Starting a company is a wild ride. You’re hustling to build a team, create a product, and keep the lights on—all while trying not to lose your mind.
But then comes a big question: how do you take care of your employees’ health without draining your budget?
Health insurance feels like a luxury when you’re operating on tight margins. Big corporations have the cash to offer full-blown benefits, but what about a scrappy startup?
The good news: it’s possible to provide solid health coverage without burning through your runway.
Let’s break it down in a way that makes sense.
Why Health Insurance Matters (Even for Small Teams)
You might think, “We’re small. Do we need to offer health insurance right now?» The short answer: is yes.
Here’s why:
- Attract Top Talent: People expect benefits. Many won’t even consider a job without health coverage.
- Keep Your Team Happy: A sick employee without coverage is a stressed employee. Stress kills productivity.
- Tax Benefits: Offering insurance can lower payroll taxes, and some plans come with additional tax breaks.
- Legal Requirements: In some cases, skipping health benefits might put you at risk of penalties, depending on team size and local laws.
So, how do you balance taking care of your team with keeping costs low?
1. Know Your Options (More Than Just Traditional Plans)
Most people think of health insurance as those big corporate plans with sky-high premiums. That’s not the only way to go. Here are some budget-friendly alternatives:
Health Reimbursement Arrangements (HRAs)
HRAs let you reimburse employees for medical expenses and premiums instead of offering a traditional group plan. A Qualified Small Employer HRA (QSEHRA) is perfect for startups with fewer than 50 employees. The best part? Reimbursements are tax-free.
Small Business Health Options Program (SHOP)
Some states offer SHOP plans, which are designed for businesses with fewer than 50 employees. These plans often come with tax credits, making them more affordable.
Association Health Plans (AHPs)
Startups can sometimes join forces with other small businesses to get better rates. By banding together, you get access to the kind of pricing that larger companies enjoy.
High-Deductible Health Plans (HDHPs) + Health Savings Accounts (HSAs)
An HDHP has lower premiums, which saves money upfront. Pair it with an HSA, and employees can stash away pre-tax dollars for medical expenses. It’s a win-win.
2. Consider Partial Contributions
No rule says you have to cover 100% of your team’s health insurance costs.
Even covering 50% or a fixed amount per employee helps—and employees appreciate it.
Some startups offer a stipend instead, letting employees buy their insurance while giving them extra cash to help with costs.
Just be careful with this approach, since stipends are taxable.
3. Work with a Benefits Broker or PEO
Going solo in the insurance world is like trying to read legal documents in a foreign language. A benefits broker does the heavy lifting for you, finding the best plans at the lowest rates.
Another option: is a Professional Employer Organization (PEO). A PEO pools multiple small businesses together, acting like a big company, to negotiate better rates. Some popular ones include:
- Gusto
- Justworks
- TriNet
Startups using a PEO get access to full HR support, payroll processing, and solid benefits—without hiring an in-house HR team. If you’re curious about different health insurance options for self-employed individuals, you can check out on this site for more insights.
4. Encourage Preventative Care & Wellness Programs
The best way to save money on healthcare? Keep people healthy.
Offering gym stipends, mental health resources, or even just promoting a good work-life balance cuts down on sick days. Employees who take care of themselves cost less in medical claims.
Some budget-friendly wellness perks:
- Free or discounted fitness apps
- Subsidized gym memberships
- Mental health days
- On-demand telehealth services
- A healthier team is a happier, more productive team.
5. Don’t Ignore Telemedicine
Traditional doctor visits are expensive. Telemedicine, on the other hand, gives employees fast, affordable healthcare without needing to leave home.
Some top-rated telemedicine services:
- Teladoc
- MDLIVE
- Amwell
For a startup looking to cut costs, adding telehealth to a benefits package is a no-brainer.
6. Use Tax Credits & Government Incentives
There are ways to get some money back:
Small Business Health Care Tax Credit – If you have fewer than 25 employees, cover at least 50% of their premiums, and pay average wages under a certain amount, you might qualify for a big tax credit.
- HRA Tax Benefits – QSEHRAs and Individual Coverage HRAs (ICHRAs) reimburse employees tax-free, reducing your taxable payroll.
- Always check with an accountant or tax expert to make sure you’re getting every dollar you can back.
7. Get Creative with Perks That Complement Health Benefits
Even if you can’t afford a full insurance package, other perks help balance things out:
- Paid Sick Leave – Employees won’t delay care because they’re worried about losing income.
- Flexible Work Schedules – Less stress, fewer sick days.
- Mental Health Support – Therapy stipends, mindfulness apps, or even a simple wellness Slack channel can make a difference.
- A well-rounded benefits package doesn’t have to cost a fortune. Sometimes, small thoughtful perks go a long way.
Final Thoughts: Health Insurance Without the Headache
Startups don’t have to choose between keeping the team healthy and keeping the company afloat. With the right approach, you can offer benefits without breaking the bank.
Offering health insurance doesn’t just make financial sense—it makes people feel valued. And at the end of the day, a happy, healthy team is what keeps a startup moving forward.
Got questions? Drop them in the comments—I’m always happy to share what’s worked (and what hasn’t) for startups trying to figure this out.
