If you’re self-employed as a contractor, sole proprietor, or as part of a partnership, you might wonder if you can purchase group health insurance like other business owners. After all, you are considered a small business by the US Small Business Association, but what do the health insurance regulations say?
State regulations vary. First, it’s important to remember that many insurance regulations are established by individual states, so the laws of California will govern this matter here. If your permanent residence is registered in another state, you should check the rules there.
Business size matters. In California, you must employ at least one other person who is not related to you in order to enroll in a group health insurance plan geared toward small businesses. So if you’re a sole proprietor or contractor, with no other employees on the books, you won’t be able to participate in a group health insurance plan. You can only purchase an individual policy on the Covered California exchange, enroll in Medi-Cal (if you qualify), or select a private policy through a broker.
However, if you employ one person, you can indeed enroll in group health insurance. Keep in mind that this employee cannot be a relative, a business partner, or another independent contractor. They must be a W-2 employee.
The self-employed business owner has options. If you qualify to enroll in a group health insurance plan, you have options. You can choose a policy through an independent insurance broker, or through a health insurance company directly. Or, you can qualify for a policy administered through the Small Business Health Options Marketplace (SHOP). You might be able to qualify for a tax credit of up to 50 percent of the cost of the plan, provided you meet certain requirements.
You could also establish a health reimbursement account (HRA), an employer-funded account which reimburses you for healthcare expenses on a tax-free basis.
When selecting a plan, balance your premiums (what you can afford to pay) with a plan that works best for your employees.
You might be eligible for tax benefits. Self-employed business owners can deduct 100 percent of their own health insurance premiums from gross income when filing their tax returns. And if you qualify for the Affordable Care Act’s premium tax credits, you can take those too.
You can get help. Choosing and enrolling in a healthcare plan can become complicated for self-employed business owners who must navigate numerous health insurance regulations and income tax rules. For expert advice, contact one of our brokers and we can help you identify the options that work best for you.