Looking for group health insurance for self-employed? If you own your own business but have no employees, you may not even realize the options available regarding group health insurance for the self-employed. These days, there are more options than ever, and some are customizable, making it easy to find exactly what you’re looking for! Read on for an affordable self-employed health insurance option.
Did you know that 99.9% of businesses in the US are small businesses, and 8 out of 10 of those have no employees? If this sounds familiar to you, you're probably self-employed.
And kuddos to you!
That is no small feat.
In addition to running your business, you're probably asking yourself, "Is there affordable health insurance for self-employed?" or "Are there group health insurance options for self-employed individuals?" or "How do I solve for health benefits for small business?"
These are great questions.
The good news is you've got options.
Do Self-Employed People Need Health Insurance?
Health insurance is crucial for everyone, including the self-employed. Without the backing of an employer, individuals running their businesses face the entire burden of health-related expenses on their own. The best health insurance for self-employed individuals is vital for financial security, maintaining good health, and ensuring access to necessary medical services. Group health insurance for self-employed or sole proprietorship health insurance plans can offer affordable solutions tailored to the needs of those who work for themselves.
How to set up health insurance for self-employed.
Who Is Considered Self-Employed?
A self-employed individual is anyone who operates their own business as a sole proprietor, independent contractor, or freelance worker and does not have any employees. This definition encompasses a wide range of professions and industries, and for these individuals, choosing the best insurance for self-employed scenarios is essential. From consultants to freelancers and artists to small business owners, having the right health insurance strategy is a cornerstone for safeguarding their business’s future and personal well-being.
What Should the Self-Employed Look for in a Health Insurance Plan?
When searching for the best health insurance for self-employed individuals, several factors can significantly impact both coverage and costs. Group health insurance for self-employed people can offer competitive premiums and comprehensive coverage, making it a valuable option for those without traditional employer-sponsored health plans. Here are vital aspects to consider:
- Coverage Details: Ensure the plan covers various medical services, from preventive care to major surgeries. The best insurance for self-employed workers often includes benefits like mental health services, prescription drugs, and emergency care.
- Costs: Analyze the costs beyond the monthly premium. Look at deductibles, copayments, and out-of-pocket maximums. Sole proprietorship health insurance plans might offer different cost structures, so choose one that effectively balances out-of-pocket costs with monthly premiums.
- Network: For self-employed individuals, having access to a broad network of doctors and hospitals is crucial. A restrictive network can limit your choices and force you to pay higher out-of-network fees. The best health insurance for self-employed individuals typically offers a sizable network.
- Flexibility: Given that self-employment can be unpredictable, look for health insurance that offers some flexibility in coverage. This might include options for adding or removing coverage, choosing different levels of coverage, or adjusting terms based on changing professional circumstances.
- Tax Advantages: Some health insurance plans might offer tax benefits. For instance, premiums for a sole proprietorship health insurance plan might be deductible on your tax return, potentially lowering overall expenses.
By focusing on these critical factors, self-employed individuals can find a plan that meets their health needs and aligns with their financial and professional stability. This approach ensures that you select the best health insurance for self-employed status, safeguarding your and your business’s financial health.
How Much Does Health Insurance Cost for Self-Employed People?
Determining the cost of health insurance for self-employed individuals involves several variables that can influence the final premium. The best health insurance for self-employed people typically varies widely in cost based on factors like age, location, chosen plan, and the individual's health status. Understanding these factors can help in finding the most affordable and adequate coverage:
- Plan Type: The plan chosen—whether it's a group health insurance for self-employed individuals, an individual plan, or a sole proprietorship health insurance plan—can affect costs significantly. Group plans might offer lower premiums due to the risk being spread across a larger group.
- Coverage Level: Plans with more comprehensive coverage and lower deductibles generally come with higher premiums. Conversely, high-deductible plans have lower monthly costs but could lead to higher out-of-pocket expenses in the event of medical needs.
- Location: Health insurance costs also vary by state and even by regions within a state due to differences in regulation, cost of living, and available healthcare providers.
- Age and Lifestyle: Typically, older individuals pay more for health insurance than younger ones. Lifestyle choices, such as smoking, can also lead to higher premiums.
- Tax Considerations: For self-employed individuals, the premiums for health insurance might be tax-deductible, which can effectively reduce the cost of insurance when considering annual financial planning.
On average, the cost of health insurance for self-employed individuals can range from a few hundred to several thousand dollars per month, depending on the abovementioned factors. It's crucial for self-employed individuals to carefully compare plans and consider how each plan's costs will fit into their overall budget and financial strategy. The best insurance for self-employed persons fits their health needs and aligns with their financial circumstances, ensuring health and financial stability.
Insurance for self-employed: what's best?
