Man talking on cellphone with laptop; health insurance for self-employed

Stepping out to work for yourself: ✔

Starting your own business: ✔

Getting group health insurance for self-employed: in progress.

Learn the best way to take this last task from “in progress” to complete whether you want to buy self-employed health insurance for yourself or cover your employees.

What Is Being Self-Employed?

According to the IRS, you’re self-employed if you run a trade or business as an independent contractor, a sole proprietor, or as a member of a partnership, or if you’re in business for yourself, including having a part-time business. Both sole proprietors and partnerships can hire employees, but the owners are still legally recognized as self-employed.

Self-Employed Profile

In a 2018 small business profile report from the Small Business Administration, there were about 30.2 million small businesses in the U.S. and approximately 24.3 million of those business were nonemployers—defined as self-employed business owners with no employees.

Buying Group Health Insurance With No Employees

If you work for yourself and have no employees, you are considered a small group of 1 and can only buy group health insurance for self-employed through an insurance company or agent in certain states. Less than half of the 50 states (including the District of Columbia) sell small group health insurance to nonemployers. So as a self-employed person with no employees, you would have to buy an individual health insurance policy in most cases.

Another option is the stand-alone health reimbursement account (HRA), which is an employer-funded group health plan from which you are reimbursed tax-free for qualified medical expenses up to $4,950 per year.

If you’re able to buy health insurance as a small group of one in an issuing state, one of the main advantages is that most states that sell such policies do so on a guaranteed-issue basis. The chart below from Kaiser Family Foundation shows a list of states where you can buy self-employed group coverage as a small group of one.

States That Issue Group Health Policies to Self-Employed Group of 1

Location

Definition of Small Group

Guaranteed Issue for Self-Employed Group of 1

Colorado

1 to 50

Yes

Connecticut

1 to 50

Yes

Delaware

1 to 50

Yes

Florida

1 to 50

Yes

Hawaii

1 to 50

Yes

Iowa

1 to 50

No

Louisiana

1 to 50

No

Maine

1 to 50

Yes

Massachusetts

1 to 50

Yes

Mississippi

1 to 50

Yes

New Hampshire

1 to 50

Yes

New York

1 to 50

No

North Carolina

1 to 50

Yes

Rhode Island

1 to 50

Yes

Vermont

1 to 50

Yes

Washington

1 to 50

Yes

Source: Kaiser Family Foundation, 2013 Small Group Health Insurance Market Guaranteed Issue

Note: Check with your state insurance department to verify if group health insurance policies are sold to small groups of one.

Buying Group Health Insurance With Employees

If you have at least one employee (someone who is not an independent contractor, your spouse, or a business partner or part-owner of the company), you can buy group health insurance through an agent, directly from an insurance company, or through the public exchange. Basically, you have more options for how you can buy a group health policy when you’re a self-employed business owner with employees.

Similar to an HRA, you have the option of a qualified small employer health reimbursement account (QSEHRA), which is available to employers with up to 49 employees. The business owner offers minimum essential health coverage, sets an allowance for the QSEHRA, then employees submit their medical expenses for tax-free reimbursement. Employees can be reimbursed up to $4,950 per year for individuals and up to $10,000 per year for families.

Buying Health Insurance for Self-Employed Through an Agent

Working with an agent is usually the best way to buy health insurance because it requires little work on your part, and you get access to a wide variety of self-employed health insurance plans. The variety of plans that an agent can sell depends on the insurance agency the agent is contracted with. Some insurance agencies have contracts with hundreds of health insurance companies to sell their products while other agencies may only be able to sell plans from a small number of insurance companies. Having lots of options to compare self-employed health insurance rates can make it easy to find affordable health insurance for yourself or your small group.

Another reason why you would want to work with an agent is to maximize your time. As a self-employed business owner, you may wear many hats—like being the human resources, accounting, and legal team all in one. Juggling so many roles may not allow you the luxury to fully analyze all the different group health plans out there. You may also need to find out what health benefits employees are looking for. Again, time may not afford you the opportunity to meet with each employee. By shopping for group health insurance for self-employed through an agent, you can get:

  • No-cost consultation service that includes a complete cost-analysis of your health insurance needs
  • A professional who can meet face-to-face with each of your employees and be there year-round to answer benefit questions
  • Advice from a licensed professional who’s knowledgeable about the group health market
  • Help from someone local in your area, which could make it easy to get to your office

Working With an Agent Can Help With Employee Satisfaction

Employees with thumbs upBecause a licensed insurance agent can provide employees with a greater level of service by assessing their health coverage needs, explaining different plan options, and even identifying where supplemental insurance can help fill the gaps in major health coverage, this may create better employee satisfaction and retention.

A 2016 employee benefits study conducted by Aflac revealed that employees who are satisfied with their health insurance benefits are less likely to search for a new job in the next 12 months.

A satisfied employee may also be more likely to recommend your company to job seekers. So offering group health insurance that meets your employees’ needs can also help with recruiting future employees.

Buying Health Insurance for Self-Employed Without an Agent

Buying group health insurance for self-employed directly from an insurance company without the help of an agent is another option that you have. But going this route may be best only if you’ve already done the research to know what type of plan you want and you’re quite knowledgeable about health insurance terms and processes. Also, not all insurance companies sell group health policies directly to consumers. So that’s additional time that you would have to spend finding out which ones do. If you choose not to use an agent, you will be responsible for benefits administration tasks, such as initial and annual enrollments, and billing and claims resolution.

