Small business health insurance in Massachusetts

Importance of small business health insurance

Small businesses are the driving force of the Massachusetts economy. Adding health insurance to your benefits package is an excellent way to stand out among your competitors and build a happy and healthy workforce. We’ll review the most important reasons for offering health benefits to your team.

The employer mandate

The federal government doesn’t require small businesses in Massachusetts to offer health insurance. However, the Affordable Care Act requires applicable large employers (ALEs) to follow the employer mandate.

Businesses with 50 or more full-time equivalent employees (FTEs) must offer affordable health benefits that provide minimum essential coverage (MEC) to at least 95% of their full-time workers and their dependents. If you don’t offer affordable MEC to at least 95% of your full-time employees and at least one of those workers purchases health insurance with a subsidy on the individual market, you could face costly penalties.

ALEs could also be subject to a fine if their employer-sponsored coverage doesn’t pay for at least 60% of covered healthcare expenses for the standard population. This is to ensure your coverage provides minimum value.

The ACA doesn’t require small businesses and nonprofits in Massachusetts with fewer than 50 FTEs to offer health insurance at their company. But if you do, you’ll be better positioned to attract and retain top-quality workers.

The Massachusetts individual mandate

The federal government repealed the ACA’s individual mandate in 2019. This previously required individuals in every state to have health coverage. But Massachusetts has its own state-specific requirements.

Since 2006, Massachusetts residents age 18 and older and individuals who will become residents within a 63-day timeframe must have health insurance that provides minimum creditable coverage (MCC) throughout the year or pay a penalty. The penalty amount depends on your income, age, and family size.

Small business owners can help employees avoid the individual mandate penalty by providing qualifying health insurance coverage.

Benefits of providing health insurance to employees

Offering health insurance to your staff has many advantages beyond complying with the employer mandate or helping employees comply with the state’s individual mandate.

Having a comprehensive health benefit has several perks, including the following:

• You can better entice job seekers and retain qualified employees
• It has tax advantages for employers and employees
• It improves wellness, productivity, and engagement across your organization

Health insurance is crucial for keeping employees happy and engaged. Workers who feel you value and care for them are more likely to stay at your company instead of seeking new jobs. This can help you keep turnover low and avoid the high cost of hiring new staff members.

Adding an attractive health benefit to your compensation package can also help you attract new workers. Our 2024 Employee Benefits Survey found that 81% of employees said a company’s benefits package is an important consideration when determining whether to accept a job. Our survey also found that 92% of employees rated health benefits as somewhat or very important.

Another primary concern for employers is productivity and wellness. Providing health coverage helps boost productivity because employees can access medical care when they need it and better focus when at work. Healthier employees are also less likely to miss work due to illness or stress about receiving an unexpected medical bill.

Small business health insurance options in Massachusetts

Understanding health insurance in Massachusetts can be tough for small businesses. There are many coverage options available, and they all meet different needs. So, it’s vital to know the details of each one.

Some of the options available to small businesses include:

• Traditional group health insurance
• Health reimbursement arrangements (HRAs)
• Association health plans (AHPs)
• Supplemental benefits

Each choice has its features, benefits, and costs to consider, allowing small business owners to customize their health insurance policies based on their budget and diverse workforce.

Group health insurance in Massachusetts

Traditional health insurance plans are a common choice for small businesses in Massachusetts. Employers can share the cost of premiums with employees, making the policy more affordable. You can also include coverage for employees’ spouses and dependents.

Group plans typically come in one of the following models:

• Preferred provider organization plans (PPOs): This is the most common type of plan. PPOs offer a network of healthcare providers who have agreed to provide care at lower prices but also cover services performed outside of that network.
• Health maintenance organization plans (HMOs): HMO plans provide various healthcare services through a network of providers who work exclusively with the HMO or agree to serve its members.
• Exclusive provider organization plans (EPOs): An EPO combines elements of both an HMO and a PPO. Individuals covered by an EPO must seek care from a preferred network of providers, but can also see specialists without needing a referral.
• Point of service plans (POSs): With a POS plan, you pay less when you visit in-network doctors. But you need a referral from a primary care doctor to see a specialist.

The best plan for you and your employees will depend on your needs and budget.

Larger companies tend to choose group health coverage because they have a large enough risk pool to lower the cost of monthly premiums. However, most insurers require you to enroll at least 70% of your employees in the plan. If you don’t, you won’t be able to offer it. Many small organizations have too small of a group to meet the participation requirements.

These plans also have high costs, especially for small employers. According to KFF, in 2024, employers covered 84% of their employees’ self-only premiums and 75% of family insurance premiums. Depending on your chosen plan and the number of employees enrolled in coverage, this can be very costly.

You can consider a high deductible health plan (HDHP) if your preferred plan is too expensive. These plans tend to have the lowest premiums. But, they require employees to meet higher deductibles before the insurance company starts covering their medical costs. So, while HDHPs may be good for your budget, they can put more financial pressure on your staff’s wallets.

If you’re determined to get a group health plan, you must know where to buy one. Massachusetts doesn’t use the federal Small Business Health Options Program (SHOP) Marketplace. However, employers can get a small group health plan through Massachusetts Health Connector. These plans are for Massachusetts employers with fewer than 50 FTEs and are often more affordable for small businesses.

Those with fewer than 25 FTEs who pay an average annual salary of $56,000 or less per employee may also qualify for the small business health care tax credit. To qualify, employers must offer coverage from the Health Connector’s small business Marketplace. They must also pay for at least 50% of their employees’ premiums.

