Do I Need Self-Employed Health Insurance? | eHealth

If you’re part of the growing number of self-employed or freelance workers, you’re not alone. In fact, there were 57 million self-employed Americans in 2019, according to a study by Upwork and the Freelancers Union. The appeal of this kind of work includes flexibility and work-life balance, but it also means you have to take care of everything yourself. And one important aspect to consider is health care coverage. As an independent contractor or consultant, you might have multiple options for insurance. Luckily, eHealth can assist you in navigating these options at no extra cost!

How do I determine if self-employment health insurance is necessary?

If you earn taxable income but don’t have an employer or employees, chances are you’ll need to find health insurance as an independent contractor. This applies to various roles, including independent contractors, independent workers, consultants, consignment workers, and those in private practice in fields like medicine, law, or accounting. It’s important to explore your self-employed health insurance options to avoid penalties for not having coverage. Starting from the 2019 plan year, there’s no federal tax penalty for not having health coverage if you can afford it but check your state’s rules as you may owe a state fee. If you’re unsure about the regulations in your state, our article on whether your state requires health insurance can provide helpful information. Additionally, a licensed eHealth insurance agent can guide you through the individual mandate rules in your state and present your options. It’s worth noting that if you have one employee besides yourself, you might qualify for small business group health insurance, which covers both you and your employees.

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Is it necessary for small business owners to insure self-employed and independent contractors?

Some individuals work as freelancers for employers. If you own a small business that employs self-employed workers, you might wonder if you need to provide health coverage. According to the Affordable Care Act, businesses with fewer than 50 full-time workers aren’t obligated to offer health coverage. However, some small businesses may voluntarily choose to provide health coverage to their full-time employees. To learn more, take a look at eHealth’s Small Business Health Plans page. When it comes to self-employment, rules may differ based on location, state, and insurance carrier. Generally, small businesses aren’t required to offer health coverage for self-employed individuals. However, in some cases, employers may extend group health coverage to their self-employed workers. If you’re a small business owner considering this option, remember that you’re not required to contribute to the premium, but if you choose to do so, the self-employed person might need to report these contributions as taxable income. On the other hand, self-employed workers who pay their premiums can deduct the cost from their income taxes. Independent contractors, like self-employed individuals, can learn more about their coverage options.

Independent Contractor or Freelance Contractor: Does It Matter?

The IRS defines an independent contractor as someone whose work is controlled or directed only to achieve a specific outcome. There is no employer-employee relationship. Doctors, accountants, and lawyers in private practice are typically classified as independent contractors. On the other hand, a freelancer is a temporary self-employed professional who provides products and services to multiple organizations. Freelancers often work for various clients and take on multiple projects based on their availability. This category includes journalists, copywriters, graphic designers, and web programmers. Whether you identify as an independent contractor, self-employed person, or fall into another self-employed category, securing health insurance coverage is crucial. When you’re sick or injured, you’re unable to work, and you won’t receive paid sick days. This puts you at risk of facing substantial medical expenses.

Health Insurance Options for Self-Employed and Independent Contractors

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As an independent contractor, freelancer, or consultant, you have several avenues to obtain health insurance. These options include:

• Group health plan of a parent, spouse, or domestic partner
• Individual and family health insurance plan under the Affordable Care Act (ACA)
• Short-term health insurance
• COBRA coverage

Each option has its pros and cons, and there are specific factors that determine your eligibility. Let’s take a closer look at each plan type to find the one that suits you best.

Parent, Spouse, or Domestic Partner Group Health Plan

If you’re eligible, you may enroll as a dependent in the group health plan of a working parent, spouse, or domestic partner. The advantages of group health coverage include lower costs due to subsidies from employers and unions. Additionally, group health coverage often includes extra benefits like vision, dental, and prescription drug coverage. However, there are disadvantages. For example, if you’re single, live alone, or are 26 years old or older, you aren’t eligible for group coverage through a spouse, domestic partner, or parent. Plus, employers or unions can’t subsidize dependent coverage, potentially leading to expensive premiums. Additionally, you can’t select the specific coverage you need; you must accept the coverage offered by the employer or union.

