Medically reviewed by Jawad Arshad, MD, FACEP. Last reviewed: October 7, 2026.
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Small business health insurance for 1 employee works only if that one person counts as an employee under the insurance rules. Many owners find out too late that a spouse or a partner does not count.
Key facts
- HealthCare.gov says a business with at least one full-time employee other than the owner, a spouse, a family member or another owner may be able to enroll in a SHOP plan (HealthCare.gov, 2026).
- Average annual premiums at firms with 10 or more workers were $9,325 for single coverage and $26,993 for family coverage in 2025, and workers paid an average of $1,440 for single coverage (KFF Employer Health Benefits Survey, 2025).
- The small business health care tax credit is worth up to 50% of premiums, lasts two consecutive tax years, and excludes owners, partners and their family members from the employee count (IRS, 2026).
- The credit requires fewer than 25 full-time equivalent employees and average wages under $67,000 (IRS Form 8941 instructions, 2025).
- The self-employed health insurance deduction is not allowed for any month you could join an employer-subsidized plan, including a spouse's plan (IRS Instructions for Form 7206, 2025).
Can I get small business health insurance for 1 employee?
Yes, if the one employee is a common-law employee and not you, your spouse, a family member or another owner. HealthCare.gov (2026) says an employer with at least one such full-time employee may be able to enroll in a SHOP plan.
Carriers can set their own rules on top of that. Some will not write a group for a single enrolling person, and some ask for proof that the employee is on payroll. Ask each carrier for its rule in writing before you apply.
Table: Who counts as the one employee
| Person | Counts as the employee for SHOP? | Source |
|---|---|---|
| A W-2 worker who is not an owner or family member | Yes, if full time | HealthCare.gov, 2026 |
| You, the owner | No | HealthCare.gov, 2026 |
| Your spouse or another family member | No | HealthCare.gov, 2026 |
| Another owner | No | HealthCare.gov, 2026 |
Our small business health insurance plans guide explains the group plan types, Summit's page on health insurance for a small business with 1 employee covers the setup, and our group health insurance quotes checklist lists what a quote must show.
What does small business health insurance for one employee cost?
Group coverage for one employee costs the premium for that one person, split between you and the employee. No national average exists for a one-employee business, because KFF no longer surveys firms with fewer than 10 employees (KFF, 2025).
Use the KFF averages only as a rough check. At firms with 10 or more workers, the average annual premium for single coverage was $9,325 in 2025, and workers paid $1,440 of it (KFF, 2025). That leaves $7,885 a year, or about $657 a month, for the employer. The $7,885 is calculated from the two KFF figures.
Here is a worked example. The numbers are hypothetical, so you can see the math. Your quote will differ. You offer one employee single coverage at a $540 monthly premium and pay 60% of it.
| Item | Monthly | Yearly |
|---|---|---|
| Total premium | $540.00 | $6,480 |
| Your share (60%) | $324.00 | $3,888 |
| Employee share (40%) | $216.00 | $2,592 |
If the business qualifies for the small business health care tax credit, it can claim up to 50% of the premiums it pays (IRS, 2026). On the $3,888 you pay, the most the credit could return is $1,944. The credit needs fewer than 25 full-time equivalent employees and average wages under $67,000 (IRS Form 8941 instructions, 2025), and the IRS sets further limits, so the real amount may be lower. Our small business health care tax credit guide covers who qualifies.
What if my only employee is my spouse?
If your only employee is your spouse, group coverage through SHOP is generally not available, because HealthCare.gov (2026) does not count a spouse or family member as the qualifying employee. You and your spouse would look at individual coverage instead.
The same rule applies to a business owned by two partners with no other staff. Neither owner counts, so the business has no qualifying employee. Our health insurance for small business owners guide covers that case.
How do I cover myself if I own the business?
You cover yourself through an individual plan, a group plan if the carrier allows the owner to enroll with the employee, or a spouse's employer plan. Check the Form 7206 rule before you decide, because it can remove your tax deduction.
The IRS says you cannot take the self-employed health insurance deduction for any month you were eligible for an employer-subsidized plan, including your spouse's, even if you did not enroll (IRS Instructions for Form 7206, 2025). The deduction is for owners who are self-employed with a net profit, partners, and more-than-2% S corporation shareholders (IRS, 2025). Our health insurance for self-employed guide shows the cost and the options.
Can one employee use a Section 125 plan?
Yes, an eligible employee can pay their share of the premium before tax through a Section 125 cafeteria plan. IRS Publication 15-B (2026) says qualified benefits paid through the plan are exempt from income tax withholding, Social Security tax and Medicare tax. The owner usually cannot join.
Publication 15-B (2026) tells employers not to treat a 2% shareholder of an S corporation as an employee for this purpose. Sole proprietors and partners are generally treated the same way, so confirm your status with a tax professional.
With one employee, the payroll saving is small. Using the $216 employee share from the example, the numbers look like this.
| Monthly pre-tax premium for the employee | Employer FICA saved (7.65%) | Employee FICA and income tax saved (7.65% plus 12%) |
|---|---|---|
| $216.00 | $16.52 | $42.44 |
| $457.00 | $34.96 | $89.80 |
| $700.00 | $53.55 | $137.55 |
At $216 a month, the employer saves $16.52, which is below Summit's $35 per enrolled employee monthly fee. The saving equals the fee at about $457 a month, because $35 divided by 7.65% is $457 (Summit Health Benefits, 2026). The employee column assumes a 12% federal bracket (IRS Revenue Procedure 2025-32, 2025). Run your own numbers in the Section 125 calculator before you decide.
Which option should I choose?
Choose group coverage when you have a qualifying employee and a carrier that will write the group, and choose individual coverage when you do not. A one-employee group is a good fit when the employee wants coverage and you want a tax deduction for the employer share.
Results depend on your plan terms and IRS rules. Not legal or tax advice.
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Frequently Asked Questions
Can a small business buy health insurance for just one employee?
What is the best health insurance for a small business with one employee?
Does my spouse count as an employee for small business health insurance?
How much does health insurance cost for a small business with one employee?
Can I get a tax credit for covering one employee?
Can the owner be covered under the same group plan?
Sources: HealthCare.gov, SHOP and employee eligibility for small businesses (2026); KFF, 2025 Employer Health Benefits Survey (2025); IRS, Small Business Health Care Tax Credit and the SHOP Marketplace (2026); IRS, Instructions for Form 8941, Credit for Small Employer Health Insurance Premiums (2025); IRS, Instructions for Form 7206, Self-Employed Health Insurance Deduction (2025); IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (2026); IRS Revenue Procedure 2025-32, 2026 inflation adjustments (2025); Summit Health Benefits, individuals and families membership page and pricing (2026).