Do you work for yourself and need health insurance? It may be easier than you think.
Table of Contents
Where to Buy Health Insurance
There are four places where you can buy health insurance.
- Health Insurance Marketplace
- Being on your spouse’s plan
- Being on your parent’s plan if you’re under 26
Health Insurance Marketplace
The Health Insurance Marketplace, or Obamacare exchange, allows anyone to buy health insurance. Note that some states have their own exchange instead of healthcare.gov, but it works the same way.
You do not need to be eligible for a subsidy or seeking a subsidy to use the exchange. You will just need to pay full price if you don’t qualify for a subsidy.
Marketplace plans vary widely by location. In some areas, the best plans you can buy from major health insurance companies are available. In others, there are only very limited plans from providers with terrible reviews.
You can also buy health insurance directly from an insurance company. You should only do this if you know you won’t qualify for a subsidy, since you can only get the Premium Tax Credit on marketplace plans.
Some private plans may not qualify as minimum essential coverage. These plans don’t meet one or more requirements of the Affordable Care Act. They may not cover enough services or have too high of a deductible. If you buy one of these plans, you will have to pay the penalty for not buying health insurance.
Prices and options will vary widely. You’ll want to compare both what you can get from other providers and what’s available in the marketplace.
You may be able to be added to your spouse’s plan at work. Compare pricing and coverage against what you can buy separately in the marketplace or privately.
If you decide not to use your spouse’s coverage when you’re able to, even if it costs more, you lose two tax benefits:
- Self-employed health insurance deduction
- Premium tax credit
You may be able to remain on your parent’s coverage until you turn 26. Like spousal coverage, you’ll need to compare cost and coverage against your other options.
Unlike spousal coverage, you do not lose your tax benefits if you don’t use your parent’s coverage.
How to Pay for Small Business Health Insurance
Like other business expenses, it’s usually best to pay with a business account. If your business is a separate entity, such as a corporation, you’ll generally want to buy it in the name of the business.
However, you generally won’t deduct self-employed health insurance on your tax return as a business expense. Instead, it has its own line on your Form 1040.
Can You Use an HSA?
You can open a Health Savings Account if your health insurance plan makes you eligible. Eligibility depends on your deductible and out-of-pocket maximum. Most plans, especially those on the marketplace, include HSA in their name if they’re available.
Unlike an employer plan, there is no way to avoid FICA taxes on a self-employed HSA. You only get a deduction on your income taxes. However, since you must contribute as an employee rather than as an employer, it doesn’t reduce your qualified business income for the 20% QBI deduction.
When Can You Buy Small Business Health Insurance?
You can buy marketplace plans during the open enrollment period. This is usually November to mid-December for coverage that will be effective for the following calendar year.
You can start coverage or change plans in the middle of the year if you have a qualifying life event. This is generally things like a job change, move, or large change in income.
Private health insurance companies typically follow similar rules, but the exact timing and procedures may vary.
What to Do Now
- Review your coverage options and pricing.
- Research tax deductions and credits for each option that may change your overall cost.
- Mark on your calendar when you’ll be able to buy or change coverage so you don’t forget.
- Read this insurance guide to learn more about how to determine your insurance needs.