The largest source of healthcare coverage in the U.S. for the non-elderly population (age < 65) and their dependents is employer-sponsored health insurance. In light of the exemption of small firms (< 50 full-time employees) from the “pay-or-play” mandate of the federal Affordable Care Act (ACA) and the substantial costs of employee health insurance to any employer, we investigate why most small firms still offer coverage, and how they manage to do so. We used the Kaiser Family Foundation (KFF)/Health Research and Education Trust (HRET) public dataset (2015–2019) for this purpose. Findings suggest that coverage objectives, strategic choices, and human resource practices in small firms initially pass through the lens of the business owner’s comparative advantages. On that basis, a compensating wage differential might be opted. Healthcare coverage, financial risk, and human resource management intertwine, with long-run consequences on employer health plan design and structure, benefit offerings, and insurance costs. This is particularly important considering that both employer and employee typically contribute to health insurance premiums in small firms. And considering that 96% of all U.S. firms are small, the findings of this study have implications on business operational risk.