 Open Enrollment⁶ period, more than 128,000 Connecticut residents received these tax credits for their marketplace health plans, according to KFF.

Eligibility for federal premium tax credits was originally based on federal poverty guidelines, as determined by the IRS and the Marketplace. The Inflation Reduction Act removed the upper-income limit through the end of 2025, allowing anyone whose premiums exceed 8.5% of their household income to qualify for these credits. Without an extension, eligibility may return in 2026 to those with incomes between 100% and 400% of the FPL only.

The table below shows the health insurance companies offering plans on Connecticut’s individual market for 2026, according to HealthCare.gov’s rate review website⁷:

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows employees to keep their employer-sponsored health insurance for a limited period after leaving their job. Federal law requires employers with 20 or more full-time employees who offer health insurance to provide COBRA coverage. In addition, Connecticut has its own “mini-COBRA” law⁸ that extends similar protections to employees of smaller businesses with fewer than 20 workers.