Affordable Care Act Individual and Family Health Insurance Plan

As a consultant or independent contractor, you have the option to shop for health insurance through the Affordable Care Act (ACA). eHealth can help you find the right individual health insurance plan that suits your needs during the open enrollment period, which typically runs from November to mid-December. Plans purchased during this time usually start coverage on January 1 of the following year. If you miss open enrollment, you might qualify for special enrollment due to specific life circumstances. You can learn more about plans and enrollment on the eHealth website. The advantages of buying an ACA plan include guaranteed coverage and consumer protections. Comparing different coverage levels (bronze, silver, gold, and platinum) is relatively straightforward, allowing you to find affordable coverage that meets your needs. Furthermore, if you qualify for a tax subsidy, your out-of-pocket costs could be lower. On the other hand, if you don’t qualify for a subsidy, an ACA plan might be more expensive than you can afford. More information about ACA plan subsidies and income levels is available on the eHealth website.

Short-Term Medical Insurance

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Temporary coverage is an option through a short-term health insurance policy. With eHealth, you can explore and compare short-term health insurance plans available in your area. The advantages of short-term policies include the ability to purchase them at any time, as there’s no open enrollment period. Additionally, they’re often more affordable than comprehensive health plans provided by private insurers and on the government exchange. However, there are disadvantages to consider as well. Typically, short-term policies provide coverage for less than a year, and there’s no guarantee that you’ll be able to renew your coverage. Furthermore, these policies might not cover all the benefits you need since they don’t have the same minimum requirements as ACA plans. It’s also worth noting that some states have restrictions or even prohibit the sale of short-term policies.

COBRA Coverage

If you recently left a full-time job, you might be eligible to continue your previous employer’s group health coverage through COBRA for a period of 18 to 36 months, depending on the circumstances. COBRA coverage offers the advantage of maintaining continuous health insurance while you establish yourself as an independent or self-employed contractor. Essentially, it allows you to continue the same coverage you had with your previous employer. However, there are drawbacks to consider as well. COBRA coverage is likely to be more expensive compared to purchasing health insurance as an independent contractor. Additionally, it has a limited duration, typically lasting between 18 and 36 months.

Medicaid

Medicaid is a needs-based assistance program that provides free coverage to approximately 74 million Americans. It can be a robust insurance option for qualified self-employed workers. Eligibility is primarily based on income, with most states offering Medicaid to individuals living below 138% of the federal poverty level. Disability and having children are additional factors that might influence eligibility. You can check your eligibility through healthcare.gov. The benefits of Medicaid include varying provisions depending on the state program, but federal guidelines require all states to provide a minimum benefit package that covers inpatient and outpatient care, medical care, and various other services. Furthermore, out-of-pocket costs for health care are significantly lower compared to private health insurance. Enrollment for Medicaid is open all year. However, access to health care providers that accept Medicaid might be limited, and eligibility rules can vary by state. Medicaid coverage ends when the insured no longer meets the criteria or eligibility requirements.

How much does self-employment health insurance cost?

In 2020, the national average monthly premium for health insurance on a benchmark plan (referred to as the “silver” plan) is $456 per month, or $199 if you qualify for a tax subsidy. If you’re looking for health insurance coverage for your family, the average cost is $1,134 in 2020. Details on the cost of self-employed health insurance can be found in our article, “How Much Does Self-Employed Health Insurance Cost?” The amount you pay for coverage varies depending on your household income and the number of family members covered by the health plan. If your family income doesn’t exceed 400% of the federal poverty level (approximately $49,960 for a single individual or $103,000 for a family of four in the contiguous United States), you may qualify for tax subsidies that significantly reduce your monthly costs. When applying for benefits, you’ll need to estimate your annual income, which can be adjusted later if necessary. Your eligibility for a subsidy is initially based on this estimate. Any changes in your income and subsidy eligibility will be reconciled when you file your federal income tax return. If your estimated income is lower than your actual income, you might need to repay part of your subsidy when you pay your taxes.

Find the Perfect Self-Employed Health Insurance Plan for You

Comparing health insurance options as an independent or self-employed contractor can be overwhelming. At eHealth, we aim to simplify this process for you. Our user-friendly website and licensed insurance agents are here to help you find the right coverage at the best price. It’s important to note that eHealth assistance is free, and you won’t pay more for a plan purchased through eHealth compared to buying it elsewhere. Start comparing individual health insurance plans by entering your zip code and exploring the top options available in your area. Remember that this article provides general information and may not be updated post-publication. It’s always advisable to consult your tax, accounting, or legal advisor for personalized advice rather than relying solely on this article.

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