Group health insurance is a great way for employers and employees alike to enjoy reduced rates and quality coverage. But how does it work for self-employed workers?
Getting a group health insurance plan as a self-employed worker can save you money on monthly premiums since they’re offered at a reduced rate. But group health insurance is not offered to all self-employed workers. In this article, you’ll learn who is eligible for group health insurance, how to get it, and what to keep in mind while deciding on the best plan for you.
As a self-employed worker, the ability to get group health insurance will depend on if you have other employees or not and where you live. Self-employed people can get group health insurance by using the Small Business Health Options Marketplace (SHOP) or with the help of a health insurance agent.
Insurance is always a topic of interest among self-employed people, and it’s one that’s been studied extensively over the years. As a self-employed worker myself, I’ve been through it all when it comes to looking for health insurance, including searching for group coverage for my group of one! Everything you read here is a combination of real-world experience and extensive research into self-employment insurance.
Group Health Insurance While Self-Employed
Even if you’re self-employed you still might be able to get group health insurance and it’s certainly something worth looking into. After all, group health insurance rates are typically quite a bit cheaper per person than an individual plan. But the first thing you need to know is how “self-employed” is truly defined in the eyes of the law.
Per our good friends at the IRS, you would be considered self-employed if you meet at least one of the following requirements:
- You run a business or a trade that turns a profit through the course of a year as an independent contractor, sole proprietor, or as the owner of a single-member limited liability company (LLC).
- You’re a member of a legal partnership that runs a trade or business which turns a profit.
- You’re otherwise in business for yourself, even if it’s just a part-time business.
Keep in mind that even if you’re self-employed due to any of the above, you can still technically hire employees. Depending on how your business is set up at that point, you as the owner could still be considered self-employed. But that’s beside the point. Now that you have a better understanding of what the IRS sees as self-employed, it’s time to dive deeper into the insurance aspect.
Can you get group health insurance when you’re self-employed, whether you have additional employees or not?
Can I Get Group Health Insurance if I’m the Only Employee?
It may sound strange at first. Group health insurance even if you’re the only employee. How does that work? The short answer is that yes, you actually can get group health insurance even if you’re self-employed and you’re the only employee, in some cases. You would just be purchasing the group plan as a group of one.
The long answer is that it depends on the state that you live and practice your business in. The following states define group size for small group insurance as 1 to 50:
- Colorado
- Connecticut
- Delaware
- Florida
- Hawaii
- Iowa
- Louisiana
- Maine
- Massachusetts
- Mississippi
- New Hampshire
- New York
- North Carolina
- Rhode Island
- Vermont
- Washington
The above states (except LA and NY) also require insurance companies to sell insurance policies that are guaranteed-issue. This means that the plan must enroll you and offer coverage in the small group market, even as a group of one. As you can see, this list is pretty short. Only 16 of the 50 states are on it.
So even though it is possible, in most cases you won’t be able to get group insurance if you’re the only employee.
Buying Group Health Insurance When You Have Employees But You’re Still Self-Employed
As alluded to previously, self-employed people — including sole proprietors and partnerships — can still hire employees to work under them while still technically remaining self-employed. And once you have at least one employee working for you, you’ll officially be considered a group of two and be able to buy group health insurance across the country.
The key to this is that your employee has to be a legitimate employee that’s working for you and your business. To prevent people from taking advantage of this and getting group health insurance, the employee cannot be another self-employed person, a spouse, or your business partner.
But as long as your employee is not one of those people, then you’ll have access to the full range of group health insurance options. This really opens the door when it comes to health insurance options not only for you but also for your employee(s).
So now you know when you’re eligible to buy group health insurance when you’re self-employed, let’s take a look at your best options for doing so.
Can I Buy Group Health Insurance on the Marketplace?
If you’re thinking about the health insurance marketplace that you might have looked for individual health insurance plans are, then no. But employers have access to their own public exchange known as the Small Business Health Options Marketplace, or SHOP for short. It’s important to note that the SHOP marketplace has a slightly different definition of what self-employed means in its eyes.
Per the SHOP, self-employed workers are those with no employees whereas anyone with at least one employee is considered a small business employer. But this is why it’s important to remember above where we discussed how self-employed people can still technically hire employees. And to qualify to buy a group insurance plan from the SHOP, you have to have at least one full-time employee that again isn’t a spouse or business partner.
So as long as you have at least one full-time employee working under you, you are eligible to purchase a group insurance plan from the SHOP. And you might even qualify for additional tax credits if you have fewer than 25 employees, use a SHOP insurance plan for at least 2 years, pay your employees less than $50,000 on average, and cover at least half of your employees’ healthcare premiums.
How to Pick the Best Group Health Insurance Plan for Self-Employed
If you’ve ever searched for insurance plans before, you know how stressful it can be because of how many options there are. When it comes to choosing the best group health insurance plan as a self-employed worker it really boils down to a couple of main things. First, do you have any employees? And second, if so, how much of their premiums are you willing to cover as their employer?
If you don’t have any employees and you’re searching for a group plan as a group of one then it’s easy. You just need to decide what’s best for you. Do you want a high-deductible health plan that covers the basics but is cheap monthly, or do you need top-notch coverage that costs you more month after month? This will come down to your needs and how much you want to spend.
But if you’re self-employed but have at least one employee — or more — then finding the best group health plan requires a bit more work as it becomes more of a balancing act. As a business owner, you want to make sure that you’re able to cover the required portion of your employee’s premium — which is usually at least 50% — without affecting your business. But at the same time, you need to make sure the plan offers suitable coverage for you as well as your employees.
So if you’re self-employed and looking for group health insurance for yourself and your employees, we recommend using an insurance agent to help you. Agents know the industry like the back of their hands and can point you in the right direction of the perfect plan for everyone.
Are Health Reimbursement Accounts Similar to Group Insurance?
A Health Reimbursement Arrangement (HRA) — often called a Health Reimbursement Account — is not insurance of any kind on its own, group or otherwise. An HRA is a way for employers to offer healthcare benefits to their employees in a tax-efficient manner. With an HRA, employers set an allowance that the employees can use to pay for their monthly healthcare expenses with tax-free money.
The employer then reimburses the employee for the amount that they paid, up to the allowance that the employer set forth. Small businesses typically use HRAs as a way to offer their employees health benefits of some sort, but at a much cheaper option than finding a suitable group insurance plan. This is of course because the employer can set the monthly limit at whatever amount they see fit — usually lower than typical group coverage.
So the short answer is no, HRAs are not another name for some sort of group health insurance. But they are an excellent option for employers (including self-employed) to offer some sort of tax-advantaged way to help their employees if group health insurance is out of the question.
