Health Insurance Without the Headache: A CPG Founder’s Guide
Key Takeaways
Most small CPG brands aren’t legally required to offer insurance, but offering the right plan early can support retention, recruiting, and team health.
Options like QSEHRAs, group plans, and stipends each have pros and cons. The best fit depends on your stage and headcount.
“Good” coverage doesn’t mean expensive. Founders can balance affordability with coverage that employees actually use.
Smart cost-sharing, high-deductible plans with HSAs, and better payroll integration can cut complexity without cutting value.
Health insurance gets treated like a monster in the closet. Founders avoid it as long as possible, then scramble when a key hire asks, “Do you offer benefits?” Or worse, when a teammate gets sick and the safety net isn’t there.
I get it. This topic feels expensive, confusing, and full of jargon. But here’s the thing—done right, insurance can be a growth tool, not a drain. And for me, it’s also personal.
I grew up with a single mom who worked multiple jobs to keep things steady. One unexpected medical bill could’ve wrecked us. But she had employer-provided health insurance, and that changed everything. So when I became an employer myself, I made a decision: I was going to offer health insurance to my team. Not because the law required it. But because I know how much it matters.
Do You Have to Offer Health Insurance? It Depends
Let’s start with the legal side.
Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees (FTEs) are required to offer health insurance that meets minimum standards—or pay a penalty. If you’re under that threshold, you’re not legally obligated to offer anything.
But “not required” doesn’t mean “not important.”
Founders with small teams still choose to offer benefits early for a few key reasons:
Recruitment: Strong candidates, especially those leaving big companies, expect health coverage.
Retention: Health benefits reduce churn. People stay where they feel supported.
Team health: When employees skip care because of cost, it can lead to burnout or absence.
What About State Rules?
Most states follow federal ACA rules, but a few have added their own regulations:
California: While small employers aren’t required to offer insurance, the state does penalize individuals who don’t have coverage. Offering a plan can help your team avoid penalties.
New York: No employer mandate for under-50 FTEs, but there are state-specific plan options and requirements if you do offer coverage.
Texas: Follows federal rules, with no additional state mandate, but lacks some of the public infrastructure CA and NY offer, so employer-sponsored coverage can be even more critical.
Bottom line: You might not be required to offer health insurance yet, but it’s often the right strategic move.
Core Options for Small Teams: Group Plans, QSEHRAs, and Stipends
When you’re under 50 employees, you’ve got three main paths:
1. Traditional Group Plans
What it is: A full health insurance policy purchased for your team, often through a broker or a PEO (like Gusto or Rippling).
Pros: Feels familiar to employees. Often includes dental, vision, and other benefits.
Cons: Expensive. Less flexibility. Requires admin time.
Best for: Teams with 5+ W-2 employees looking to standardize benefits.
Estimated cost: $500 to $900+ per employee per month depending on plan generosity and geography.
2. QSEHRA (Qualified Small Employer HRA)
What it is: QSEHRA reimburses employees tax-free for premiums and medical expenses up to an annual cap.
Pros: Flexibility. Employees pick the plan that fits them. You set your budget.
Cons: Requires employees to find their own plans. Some complexity in setup and documentation.
Best for: Brands with fewer than 10 employees that want to offer support without locking into group plans.
2025 reimbursement caps: $6,150/year for individuals, $12,450/year for families.
3. Taxable or Post-Tax Stipends
What it is: You give employees a fixed cash amount each month to use however they choose.
Pros: Simple. No compliance burden. Employees like the flexibility.
Cons: Taxable. Doesn’t count as health insurance. No protections.
Best for: Very early-stage brands or teams with mixed employment types (W-2 and 1099).
Amount typically offered: $100 to $400 per month per employee.
What Does a “Good” Plan Actually Include?
