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.
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.
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.
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:
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.
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:
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.
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:
Check out our new small business health insurance guide to dive deep into these ideas.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.