As a self-employed individual with no employees, you likely fall under either a sole proprietorship or a single-member LLC. However, navigating the world of health insurance can be a bit tricky as the IRS sees no separation between you and your business.
This means that even if you work full-time for your company, you are not considered an employee. It's important to remember that this applies to both Sole Proprietorships and Single-Member LLCs that did not elect corporate taxation.
Here are some budget-friendly, tax-advantaged options for health benefits:
- Purchase an individual health plan, either off-exchange or from the ACA exchanges. (Our individual health insurance platform can help you shop).
- Consider an affordable alternative to traditional insurance, like a faith-based sharing plan.
- Get on your spouse's employer-sponsored health plan, if available.
- Purchase a group health insurance plan for yourself (in certain states).
- Hire your spouse as an employee and set up a health reimbursement arrangement. We know this sounds crazy. But hear us out.
Check out our new small business health insurance guide to dive deep into these ideas.
Can You Get Group Health Insurance If You Don’t Have Employees?
According to the Kaiser Family Foundation, the following states define self-employed individuals as "groups of one" and require insurers to guarantee them coverage in the small group market.
- Colorado
- Connecticut
- Delaware
- Florida
- Hawaii
- Iowa
- Louisiana
- Maine
- Massachusetts
- Mississippi
- New Hampshire
- New York
- North Carolina
- Rhode Island
- Vermont
- Washington
What are the options for group health insurance for the self-employed?
Small group insurance: Small-group insurance has been the primary option for many small employers seeking health benefits. Options include managed care (HMO, PPO, and POS), indemnity fee-for-service, and high-deductible health plans.
You can buy small-group plans directly from an insurance company, via a broker or private exchange, or from their state’s SHOP Exchange. You can sign up for this anytime, not just during open enrollment.
While these plans are well-known, tax-free, and solid product options, they are also expensive, one-size-fits-all. They have unpredictable premium increases year over year, as well as participation rate requirements.
But remember, only certain states guarantee self-employed individuals the ability to elect a group plan.
Many small business owners like you are opting for the new reimbursement model instead which boasts many benefits, helps with budget control, and is more predictable.
Small Business Health Options (SHOP) Marketplace
The Small Business Health Options Program (SHOP) Marketplace is explicitly designed for small business owners and self-employed individuals who want to provide health and dental insurance to their employees. For self-employed individuals with no employees, navigating the SHOP Marketplace can be challenging as eligibility typically requires at least one full-time equivalent employee other than the owner or a family member. However, for those who qualify, SHOP offers a variety of plans at different cost levels, allowing small business owners to choose coverage that best suits the needs of their business and employees. This marketplace also provides the advantage of potential tax credits that can reduce premium costs significantly, making it an appealing option for those looking to offer group health insurance for self-employed teams.
Plans Through an Insurance Company
Self-employed individuals can also purchase health insurance directly through an insurance company. This option provides flexibility in selecting from various plans that might not be available on government-run exchanges. When choosing the best health insurance for self-employed individuals through an insurance company, it’s important to compare all available options to determine which plan offers the best balance of cost, coverage, and network. Direct purchase might involve higher premiums but often comes with more comprehensive coverage and additional services like wellness programs, which are tailored to individual health needs and can be particularly beneficial for sole proprietorship health insurance seekers.
Plans Through Medicaid
For self-employed individuals with lower incomes, Medicaid provides a cost-effective solution for health insurance. Eligibility for Medicaid varies by state, as each state has guidelines concerning income levels and other qualifications. Medicaid plans often have low or no premiums and lower out-of-pocket costs, making them an attractive option for those who qualify. Self-employed individuals need to check their eligibility, especially if their income fluctuates, as they may qualify during periods of lower earnings. Medicaid can be a crucial safety net, offering comprehensive health coverage, including doctor visits, hospital expenses, maternity care, and even mental health services, ensuring that the best health insurance for self-employed persons is accessible regardless of income level.
Health Reimbursement Arrangements
A health reimbursement arrangement is an affordable, tax-advantaged alternative to traditional insurance in which employers reimburse their employees on a pre-tax basis for individual insurance premiums and medical expenses (if applicable).
The use of new reimbursement models like QSEHRA and ICHRA put the employer's reimbursements on nearly the same tax playing field as traditional small group plans, but without all the hassles and requirements. Before, a big advantage for group plans was that they were deductible expenses for employers and were taken out of employee paychecks on a pre-tax basis.
Before we discuss how to do this, let's discuss the two main types of HRAs.
QSEHRA: The Qualified Small Employer Health Reimbursement Arrangement, or QSEHRA, allows small employers to set aside a fixed amount of money each month that employees can use tax-free to purchase individual health insurance or pay medical expenses. This means employers can offer benefits in a tax-efficient manner without the hassle or headache of administering a traditional group plan, and employees can choose the plan they want. Reimbursement amounts can vary based on age and family size.