Buying Health Insurance for Self-Employed Through the Public Exchange

The public exchange for employers, known as the Small Business Health Options (SHOP) Marketplace, categorizes business owners with no employees (hiring independent contractors doesn’t count as having employees) as self-employed and those with employees as small employers. To buy group health coverage through the SHOP, you must have at least one eligible full-time equivalent employee. An eligible employee cannot be a spouse, business partner, or part owner in your company. You usually need to have no more than 50 employees (some states allow up to 100) to buy a SHOP plan. If you want to enroll yourself in the plan, at least one of your employees must first be enrolled.

Your small business may qualify for a tax credit of up to 50 percent if you have fewer than 25 employees, but this comes with certain requirements:

  1. You have to buy a SHOP plan for at least two years.
  2. Your employees can’t earn more than $50,000 in average annual wages.
  3. You must pay for at least 50 percent of employees’ premium costs.

Compared to self-employed health insurance coverage outside the SHOP marketplace, it has been reported that the SHOP has fewer plans, many states only offer plans from one insurance company, and available plans are usually the more expensive options. A health insurance agent can help you evaluate whether a SHOP plan makes sense for your business.

Choosing a Self-Employed Health Insurance Plan

The type of self-employed group health plan you choose may depend on whether or not you have employees. If you have no employees, then how you go about choosing group health insurance for self-employed may be the same as if you were buying individual health coverage or family health insurance. If you have employees, then you have to consider things like how much you can afford to contribute toward employee premiums (most insurance companies require at least 50 percent of premium cost), the network of providers employees would have access to, and the amount employees would have to pay for a plan that has a deductible. Of course, the goal is to pick a plan that makes financial sense for your business while also being what’s best for your employees.

The chart below shows features of different types of group health insurance plans.

Plan Type Access to In-Network and Out-of-Network Providers Premium Cost Level Deductible Cost Level Best Type of Plan if:
Health Maintenance Organization (HMO) In-network only, except for emergencies* Usually lower than most other plans. Lower employee premiums means lower employer premium contributions. Usually has no deductible. If there is a deductible, typically lower than most other plans. You want care organized through a central provider (must have a primary care physician [PCP] and get referrals in most cases*) and lower out-of-pocket costs
Preferred Provider Organization (PPO) Both, but there’s a lower percentage of coverage out-of-network Usually has one of the highest premiums compared to other plan types Not the highest, but typically more than an HMO plan You want more flexibility to visit providers without going through a PCP or getting a referral.
Point of Service (POS) Both, but typically need a referral from PCP to go out-of-network Typically higher than an HMO, but lower than a PPO Typically higher than both an HMO and a PPO plan You want to have a mixture of guided healthcare from a PCP with the ability to get coverage out-of-network.
High Deductible Health Plans (HDHP) Depends—can work like an HMO, PPO, or POS Usually the lowest Typically the highest You don’t get sick a lot because you would have to pay the high deductible before the plan covers certain types of care. You want to use your health insurance with a health savings account (HSA).
Fee-for-Service (FFS) Both Often the most expensive Can be lower than other plans, but the overall out-of-pocket costs are high because members typically pay for care up front and then file a reimbursement claim. You want the most flexibility to visit any provider you choose.

*A referral from a PCP is not needed for emergencies and routine care from an in-network obstetrician or gynecologist.

Self-Employed Health Insurance Deduction

If you work for yourself, you could be eligible for a self-employed health insurance deduction. If so, you can adjust your gross income when filing your tax return by deducting 100 percent of your health insurance premiums—including dental and long-term care—for your household (you and your dependents). To find out if you’re eligible, you should consult with a tax professional. If you are allowed to take the self-employed health insurance deduction, this will not prevent you from taking advantage of the Affordable Care Act’s premium tax credits, if you are eligible for those as well.

More Choices for Group Health Insurance for Self-Employed

HealthMarkets Insurance Agency works with more than 200 insurance companies across the country to give small businesses access to thousands of health insurance plans. An agent in your area can meet with you to discuss our innovative cost-saving solutions for group health insurance for self-employed. Have an agent contact you about our small business health insurance plans or call us at (800) 976-5818. We’re here to help!

HMIA003040

References

https://www.irs.gov/individuals/self-employed | http://info.legalzoom.com/can-sole-proprietorship-employees-23986.html | https://www.sba.gov/starting-business/choose-your-business-structure/partnership | https://www.healthcare.gov/self-employed/coverage/#questions | http://healthcoverageguide.org/reference-guide/purchasing-coverage/purchasing-without-a-broker/ | https://www.healthcare.gov/small-businesses/provide-shop-coverage/using-insurance-agents-and-brokers/ | https://www.sba.gov/sites/default/files/advocacy/US.pdf | http://www.forbes.com/sites/jasonnazar/2013/09/09/16-surprising-statistics-about-small-businesses/#5950f97e3078 | http://kff.org/other/state-indicator/small-group-health-insurance-market-guaranteed-issue/ | http://healthcoverageguide.org/reference-guide/benefits-providers-and-costs/cost-sharing/ | https://www.allbusiness.com/the-facts-about-ppo-hmo-ffs-and-pos-plans-770-1.html

Call us Now at (800) 976-5818 or Get a Quote Online