Self-Employed? Here's Your Guide to Navigating Health Insurance
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While Americans are most commonly insured through their employers, you will need to shop for your own individual or family plan if you are self-employed. The Health Insurance Marketplace is generally the best place to go for self-employed health insurance, although you may also be eligible for coverage through a government-funded program like Medicare or Medicaid depending on your circumstances.
Keep reading to find out all you need to know about securing health coverage when you’re your own employer and related benefits like the self-employed health insurance deduction.
Do I Need Health Insurance if I’m Self-Employed?
Health insurance is technically required by law for everyone in the United States who doesn’t qualify for an exemption, although the federal government hasn’t fined uninsured people since 2019. However, you will still have to pay a tax penalty if you go without health insurance coverage in California, Massachusetts, New Jersey, Rhode Island or Washington, D.C.
Even if your state doesn’t enforce an individual mandate, it’s still recommended that you maintain major medical insurance as a self-employed person due to the high medical costs you could encounter without it. For example, a three-day hospital stay costs about $30,000 on average without insurance.
What Is Self-Employed Health Insurance?
Health insurance for self-employed people is functionally the same as individual or family coverage since you won’t qualify for a typical job-based group health insurance plan if you work for yourself and don’t have any employees.
If you have at least one employee, you may also qualify for Small Business Health Options Program (SHOP) coverage. However, you should note that an independent contractor, family member or spouse who works for you is not considered an employee for SHOP coverage eligibility purposes.
How Does Self-Employed Health Insurance Work?
You can deduct the amount of money you spend on health, dental and long-term care insurance premiums from your taxes if you’re self-employed. In general, your business needs to make a net profit over the course of the year for you to qualify for this tax deduction. Additionally, you can’t deduct premiums for individual coverage that you paid during months when you were eligible for group coverage through either your spouse’s employer or a company that employed you.
What Type of Health Insurance Is Best if You’re Self-Employed?
One of the best ways to get individual health insurance for independent contractors and other self-employed workers is to shop on the federal Health Insurance Marketplace website or your state’s equivalent exchange if applicable. You can shop for Marketplace health plans that meet the standards for essential health benefits set by the Affordable Care Act (ACA) during open enrollment from November 1 to January 15 or anytime you qualify for a special enrollment period due to a major life event like getting married.
Jonathan Rosenfeld, founder and managing attorney at Rosenfeld Injury Lawyers, recommends combining a Marketplace high-deductible health plan (HDHP) with a health savings account (HSA) based on his personal experience as a self-employed individual. HDHPs come with low premiums and high out-of-pocket costs, while an HSA allows you to set aside pre-tax money that you can use to cover those out-of-pocket expenses.
“In my own practice, this combination offered a sensible compromise between cost and coverage, allowing me to manage my healthcare expenses more efficiently,” Rosenfeld told SmartFinancial.
Public Coverage Options
You could also secure individual self-employed coverage through a government-run program, although you will generally need to meet certain eligibility requirements. For example, you can sign up for Medicare if you are at least 65 years old or have a disability, permanent kidney failure or Lou Gehrig’s disease.
Other public health insurance options you may qualify for if your business is just getting off the ground include Medicaid, which covers members of low-income households and people with disabilities, and the Children’s Health Insurance Program (CHIP), which covers children and occasionally pregnant women whose families don’t qualify for Medicaid but also don’t make enough money to comfortably afford private health insurance.
How Much Does Self-Employed Health Insurance Cost?
Health insurance companies are only allowed to take five factors into account when setting the rates for a Marketplace health plan: your age, your location, whether you use tobacco, whether the plan will cover your whole family or just you and whether your plan falls into the platinum, gold, silver, bronze or catastrophic tier. Americans pay $477 per month on average for a benchmark plan, which is the second-cheapest silver-tier plan available in a given state.
Most Medicare members receive Part A for free, although you could have to pay either $278 or $505 per month in 2024 depending on how long you or your spouse paid Medicare taxes. Meanwhile, the monthly premium for Medicare Part B in 2024 will range from $174.70 to $594 depending on how much money you made in 2022.
How To Get Health Insurance if You’re Self-Employed
Self-employed individuals can sign up for a Marketplace health insurance plan at HealthCare.gov or their state’s equivalent marketplace website if applicable. Meanwhile, you can enroll in Medicare through the Social Security Administration website and apply for Medicaid or CHIP through either HealthCare.gov or your state’s Medicaid agency.
If you need help comparing quotes from multiple carriers before buying health insurance, consider using an independent marketplace platform like SmartFinancial. We can gather information about your budget and coverage needs through a simple questionnaire and then connect you with health insurance agents near you, sometimes in just a few minutes. To receive free health insurance quotes today, type your zip code in the box below.