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How to Get Health Insurance if You’re Self-Employed

A brief overview...
  • The Affordable Care Act coverage requirements apply to self-employed persons
  • Self-employed persons must get and keep coverage or pay a penalty
  • Self-employed persons get tax advantages and special deductions
  • Self-employed owners can expand to use the SHOP program and tax credits

In the build-up to the passage of the Affordable Care Act, statistics showed that many small business owners and sole proprietors had no health insurance. The Congress took steps to add protections and opportunities for small business owners and self-employed proprietors. The Affordable Care Act offers many advantages for insurance coverage for self-employed persons.

Combined with the tax advantages for self-employed medical expenses, the sole proprietors, and Subchapter S shareholders will have qualified health coverage and tax reduction benefits.

Comparison shopping is an excellent method for finding health insurance designed for small businesses and sole proprietors. Using comparison shopping, consumers can find lowest prices and best values. Click here to get online health insurance quotes for free today!

The Individual Mandate

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The heart of the Affordable Care Act is the requirement for universal health insurance coverage. Every eligible person must get and keep insurance coverage. The coverage must meet the quality standards of the Affordable Care Act. It must be qualified health insurance.

Self-employed persons must comply with the individual mandate to get and keep qualified insurance or pay a tax penalty. The penalty for uninsured adult persons in the calendar year 2016 was the greater of $695 or 2.5 percent of annual income.

What is self-employment?

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Self-employment is a business activity by an entity or an organization that has no employees other than the owner. Self-employment must be for profit and can be in the form of a contractor, sole proprietor, or freelancer. The key is the absence of employees. Adding one employee converts the situation into a small business.

Self-employment does not mean always working alone. Many self-employed business people engage contractors and consultants to perform work. These contractual relationships do not constitute employment, and they do not affect the status as self-employed persons for health coverage and tax purposes.

Open Enrollment Period

The open enrollment period runs from November through January of the next calendar year. The government arranges the signup times so that individuals can begin January with full coverage.

For 2017, the open enrollment began on November 1, 2016, and ended on January 31, 2017. Open enrollment is the best time for the self-employed to buy health insurance on the federal marketplace or the state exchanges.

After open enrollment, the self-employed will need a special enrollment period to get coverage.

Special Enrollment Periods

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A special enrollment is a 60-day period for signing up for health insurance. Those with special enrollments can use the federal marketplace and state exchanges.

They can take advantage of Obamacare assistance programs for which they are eligible. Special enrollments must have a qualifying event. These are changes in status that require new insurance or a new opportunity to buy insurance.

Qualifying Events

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The rules that implement the Affordable care Act contain a number of exceptions and qualifying events. The qualifying events are changes in status that would require new insurance for existing policyholders and a new opportunity for those that failed to signup in open enrollment. The federal and state governments recognize the below-listed items as qualifying events that support a special enrollment period:

  • Marriage
  • Divorce
  • Change of location
  • Adoption of a child
  • Birth of a child
  • Loss of coverage as an employee
  • Loss of coverage as a dependent

Deductible Health Insurance

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The self-employed can deduct the amounts they spend on health insurance from their gross annual income. This deduction includes the health insurance premiums they pay for themselves, their partners, and their dependents. They can deduct premiums for health, vision, and dental insurance.

Every taxpayer can deduct medical expenses, but they may not include premiums. The standard medical expense deduction applies to the amount above ten percent of the annual income.

An Important Reduction of Taxable Income

The Self-Employed Health Insurance Tax Deduction does not depend on reaching a threshold amount of spending. The essential condition is that the business must make a net profit from self-employment.

Self-employed and the Marketplace

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Self-employed persons can participate in the assistance programs offered by the Obamacare Marketplace and state exchanges. These programs apply to those with incomes between 100 percent and 400 percent of the federal poverty guideline. The assistance programs include advanced premium tax credits, costs reduction assistance subsidies, referrals to Medicaid and CHIP.

The self-employed can only access the Obamacare assistance programs through the federal Marketplace and the state exchanges. They can purchase them during the open enrollment season but not afterward unless they have a qualifying event.

Qualified Health Insurance

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The Affordable Care Act requires insurance plans to provide minimum essential coverage.

It does not accept coverage that has no limits on consumer spending or insufficient benefits. Medicare, Medicaid, and the CHIP are qualified health insurance programs. All policies sold through the Marketplace or state exchanges are qualified health plans. Insurance must meet the below-listed standards to meet the requirements of the mandate and avoid the penalty.

Employer Options

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If the self-employed business person or owner can add one person to the group, he or she can use the Marketplace SHOP program. This special small business program has features designed for very small businesses including tax credits. The addition of a second person can qualify the application for a group insurance plan.

The program offers assistance in designing and setting up a group plan. The employer gets credits for up to half of the contribution to the employee’s insurance costs. As a small-business-sponsored group plan, one can itemize the costs of the insurance as business expenses.

Self-Employed People and the Health Insurance Marketplace

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The Affordable care Act requirements for qualified health insurance coverage apply to the self-employed in the same way as other citizens and residents. Self-employed persons must get coverage or pay the penalty. They can use the Obamacare Marketplace and state exchanges to get premium tax credits, costs reduction assistance subsidies, and health Savings Accounts.

Once signed to a policy, the self-employed enjoy their special deductions for all related medical expenses. Including dental and vision coverage for self and family, self-employed persons can deduct all costs and premiums.

Comparison shopping is a proven method for finding the best health insurance coverage. Self-employed persons can use comparison shopping to find the best fit for their situation. Click here and enter your zip code to compare free health insurance quotes!

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