The following companies offer small group health plans or SHOP plans in Massachusetts in 2025, according to HealthCare.gov’s rate review site and Health Connector.

According to KFF, the average annual premium in 2024 was $8,951 for self-only coverage and $25,572 for family coverage. This is roughly $746 and $2,131 per month, respectively. Employers seeking group plans must ensure their budget is up for the financial undertaking.

Integrated HRAs

If you want to buy a group health plan and help your employees pay for out-of-pocket medical costs, you can supplement it with an integrated HRA. Also called a group coverage HRA (GCHRA), this health benefit is for Massachusetts employers of any size that offer a group health plan. Only employees enrolled in your group policy can participate.

With this type of HRA, you give a monthly allowance that your employees can use on qualified out-of-pocket healthcare costs. Once they show proof of an eligible expense, you reimburse them tax-free up to their allowance amount.

Eligible expenses include costs the group plan doesn’t cover or fully cover, like:

• Coinsurance
• Deductibles
• Copays
• And more

However, health insurance premiums aren’t eligible expenses.

GCHRAs are great for making your group plans more appealing to employees. You can also customize them to meet your specific needs. For example, while a GCHRA can work with any group plan, you can combine them with an HDHP to save money.

There are also no minimum or maximum contribution limits with a GCHRA. You can set the allowance that works best for your budget. Lastly, you can leverage seven employee classes to vary allowances and employee eligibility for extra flexibility.

Stand-alone HRAs

Stand-alone HRAs differ from integrated HRAs because they don’t require a traditional group health plan. Instead, they allow Massachusetts employers to reimburse employees tax-free for eligible out-of-pocket medical expenses, including individual health plan premiums. This makes them a good choice for employers looking for an alternative to costly group health insurance.

Like integrated HRAs, stand-alone HRAs let you set a monthly allowance and reimburse employees for qualified expenses. However, with a stand-alone HRA, you don’t need to buy a group health plan. Instead, employees enroll in their preferred individual health coverage, and you reimburse them for their premiums.

There are two types of stand-alone HRAs:

1. The qualified small employer HRA (QSEHRA): The QSEHRA is for small employers with fewer than 50 FTEs. While it has no minimum contribution limits, the IRS sets annual maximum limits. To participate in the QSEHRA, employees must have a medical plan with minimum essential coverage.
2. The individual coverage HRA (ICHRA): The ICHRA is for employers of all sizes. There’s no maximum contribution limit, and you can vary allowances and eligibility using employee classes. ALEs can use an ICHRA to satisfy the employer mandate instead of getting a group policy. Employees must have a qualified individual health plan to participate in the benefit.

Stand-alone HRAs are personalized and cost-effective alternatives to group plans for small employers in Massachusetts. With a QSEHRA or ICHRA, you can save money on health insurance while giving your employees more flexibility.

Association health plans

Your next option is an association health plan (AHP). AHPs let self-employed people and small businesses with fewer than 50 employees buy large-group health insurance together at a more affordable price. Typically, AHPs group companies from the same industry, profession, or area.

AHPs work like regular health insurance. However, they don’t have to comply with several ACA requirements. Because of this, they’re not a viable plan option for ALEs. They also offer limited covered services, which might not meet all your employees’ healthcare needs. An HRA is a better choice if you’re looking for more flexibility.

Supplemental and ancillary benefits

Supplemental health benefits are additional policies that can enhance your compensation package. Health insurance plans may only partially cover some of the medical expenses your employees will encounter. To offset this, supplemental benefits help employees pay for specific medical services and unexpected events—like emergency room visits, hospital stays, and prescription medications.

Unlike major health plans, most supplemental plans don’t provide MEC. However, they are a great way to provide your employees with extra medical coverage.

You can also offer your employees ancillary benefits—like dental insurance and vision plans—for even more comprehensive coverage.

Some of the most common types of ancillary and supplement health benefits are:

• Critical illness insurance
• Accident insurance
• Hospital indemnity insurance
• Health savings account (HSA)
• Flexible spending account (FSA)
• Dental insurance

What plans are available on the individual market in Massachusetts?

Individuals and families in Massachusetts searching for health insurance coverage have many options on the individual market. Residents can use the state’s Marketplace, Massachusetts Health Connector, to find a qualified plan. More than 290,162 people enrolled in coverage through the Health Connector platform during the 2024 open enrollment period.

The following is a list of insurance carriers offering individual plans in 2025.

All table data from HealthCare.gov’s rate review site and Health Connector.

You can enroll in a plan during the annual open enrollment period, which runs from November 1 through January 23 in Massachusetts. If you have a qualifying life event, you’ll trigger a special enrollment period and can choose a plan midyear.

Individuals and families with state-based health insurance marketplace plans may be eligible for federal premium tax credits. In 2024, 79% of Massachusetts residents who enrolled in a plan on the Health Connector platform qualified for premium subsidies.

How PeopleKeep can help Massachusetts employers

If you want to provide flexible and affordable health benefits to your employees in Massachusetts, PeopleKeep is here to help. Our HRA administration software makes it simple for small and mid-sized businesses to set up and manage their health benefits.

With PeopleKeep, companies can design their HRA to fit their specific needs and budget, and employees can use our platform to choose their preferred health plan. Our powerful and intuitive platform helps businesses monitor costs while ensuring employees get the necessary coverage.

We do the heavy lifting for you, including reviewing your employees' reimbursement requests. This saves you time and helps you stay compliant with ACA, ERISA, HIPAA, and IRS regulations.