ICHRA: The Individual Coverage Health Reimbursement Arrangement has all the same benefits as QSEHRA, but with no maximum contribution or company size limit. In addition to the flexibility of varying rates based on age and family size like QSEHRA, the hallmark feature of an ICHRA plan is that benefits can be scaled across different ICHRA classes of employees. An ICHRA can also be integrated with a group plan, another distinction.
As a self-employed individual you generally are not eligible for an HRA because you’re not an employee, your spouse can be an employee and eligible for an HRA and health plan that covers you.
Here’s the HRA strategy if you’re self-employed with no employees and you’re married:
- Hire your spouse as a W-2 employee:
- Your spouse’s salary can just be the amount you want to reimburse through the HRA, but it must be a fair wage for what they are doing (i.e., you can’t reimburse $100k through an HRA if your spouse is not doing that much work)
- It’s a good idea to have an employment contract and time sheet for record-keeping purposes
- Make your spouse the primary member on your family health plan
- Cover yourself as a dependent on your spouse’s major medical health plan
- Set up a One-Person 105 HRA, ICHRA, or QSEHRA for your spouse:
- Choose the One-Person 105 option if you have significant medical expenses or have other employees that are only excludable under the One-Person 105 rules (see Pro-Tip in the One-Person 105 HRA section above); the One-Person 105 HRA meets the HRA discrimination requirements because your spouse is the only eligible employee
- Choose QSEHRA if you have health expenses that are less than the QSEHRA reimbursement limit or have other employees that are excludable under the QSEHRA regulations so that your spouse is the only eligible employee for the QSEHRA (see the Reimbursement Rules section of our QSEHRA Guide)
- Choose an ICHRA if the reimbursement limits of QSEHRA are too restricting. There is no limits on ICHRA contributions.
- Save all your medical bills and records and have your company reimburse the bills each month from a separate account.
This strategy for employee insurance for small business only works if you don’t hire any other W-2 employees that would be eligible for either ICHRA, QSEHRA or a One-Person 105 HRA (make sure to look at those rules closely) and assumes that you and your spouse don’t own any other businesses that have employees (common ownership rules would likely apply and the plan would fail to meet Section 105 requirements). You’ll need to keep good records, too.
Tips for Self-Employed People to Find Better Health Insurance Coverage
Finding the right health insurance coverage is critical for self-employed individuals, as it provides security against unforeseen medical expenses and ensures business operations continuity. Here are some tips to help you find the best health insurance for self-employed individuals:
- Assess Your Health Needs: Before shopping for insurance, thoroughly assess your and your family's health needs. Consider your regular medical services, prescriptions, and any ongoing treatments. This will help you determine the type of coverage you need and avoid paying for unnecessary extras.
- Understand the Different Types of Plans: Learn about the different health insurance plans available, such as HMOs, PPOs, and HSAs. Each type has pros and cons regarding out-of-pocket costs, network restrictions, and flexibility in choosing healthcare providers.
- Compare Plans Carefully: Use online comparison tools or consult a health insurance broker to compare different plans. Look beyond just the premiums—consider deductibles, out-of-pocket maximums, copayments, and coinsurance. This will help you find a plan that offers the best value based on your health needs and financial situation.
- Consider Joining a Group: If you’re looking for group health insurance for self-employed people, consider joining a professional association or a group offering insurance to its members. These groups can provide access to better rates through pooled risk.
- Check for Government Subsidies: Determine if you qualify for any subsidies through the Affordable Care Act (ACA) marketplace. These subsidies can make premiums more affordable and are particularly valuable for those with fluctuating incomes.
- Review Plan Networks: Ensure your preferred doctors and hospitals are included in the plan’s network. A broader network can provide more choices and better access to specialists, which is particularly important in sole proprietorship health insurance.
- Plan for the Future: Consider how your health insurance needs might change in the coming years, especially if your self-employment situation evolves. Look for flexible plans to adjust coverage as your business and personal life change.
- Stay Informed: Health insurance regulations and offerings can change frequently. Stay informed about the latest developments in health insurance policies and market trends to ensure you always have the best possible coverage.
By following these tips, self-employed individuals can navigate the complexities of health insurance and find a plan that best suits their needs, ensuring health security and financial peace of mind.
Next Steps
Hopefully, we've shed some light on your options for healthcare for business owners. We have a ton of excellent resources available to you, including FAQ pages for the ICHRA and QSEHRA and many informational posts on our blog. You can also chat with one of our team of experts anytime!
This post was originally published in 2020 and updated in 2024 with the latest regulatory and policy updates.
