Why Small Businesses Prefer Private Health Insurance in 2025
| Health Insurance with Sherri

In 2025, small businesses are reevaluating how they provide health insurance to their employees. While traditional group health insurance plans were once the go-to option, more business owners are now turning to private health insurance policies—and for good reason. With more flexibility, fewer administrative headaches, and options tailored to individual needs, private policies are becoming the smarter, more efficient choice for companies with under 50 employees.

If you’re a small business owner, understanding this shift is key to offering competitive benefits while managing your bottom line. Here’s why private health insurance is overtaking group plans—and how Health Insurance with Sherri can help.

1. Group Health Plans Are Getting More Expensive

Rising healthcare costs have made traditional group health plans more difficult to sustain, especially for small employers. Premiums have been increasing year over year, with 2023 seeing a 7% rise on average, and that trend has continued into 2025. According to the Kaiser Family Foundation, the average annual premium for employer-sponsored family health coverage has exceeded $24,000—a steep cost for small businesses with limited budgets.

Private policies, on the other hand, allow employers to contribute a fixed dollar amount toward employee coverage, rather than being locked into fluctuating group plan rates.

2. Private Policies Offer More Flexibility for Employers

When small businesses choose private health insurance policies, they aren’t bound by the one-size-fits-all nature of group coverage. Instead, employees can select plans that suit their unique healthcare needs—whether that means lower deductibles, specific networks, or broader benefits.

With the rise of Individual Coverage Health Reimbursement Arrangements (ICHRAs), employers can now reimburse employees for premiums on their individual plans, giving them even more flexibility without losing tax advantages.

This modern approach to employee health benefits removes many of the administrative burdens tied to group plan management—like meeting minimum participation rates or complex annual renewals.

3. Small Teams Don’t Always Qualify for Group Coverage

Most traditional group health insurance plans require a business to have at least two full-time employees who aren’t family members. For sole proprietors, family-run operations, or companies with a part-time workforce, meeting these requirements can be a challenge.

Private health insurance provides an ideal alternative. At Health Insurance with Sherri, we specialize in helping small teams—even those with just one or two people—find ACA-compliant, high-quality coverage that meets both their needs and budget.

4. Private Policies Help Attract and Retain Talent

Health insurance is one of the most valued benefits by employees, especially in a competitive job market. While many small businesses assume they need group coverage to remain competitive, private policies can be just as effective—if not more so.

By contributing toward individual health plans, employers can offer personalized benefits that feel more valuable to employees. Workers are empowered to choose the right coverage for themselves and their families, rather than being forced into a one-size-fits-all group plan.

This approach not only improves satisfaction but also builds trust and loyalty, leading to stronger employee retention.

5. Year-Round Enrollment Options for Private Plans

Group health plans often require enrollment during a narrow open enrollment window. If a new hire misses this period or a qualifying event doesn’t apply, they may have to wait months for coverage.

Private health insurance offers more flexibility, with year-round enrollment opportunities available through certain short-term, private, or off-exchange ACA-compliant plans. This makes it easier to onboard employees quickly with no gaps in coverage.

At Health Insurance with Sherri, we work one-on-one to help employers and employees access plans that are available immediately and tailored to their start date and budget.

6. Lower Risk and Administrative Burden for Employers

Administering a group health plan means managing renewals, filing paperwork, handling compliance requirements, and coordinating with insurance carriers. For small business owners wearing many hats, this can be time-consuming and stressful.

Switching to private policies with defined employer contributions reduces this burden. You can still offer health benefits—without becoming an insurance administrator.

And with a licensed agent like Sherri to guide you, it’s simple to help employees choose the best plan without adding more to your workload.

7. More Options Across State Lines

If you run a multi-state small business or employ remote workers, offering a group plan that fits everyone can be complicated. Networks vary widely between states, and national group plan options are often expensive.

Private health insurance solves this by allowing each employee to pick a plan in their own state that includes their local doctors, hospitals, and pharmacies. It’s a scalable solution for growing teams—especially those with remote or hybrid workforces.

8. Tax Advantages Remain with Private Coverage

One of the major reasons employers stick with group health plans is the tax deduction. However, private policies can still come with tax benefits.

Through ICHRAs or qualified small employer health reimbursement arrangements (QSEHRAs), you can provide employees with tax-free money to pay for their own health insurance premiums.

Plus, self-employed individuals and small business owners may be able to deduct health insurance premiums on their personal tax returns—further increasing savings. (IRS Source)

Conclusion: Private Policies Are the Future for Small Business Health Insurance

In 2025, small business owners are prioritizing flexibility, affordability, and employee satisfaction when it comes to health benefits. Private health insurance policies offer a modern alternative to expensive, complicated group plans—and they’re growing in popularity across the U.S.

If you’re ready to explore how private policies can work for your business, we’re here to help. At Health Insurance with Sherri, we specialize in guiding small business owners through their options and finding coverage solutions that make sense—for your team and your budget.

📞 Ready to Explore Private Health Insurance for Your Business?

Schedule a free consultation with Sherri to learn how you can offer competitive health benefits without the complexity of group plans.