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Starting your own business means making critical decisions, including how to secure health insurance for yourself and potentially for your employees. Whether you’re a small business owner or a freelancer, it’s important to explore the right options that fit your budget and coverage needs while taking advantage of available tax benefits and savings programs.
Health Insurance Options for Small Business Owners
Small Business Health Options Program (SHOP)
The SHOP program is designed for small businesses with 1–50 full-time employees.
- Eligible businesses with up to 25 employees may qualify for the Small Business Health Care Tax Credit, which lowers the cost of small business medical insurance.
- Sole proprietors or self-employed individuals without employees are not eligible for SHOP coverage.
Small Business/Small Group Health Plans
Private insurance companies offer small group health plans for businesses with fewer than 50 full-time employees.
- These plans are often more affordable than independent health insurance plans and provide group coverage for employees.
- Offering health insurance for business owners can help attract and retain employees.
How Else Can Small Businesses Save?
Small business owners may qualify for discounted business health insurance through industry organizations such as the National Association for the Self-Employed or the Freelancers Union.
- Hiring one or more employees may qualify your business for small group plans, which are often cheaper than individual policies.
- Consult a broker who specializes in health insurance for small businesses for tailored advice.
Health Insurance Options for Freelancers, Contractors, and Entrepreneurs (1099 Income)
Affordable Care Act (ACA) Health Insurance Exchange
Freelancers and independent workers can shop for medical insurance for self-employed individuals through state or federal ACA marketplaces.
- These plans cover essential benefits like preventive care and pre-existing conditions.
- ACA Subsidies or premium tax credits may be available to reduce monthly costs, making ACA plans a popular choice for self-employed medical insurance.
Individual Health Insurance Plans
You can purchase independent health insurance directly from private insurers.
- These plans vary in cost and coverage, offering flexibility to meet your specific needs and budget.
State-Sponsored Health Insurance Plans
Some states provide health coverage for self-employed residents based on income or medical needs.
- Check with your state for eligibility and available programs.
Coverage Through a Spouse or Domestic Partner
If your spouse or domestic partner has employer-sponsored health insurance, you may be able to join their policy.
- This is often a cost-effective option compared to purchasing insurance for self-employed individuals.
Short-Term Health Insurance
Short-term health insurance provides temporary coverage for 30 to 90 days.
- This type of insurance is ideal for those transitioning between jobs or waiting for long-term coverage to begin.
COBRA Continuation Coverage
If you recently left a job with employer-sponsored insurance, COBRA allows you to continue that plan for up to 18 months or more.
- COBRA can be costly since you pay the full premium, but it ensures uninterrupted coverage.
Why Purchase Health Insurance?
Having health insurance protects you from financial risks associated with unexpected medical expenses. Whether you are running a small business or are self-employed, investing in health insurance for business owners or individuals ensures peace of mind and stability.
What Is the Self-Employed Health Insurance Deduction?
If you purchase self-employed health plans, you may qualify for a self-employed health insurance deduction on your federal, state, and local income taxes.
- This deduction allows you to deduct 100% of your premiums for health, dental, and vision insurance, but the amount cannot exceed your business income.
- To qualify, you must have no other health coverage, including through a spouse.
How Do I Claim the Deduction?
- Report your business income and expenses on a Schedule C form.
- Claim the self-employed tax deduction for health insurance on your IRS 1040 form.
Next Steps
- Small business owners should explore SHOP or small business medical insurance plans to find affordable employee coverage.
- Freelancers, contractors, and entrepreneurs should compare ACA plans, individual coverage, and state programs to determine the best health coverage for self-employed individuals.
- Evaluate your needs and budget to choose the most comprehensive and cost-effective self-employed health plans for your situation.
