Small business health insurance in Tennessee

Importance of small business health insurance

Health insurance is a critical component of any benefits package you offer as a small business. Not only does it help attract and retain top talent, but it also provides invaluable peace of mind for your employees. Let's review the most important reasons for offering health benefits to your employees in Tennessee.

The employer mandate

One reason to consider providing a health benefit in Tennessee is federal law. According to the Affordable Care Act (ACA), organizations with 50 or more full-time equivalent employees (FTEs) must offer affordable health insurance that meets minimum essential coverage (MEC) and minimum value to their employees. This is known as the employer mandate.

Employers with 50 or more FTEs, known as applicable large employers (ALEs), may incur tax penalties if they fail to provide coverage to at least 95% of their full-time employees and if any of their employees receive subsidies in the individual health insurance market. Employers with fewer than 50 FTEs aren't required to offer health coverage in Tennessee. Still, it could be helpful for your business to do so.

Benefits of providing health insurance to employees

Offering health benefits to your employees can provide advantages to you and your team, such as:

• Attract and retain qualified employees
• Tax advantages
• Improved wellness and productivity

Health insurance is the most sought-after employee benefit. This makes it a great way to keep your employees satisfied. According to our 2024 Employee Benefits Survey, 81% of employees said an employer’s benefits package is an important factor in whether they accept a job with the organization. Additionally, 92% of employees rated health benefits as important.

Small business health insurance options in Tennessee

Small businesses and nonprofits face unique challenges when providing health insurance. Understanding the different types of health insurance options can help owners make informed decisions that benefit both their employees and finances.

There are several options available to small businesses looking to provide quality healthcare coverage to their workers:

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

Group health insurance plans in Tennessee

Traditional group plans have been the common choice for organizations of all sizes for many years. These plans usually provide a wide range of coverage options, such as medical, dental, and vision benefits. The employer usually shares the cost of the plan with employees, with the employer covering a larger portion of the monthly premiums. You can also extend coverage to spouses and dependents.

There are four main types of group plans in Tennessee:

• Preferred provider organization plans (PPOs): The most common type of insurance plan is a PPO. It gives its policyholders a network of preferred healthcare providers. Members can receive outside network care, but at an extra cost.
• Health maintenance organization plans (HMOs): HMO plans provide a variety of healthcare services within their designated provider network that either exclusively contract with the HMO or agree to offer services to members. Employees enrolled in HMO plans must choose a primary care physician (PCP). The PCP coordinates their healthcare needs and provides referrals to specialists when necessary.
• Exclusive provider organization plans (EPOs): An EPO integrates features from HMOs and PPOs. Members can access healthcare services from a pre-approved network of providers without needing a referral to consult with specialists. The plan doesn’t cover care from out-of-network providers.
• Point of service plans (POSs): With a POS plan, the cost is lower for visits to in-network doctors. To see a specialist, you need a referral from a primary care physician, just like with an HMO.

The most suitable plan type for you and your employees will vary depending on your preferences and budget.

Group health coverage often offers lower monthly insurance premiums due to risk-sharing across all members of the group. Typically, around 70% of your employees need to enroll to meet participation requirements.

Employers and employees share the cost of premiums. Based on the data from KFF, typically, employers pay 83% of self-only premiums for their employees and 72% of family insurance premiums.

If the standard group health plan is too costly for your organization, consider a high deductible health plan (HDHP). These plans offer reduced premiums for both employers and employees. However, they do come with higher deductibles that employees need to cover before the insurance company contributes to the costs.

Although HDHPs provide savings, the increased deductible may result in higher costs for your employees. One possible solution is to provide a group coverage HRA (GCHRA), which is also referred to as an integrated HRA, alongisde an HDHP. This allows you to reimburse your employees for their out-of-pocket costs, such as deductibles, tax-free. A GCHRA helps to reduce the extra stress on your employees, leading to increased cost savings for both you and your team.

You can also save money with small group health insurance plans from the Small Business Health Options Program (SHOP) marketplaces. Organizations in Tennessee with fewer than 50 FTEs can access SHOP plans. If you have fewer than 25 employees and they earn less than $50,000 annually, you may qualify for the Small Business Health Care Tax Credit.

The following companies have applied to offer small group health plans in Tennessee in 2025, according to HealthCare.gov’s rate review website.

The table below shows Tennessee's lowest possible monthly SHOP premiums per employee.

Taking advantage of individual health insurance with an HRA

Employers have more than just a traditional group plan to choose from. HRAs allow employers to reimburse their employees for out-of-pocket medical expenses and individual health insurance premiums, depending on the type of HRA you offer.

Employers can cut costs by not purchasing a group plan. Instead, they provide a set monthly allowance that aligns with their budget and reimburses employees for eligible medical expenses.

