Health Insurance for Solopreneurs and Self Employed Professionals

You’re considered self-employed if you have a business with an income, but you have no registered employees. Examples are independent consultants, freelancers or independent contractors.

If you provide services to companies, or work through vendors, you will most likely receive a 1099 tax document after the end of the year summarizing the income you received from each client or vendor.

If you are selling goods directly to consumers, you will probably keep track of your income completely on your own. Some e-commerce platforms may provide you with a 1099.

Regardless, tracking your income and expenses accurately and throughout the year is important for Advanced Premium Tax Credits to help you pay for health insurance. More on those in a bit.

As a self employed person, you will no doubt have times you may wish to clone yourself. But you are in fact one person. By definition a self employed person is not a “group”. For health insurance purposes an employer group must be made up of two or more full time employees. Full time is defined as working 30 or more hours per week. Salaried employees are considered full time.

 

As soon as you hire your first employee, you can start exploring small group health insurance. Until then, there are a lot of individual plans available and even some great savings programs you could qualify for.

The short answer is yes. But, how you do that, and what type of insurance you buy can make a big difference in costs and quality of coverage. It’s also a good idea to consult with a licensed professional and most will talk through your situation for free. Your income and household size may qualify you for tax credits to help cover the cost of health insurance. Or, you may qualify for other programs.

 

Tax credits can only be used to purchase ACA qualified health insurance and you must purchase that coverage through an approved marketplace to receive them. Other types of health insurance, such as indemnity policies, are not considered qualified and you can not receive tax credits to cover any of the cost of these types of policies.

 

Tax credits are based on your “tax household” meaning only individuals that are listed on your taxes. If you have roommates or other people that live with you but you do not file taxes together, they are not a part of your tax household. You can get a quick estimate to see if you may qualify for tax credits by entering some basic information in this online quoting tool.

Tax credits to help pay for health insurance are only available if you do NOT have an “affordable” offer of coverage from an employer; either yours or your spouses. “Affordable” is defined by the affordability threshold the federal government sets each year and is adjusted for inflation. The cost of insurance is considered unaffordable if it exceeds the affordability threshold based on your income and the lowest offered employer plan. See our article on affordability for specific examples and scenarios.

 

The tax credits are “Advanced Premium Tax Credits”, meaning they are paid in advance, directly to the insurance company you enroll with to cover a portion of your insurance premium. Because they are a tax credit you must reconcile them on your taxes when you file. If you grossly underestimate your income for the year, you will have to pay the excess tax credits back.

 

There are other savings programs and coverage that may apply to you, including Medicaid and Cost Sharing Reductions. You cannot receive tax credits and Medicaid. However, people who qualify for tax credits may also qualify for Cost Sharing Reductions.

ACA qualified coverage is required to cover pre-existing conditions, does not cut off benefits at a certain threshold, and covers preventive services 100% immediately. Indemnity policies vary a lot, but many do not cover pre-existing conditions, have lifetime limits, and may not cover preventive services.