The short version
- Most self-employed people buy an individual plan, through the Marketplace or directly from an insurer.
- Help with the premium is based on the income you expect for the year, and it's settled up at tax time.
- You may be able to deduct your premiums, and some plans let you save in a Health Savings Account.
Where self-employed people get coverage
If you freelance, run a business on your own or work on 1099 contracts, there's no HR department choosing a plan for you. Most people in this position buy an individual or family plan, either through the Health Insurance Marketplace or directly from an insurer.
Buying through the Marketplace is the only way to get a premium tax credit, the income-based help with your monthly premium. Plans bought directly from an insurer don't qualify for it. If your spouse has a job that offers family coverage, compare that too.
Estimating an income that changes
Premium tax credits are based on your household's expected income for the coming year. For someone on a salary that's easy to guess. For a self-employed person it rarely is.
Use your best honest estimate of your net self-employment income, meaning what's left after business expenses, plus any other household income. Last year's tax return is a sensible starting point.
The credit is settled when you file your taxes. If you earned more than you estimated, you may have to pay some of it back. If you earned less, you may get more back.
Keep it current
A big contract or a slow quarter can change what you should be paying. Update your income on the Marketplace when it changes significantly, rather than waiting until you file.
Tax points worth knowing
The self-employed health insurance deduction
If your business makes a profit and you aren't eligible for an employer-subsidized plan, including one through a spouse's job, you may be able to deduct the premiums you pay for yourself, your spouse and your dependents.
How that deduction interacts with a premium tax credit can get complicated, so it's worth running past your tax preparer.
Health Savings Accounts
If you choose an HSA-eligible high-deductible plan, you can also put money into a Health Savings Account. Contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses aren't taxed.
The account stays yours from year to year, which suits people who are generally healthy and want to build a cushion for later.
Picking the right kind of plan
A lower premium usually means a higher deductible. If you rarely see a doctor, a Bronze or HSA-eligible plan can keep your monthly cost down.
If you have ongoing prescriptions or regular appointments, a Silver or Gold plan may cost less over the whole year despite the higher premium. Depending on your income, a Silver plan may also come with cost-sharing reductions that lower your deductible and copays.
How to compare what plans will really cost you
How I can help
Tell me roughly what you expect to earn, who needs covering and which doctors you want to keep. I'll compare the plans available in your state and help you settle on an income estimate you can stand behind. For the deduction itself, your tax preparer is the right person to ask.
See the states where I'm licensed
This article is general information, not tax or legal advice about your own situation. Rules, plans and prices vary by state and can change from year to year.