While silver-level individual plan premiums tend to be slightly more expensive than small group plans in the state, you and your employees can save money on monthly costs with a marketplace plan. You can then reimburse your employees for their individual health insurance premiums through an HRA.

Two types of HRAs that allow you to reimburse employees for their insurance premiums are:

• The qualified small employer HRA (QSEHRA): In 2016, Congress created the QSEHRA for organizations with fewer than 50 FTEs to offer tax-free reimbursement for qualifying health expenses and insurance premiums. The IRS sets a limit on maximum allowances, which they adjust each year for inflation. This is a great choice for small businesses and nonprofits aiming to provide a first-time benefit or reduce costs on premiums.
• The individual coverage HRA (ICHRA): The ICHRA is for organizations of all sizes. It functions similarly to a QSEHRA but offers greater flexibility and customization options. There is no specified maximum contribution limit, allowing you to provide your employees with a higher amount compared to a QSEHRA. You can also differ allowances and eligibility with 11 employee classes. ICHRA is a cost-effective option for businesses that need to satisfy the employer mandate.

Health stipends

Organizations have the option to provide a health stipend to employees for medical expenses. A stipend is additional compensation you can provide to your employees. Stipends are a flexible way to help employees pay for out-of-pocket expenses, including premiums, items, and services that an HRA or group plan doesn’t cover.

However, stipends come with drawbacks. The IRS views stipends as taxable income. Federal rules also don’t allow you to request proof of insurance or receipts for items specified in IRS Publication 502. Stipends don't satisfy the employer mandate either, which means companies with 50 or more FTEs may face financial penalties if they provide a stipend rather than insurance or an ICHRA.

However, stipends are a great option for small businesses or organizations looking to supplement their existing health benefits.

Ancillary and supplemental benefits

Health insurance is a crucial benefit for employees, but it might not provide complete coverage for their medical needs. You can help by offering ancillary benefits in addition to health coverage.

Here are some of the most common types of supplemental health benefits:

• Critical illness insurance: Critical illness insurance provides coverage for medical emergencies that a regular health insurance policy may not fully cover, such as cancer, stroke, and kidney failure. It provides a lump sum to cover medical bills or lost wages.
• Vision insurance: Many major medical plans don't include coverage for vision expenses, such as prescription glasses, contact lenses, and eye exams. Supplemental vision coverage can help your workers get the eye care they need. You can also reimburse employees for these expenses using an HRA.
• Dental coverage: Both group and individual medical plans usually do not include coverage for adult dental care, similar to vision coverage. Providing dental insurance can help your employees afford exams, fillings, and other services. An HRA can also reimburse employees for these expenses.
• Health savings account (HSA): An HSA is an employee-owned account that you and your employees can contribute to. Employees can use their HSA funds to pay for future medical expenses.
• Flexible spending account (FSA): A healthcare FSA allows you to help pay for your employees’ out-of-pocket costs for medical care. It covers many of the same items as an HRA, except for insurance premiums.

If you offer a QSEHRA or ICHRA as your health benefit, your employees can use their allowance from either benefit to cover the cost of vision, dental, and other supplemental coverage in addition to their health policies.

What plans are available on the individual market in Tennessee?

Individuals and families in Tennessee use the federal Health Insurance Marketplace at HealthCare.gov. Six insurers provide health plans for 2024, with plan availability differing across the state. However, Ascension (US Health & Life) is ceasing coverage for 2025. All areas in Tennessee will have at least three exchange-based health insurers offering plans.

The open enrollment period in Tennessee is from November 1 to January 15. Individuals and families with marketplace plans may be eligible for federal premium tax credits, also known as premium subsidies. During 2024 open enrollment, 96% of individuals in Tennessee who enrolled in health plans from the Health Insurance Marketplace received premium subsidies. The IRS usually considers federal poverty guidelines to determine eligibility for tax credits, but the Inflation Reduction Act eliminated the upper income limit until 2025. Now, anyone can access these credits if their premiums exceed 8.5% of their household income.

If individuals miss open enrollment, they can’t enroll in a health policy from the marketplaces unless they experience a qualifying life event that creates a special enrollment period.

How PeopleKeep can help

If you’re ready to offer flexible, personalized health benefits to your employees in Tennessee, PeopleKeep can help. Our HRA administration platform makes it easy for organizations of all sizes to set up and manage their benefits in minutes each month.

With PeopleKeep, businesses design HRAs that meet their specific needs and budget. This provides employees with the flexibility to choose the healthcare options that work best for them. An HRA’s customization capability allows businesses to control costs while ensuring employees receive the coverage they need.

We even review your employees’ reimbursement requests for you, saving you time and ensuring compliance with ACA, ERISA, and IRS regulations. By simplifying benefits administration, PeopleKeep saves businesses valuable time and resources, allowing them to focus on their operations.