Health Insurance for the Self-Employed: Your Options

When you work for yourself, there's no HR department picking a health plan for you. The good news is that self-employed people usually have more choices than they realize. The key is knowing which options fit your income, your health and the doctors you want to keep.

Your main options

1. A Marketplace (ACA) plan. These plans have to accept you, cover pre-existing conditions, and include the same core benefits, such as prescriptions, maternity care and mental health care. Plans come in Bronze, Silver and Gold levels, which trade a lower monthly premium for a higher deductible, or the other way around. If your income qualifies, you get help paying the premium. You can enroll during open enrollment each fall, or after a qualifying life event, such as losing other coverage.

2. A private plan. Private plans sold outside the Marketplace are usually priced on your health instead of your income. If you're healthy, they can mean a lower premium or a broader doctor network, and many let you apply any time of year. They can also turn you down, leave out conditions you already have, and cover less. See how they compare in private plans vs. Marketplace plans.

3. A spouse's or partner's employer plan. If one is available, compare it side by side. It isn't always the cheapest option once you add a spouse and kids.

4. Medicaid. In some states, you may qualify during a lower-income year. The rules depend heavily on where you live.

5. COBRA, if you just left a job. COBRA lets you keep your old employer's plan for a while, usually at full price. It can bridge a short gap, but it's often the most expensive choice. See COBRA vs. your other options.

What decides your premium

Marketplace plans are priced on your age, where you live, whether you use tobacco, and the plan level you pick. Your health doesn't change the price. Your household income then decides how much premium help you get, if any.

Private plans are priced mostly on your age, where you live, your health history and the plan design you choose. Income doesn't matter, which is why they can be a good value if you earn too much for premium help.

Estimating income when it changes every month

Marketplace premium help is based on your expected net self-employment income for the year, meaning what's left after business expenses, not your gross revenue. A few tips:

• Start from last year's tax return, then adjust for what you expect this year.
• Update your Marketplace application during the year if your income changes a lot.
• If you estimate too low, you may have to pay some of the premium help back when you file your taxes. If you estimate too high, you may get money back.

The difference is settled on your tax return, so it's worth keeping your estimate realistic rather than hopeful.

What if you have a slow year?

A lower income can mean more premium help, and in some states it can mean you qualify for Medicaid. The rules for very low incomes differ a lot from state to state, so check before you estimate. Our state guides explain how it works in Florida, Texas, Georgia, Missouri, Wisconsin and Nevada.

The self-employed health insurance deduction, in plain English

Many self-employed people can deduct the health insurance premiums they pay for themselves, their spouse and their dependents. In general:

• You take it on your personal tax return, so it can lower your income tax even if you don't itemize.
• You need a profit from your business, and the deduction can't be more than that profit.
• You usually can't take it for any month you could have joined an employer plan through your own job or your spouse's.
• It generally doesn't lower your self-employment tax.

The rules get more detailed if you also receive Marketplace premium help, so ask your tax professional how it applies to you.

What to compare

• Monthly premium versus the deductible and out-of-pocket maximum
• Whether your doctors, hospitals and prescriptions are in-network
• What the plan limits or doesn't cover
• Whether you can enroll now or need to wait for open enrollment

Common mistakes to avoid

• Picking on premium alone. A cheap plan with a high deductible can cost more if you end up needing care.
• Guessing income too low. It can mean paying back premium help at tax time.
• Letting coverage lapse. When you leave a job to work for yourself, line up new coverage before the old plan ends.
• Skipping the network check. Make sure your doctors are in-network before you enroll, not after.
• Auto-renewing without looking. Premiums and networks change every year.

Common questions

Do I need an LLC or a business to buy health insurance as a self-employed person?

No. Freelancers, sole proprietors, gig workers and 1099 contractors can all buy individual health insurance. You don't need a formal business.

Can I get coverage if I have a pre-existing condition?

Yes. Marketplace plans can't turn you down or charge you more because of your health. Private plans can, so a Marketplace plan is usually the better fit if you have an ongoing condition.

When can I sign up?

Marketplace plans have open enrollment each fall, or a special enrollment period after events like losing other coverage. Many private plans let you apply any time of year.

Can I deduct my premiums?

Many self-employed people can, as long as their business made a profit and they couldn't join an employer plan. Ask your tax professional how it applies to you.

What if I also have employees?

Then you have more options, such as a small group plan. See small business health insurance.

Get a second opinion on your options

Want to go deeper? See how much self-employed health insurance costs.

Kyle compares your options side by side on one free call and tells you plainly which one fits your income, your health and your doctors. If you drive for a living, see our guide to health insurance for truck drivers.