A great benefits plan is about access, usability, and fit. Here’s how to evaluate the pieces:
| Plan Feature | Why It Matters | What to Look For |
|---|---|---|
| Deductible | Impacts when coverage kicks in | Under $2,000 if budget allows |
| Premiums | Monthly cost to employer and employee | Balance low cost with coverage |
| Provider Network | Who employees can see | PPOs offer more flexibility |
| Copays | Cost of office visits, prescriptions | Reasonable flat rates ($20–$40) |
| Rx Coverage | Prescription access | Tiered pricing for common meds |
| Mental Health | Access to therapists, counselors | Covered sessions + EAP options |
| Telemedicine | On-demand care options | Included with no extra fees |
You don’t need the most expensive plan on the market. But you do need a plan your employees can actually use. If your team has to pay $5,000 out-of-pocket before coverage kicks in, they’ll avoid getting care—and your “benefits” won’t feel like a benefit.
How to Keep Costs Under Control Without Cutting Value
Offering insurance will cost you money. That’s reality. But you have more levers than you think to keep those costs in check.
Here are founder-friendly ways to do it:
Set a fixed contribution per employee: Rather than covering a percentage, give each employee a monthly budget—say $300—to use toward their plan. That caps your exposure.
Use QSEHRA to let employees shop: This model gives flexibility and cost control. You reimburse, but you don’t own the plan.
Offer high-deductible plans with HSA support: Pair a low-premium, high-deductible plan with employer HSA contributions. It lowers premiums and helps employees save pre-tax dollars.
Review plan usage annually: If nobody is using the out-of-network benefits you’re paying for, switch to a leaner PPO. Watch renewal pricing too—costs creep up quietly.
What’s a Realistic Benefits Budget?
| Team Size | Monthly Budget (Total) | Notes |
|---|---|---|
| 1–3 employees | $300–$800 per employee | QSEHRA or stipends may suffice |
| 4–10 employees | $500–$1,000 per employee | Group plans become more viable |
| 10–20 employees | $700–$1,200 per employee | Better plans, leverage via scale |
Getting Set Up: What You Actually Need to Do
This part seems scary. It’s not. Here’s the big-picture setup checklist:
Decide on a structure (Group plan, QSEHRA, stipend)
Choose a partner (Broker, PEO like Gusto or Rippling)
Define eligibility rules (When does someone qualify? 30 days? 90?)
Sync with payroll (So deductions and reimbursements are automatic)
Onboard your team (Explain plan details clearly—help them choose)
Distribute required notices (Summary of Benefits, 1095s, etc.)
Founders often forget the part where things change. Employees leave. Plans renew. You need a system that makes maintenance simple.
At Cultivar, we recommend using Gusto or Rippling because they eliminate most of the admin headache. When someone enrolls, the deductions sync. When someone leaves, their benefits auto-cancel.
And yes, I’ve learned this the hard way. I once forgot to remove an employee who left. I paid over $1,000 in health insurance costs before I caught it. I got the money back eventually, but it was a hassle and a time suck I didn’t need. That experience made it crystal clear why automation matters.
Benefits Aren’t a Luxury—They’re a Growth Tool
Founders avoid health insurance because it feels like a trap. But when done right, it’s not just a cost. It’s a foundation. Your team deserves it. And your business will grow faster when your people feel secure.
You don’t have to figure this out alone. Cultivar helps Founders choose the right structure, keep costs in check, and build a benefits strategy that scales with their team.
Ready to offer insurance without losing sleep? Talk to Cultivar about choosing the right health coverage for your stage and budget.
FAQs
When should a Founder start offering health insurance?
Most Founders wait until their second or third full-time hire, but the right time depends on your goals. If you are competing for talent from established companies, offering health benefits early can make you stand out. If your hires are already shouldering their own coverage, a QSEHRA or stipend can bridge the gap until you scale. The key is to plan before someone asks about benefits so you are ready to act, not react.
How can I tell if my team actually values the plan I offer?
Ask directly and review usage data. If employees consistently choose the lowest-tier coverage or skip using key features like telemedicine, the plan may not fit their needs. Conduct short anonymous surveys once a year to learn what benefits matter most—mental health access, lower premiums, or family coverage. The best plan is one your team understands and uses.
What should I do if health insurance costs jump at renewal?
Start the renewal process early, at least sixty days before the current term ends. Gather claims and participation data, then ask your broker or PEO for multiple quotes, including high-deductible options paired with HSAs. Evaluate total cost, not just the premium. If the increase still feels steep, shift to a defined-contribution model or adjust employer contributions while keeping employee costs predictable.