Small businesses across the United States are facing a sharp shift in how they support employee health needs. With healthcare costs climbing and Affordable Care Act (ACA) Marketplace subsidies expiring, many owners are stepping away from traditional health insurance plans. In response, telehealth is gaining traction as a practical, lower-cost option that still gives workers access to essential care.
This change reflects financial pressure rather than a lack of concern for employee well-being. For many smaller employers, the math behind health insurance simply no longer works.
ACA Subsidies End, Coverage Gaps Grow
The expiration of ACA Marketplace subsidies on December 31 is expected to leave an estimated 4.8 million people uninsured this year. As a result, 2026 plan premiums are projected to rise sharply, in some cases increasing several times over. Small businesses are absorbing much of this impact due to their limited bargaining power and tighter budgets.
Data from KFF, a nonpartisan health policy research group, highlights how closely small businesses are tied to the Marketplace:
1. 48% of adults with ACA Marketplace coverage are small business owners, employees, or self-employed individuals
2. Small business owners are three times more likely to depend on Marketplace plans than other enrollees
As premiums climb, this reliance has turned into a major vulnerability.
Small Business Owners Face Coverage Loss
Freepik | Rising costs and ending subsidies are driving small firms toward telehealth over traditional insurance.
For many owners, premium increases have been swift and severe, forcing difficult decisions.
Eric Frankenfeld, a chiropractor, and his wife and office manager Lisa Frankenfeld, decided to drop coverage in 2026 after learning their monthly premium would jump from $340 to $1,928.
“We are health care providers who cannot afford benefits. Oh, the irony. Purchasing a plan doesn’t make financial sense. We’re just going to cross our fingers and hope for the best.”
In Martinsburg, West Virginia, Rick Cole of Martinsburg Service described the broader impact of rising health costs:
“High health care costs for small businesses like mine have cost us employees, made it hard to find employees, reduced our net profit considerably, and put strains on our work families!”
In Brandon, Vermont, Kathy and Jeffrey Many, who operate a garage door business, chose to go uninsured after their monthly premium was set to rise from $625 to nearly $2,670.
Kathy Many described the decision as unsettling, calling life without coverage “very nerve-wracking,” yet unavoidable given the numbers.
Employer Health Coverage Is Declining
New national research from the Employee Benefit Research Institute (EBRI) shows a clear downward trend in employer-provided health benefits:
1. Only 49% of employers currently offer health insurance
2. Small businesses are dropping coverage faster than larger firms
Industry forecasts point to a 9% increase in employer health care costs in 2026, pushing the average total cost per employee above $17,000. This marks the largest increase in 15 years and places added strain on employers already working to retain staff.
According to Paul Fronstin, Ph.D., Director of Health Benefits Research at EBRI:
“If health insurance premiums rise faster than wages and general inflation, small employers are likely to face intensified financial strain, which could accelerate the erosion of health plan sponsorship among firms with fewer than 100 workers.”
Telehealth Steps In as Costs Rise
As premiums rise and coverage options shrink, telehealth plans are emerging as a practical alternative for uninsured workers. While these plans do not replace comprehensive insurance, they address routine medical needs and mental health support, which many employers view as a meaningful baseline.
Freepik | Telehealth acts as a functional alternative for maintaining employee wellness at lower costs.
Telehealth programs typically offer:
1. 24/7 access to licensed doctors and mental health therapists
2. Care available from any location, year-round
3. Fewer missed workdays and improved productivity
Many services now operate on subscription-based models, providing unlimited visits for a flat monthly fee with no per-visit charges.
Wendy Jordan of Jordan Capital Consulting, which brokers telehealth plans, explained the appeal:
“When traditional insurance isn’t financially viable, $40 a month per employee is feasible for small businesses that want to provide a baseline level of care for their team and their families.”
Jordan also noted growing interest from organizations beyond individual employers:
“We’re also onboarding an increasing number of business associations and trade associations, as well as local chambers of commerce. They see the importance of making this available to their member base and the value in adding it to their membership benefits as the need for alternative health insurance options soars.”
What’s Next for Small Business Health Care
For nearly half of U.S. small businesses, providing traditional health insurance at an average annual cost of $17,000 per employee remains out of reach. At the same time, offering no support at all carries risks tied to retention, morale, and long-term stability.
Lower-cost virtual care models are filling a growing gap by giving employees access to medical and mental health services without overwhelming business budgets. While telehealth does not solve every coverage challenge, it is becoming a workable middle ground for employers facing rising premiums and limited options.
As healthcare costs continue to climb, this approach is reshaping how small businesses support their workforce in a changing benefits environment.