A guide to health insurance for independent contractors

Being an independent contractor has its perks‌ — ‌freedom, flexibility, and control over your work. But with that freedom comes certain obligations, such as sorting out benefits like health insurance. For traditional employees, health insurance is often a standard part of their compensation package. However, independent contractors, freelancers, and gig workers don’t enjoy that same luxury.

As a US-based 1099 contractor, you’re on your own when it comes to securing health coverage, and the process can feel overwhelming. But don’t worry! In this guide, we’ll explain the types of health insurance options and other factors to consider while choosing a health insurance option that’s right for you.

What makes health insurance for contractors different?

For those used to working as W-2 employees, health insurance often comes in the form of an employer-sponsored plan. You simply sign up during open enrollment, and your employer covers a significant portion of the premium. Easy, right?

When you’re an independent contractor, though, things change. You’re responsible for securing your own health insurance, which means finding a plan that suits your needs and, just as importantly, your budget. Many contractors don’t realize the importance of having health coverage until an unexpected medical bill shows up, and without an employer to share the cost, those bills can be staggering.

Key challenges for independent contractors include:

• Higher premiums without employer contributions.

• Fewer group plan options, meaning you often pay more as an individual.

• Limited knowledge about tax deductions and subsidies that can make coverage more affordable.

Types of health insurance options for 1099 contractors

The good news? Independent contractors have several options for securing health insurance, and with the rise of the gig economy, there are more alternatives than ever before. Let’s break down the most popular options:

1. Individual market plans

These are plans you purchase directly from health insurance companies or through government-run exchanges like the Affordable Care Act (ACA) marketplace. These plans must comply with ACA regulations, which means they offer essential health benefits, including preventive care, mental health services, and emergency coverage.

Pros: These plans cover a broad range of needs and cannot deny you based on pre-existing conditions. Cons: They can be more expensive since you’re paying the entire premium yourself.

2. Private health insurance plans

Private health insurance plans are purchased outside of government marketplaces, directly from insurers. They may offer more customization but often lack the protections of ACA-compliant plans.

Pros: More flexibility in plan types and networks. Cons: They may not cover essential benefits like preventive care or mental health services.

3. Health sharing programs

These are not technically insurance but rather cooperatives where members pool their resources to cover each other’s medical expenses. While often cheaper than traditional insurance, they don’t guarantee the same level of coverage and can exclude pre-existing conditions.

Pros: Lower costs and a sense of community support. Cons: Not regulated, meaningless consumer protection.

4. Short-term health insurance

Short-term plans provide temporary coverage, usually lasting a few months to a year. They can be a good option if you're between jobs or just need a stopgap solution, but these plans often exclude coverage for pre-existing conditions.

Pros: Quick coverage at a lower cost. Cons: Limited coverage and often excludes key benefits like mental health services.

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Factors to consider when choosing health insurance 

Now that you understand the types of plans available, how do you choose the best one for you? Here are key factors to weigh when selecting health insurance:

1. Premiums, deductibles, and out-of-pocket costs

Contractors need to strike a balance between affordable premiums and manageable out-of-pocket costs. Lower premiums often come with higher deductibles, meaning you’ll pay more before your insurance kicks in.

2. Network availability

Check if the plan’s provider network includes your preferred doctors, specialists, or hospitals. If you need specific care, like ongoing therapy or prescriptions, ensure these are covered under the plan.

3. Prescription drug coverage

If you take regular medications, verify the plan includes prescription drug coverage. Some cheaper plans may not cover certain drugs or require higher copayments for brand-name medications.

4. Preventative care and mental health services

The gig life can be stressful, so access to preventative care and mental health services is essential. Ensure your plan offers adequate coverage in these areas to keep both your physical and mental health in check.

Navigating the ACA marketplace as a 1099 Contractor

The Affordable Care Act (ACA) was a game-changer for independent contractors. It created a marketplace where individuals could purchase health insurance, often with subsidies to make coverage more affordable. As a 1099 contractor, you may qualify for subsidies based on your income, which can significantly reduce your monthly premium.

How to enroll in an ACA Plan

1. Visit Healthcare.gov or your state’s health insurance marketplace.

2. Fill out your application with information about your income and household.

3. Browse available plans, compare coverage options, and enroll.

Pros and cons of ACA Plans

Pros:

• ACA plans cover essential health benefits like maternity care, emergency services, and mental health treatment.

• You can’t be denied coverage for pre-existing conditions.

Cons:

• Some plans have higher premiums, especially for those who don’t qualify for subsidies.

Self-employed health insurance deductions: Maximizing tax benefits

One major perk of being an independent contractor is that you can deduct your health insurance premiums on your taxes. If you're self-employed and not eligible for any employer-sponsored health plan, you can write off your premiums as an "above-the-line" deduction. This lowers your taxable income, saving you money at tax time.

Eligibility for tax credits and subsidies

Independent contractors earning between 100% and 400% of the federal poverty level may qualify for subsidies to help pay for ACA plans. Be sure to explore these options to reduce your health insurance costs.

Group health insurance options for freelancers

Though group health insurance plans are typically tied to traditional employers, some professional associations offer group health plans for freelancers and contractors. Joining a group plan can provide you with lower premiums and better coverage.

Examples of group health insurance options:

• Freelancers Union: Offers health insurance options for independent workers in certain states.

• Local Chambers of Commerce: Some regional groups offer plans to members.

Supplemental health benefits for contractors

Health insurance isn’t the only type of coverage contractors should consider. You may also want to add supplemental insurance to cover other needs, like dental, vision, or disability insurance.

Critical illness and accident coverage

Supplemental insurance policies can provide extra protection for critical illness or accidents, which aren’t always fully covered by standard health plans. These policies offer peace of mind in case of unexpected events.

Future trends in health insurance for independent contractors

As the gig economy continues to grow, we’re seeing more innovation in health insurance for independent workers. New platforms are emerging to cater specifically to the needs of freelancers, offering benefits like flexible coverage and lower rates.

Emerging solutions:

• Portable benefits: A model where benefits, including health insurance, travel with workers from gig to gig.

Legislative changes: As the contractor workforce grows, there’s potential for new laws that could make health insurance more affordable and accessible.

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Finding the right health insurance as an independent contractor

Securing health insurance as an independent contractor doesn’t have to be overwhelming. By understanding your options and taking advantage of tax deductions and subsidies, you can find a plan that works for you without breaking the bank.

Research your options and choose a plan that fits your specific health needs. Whether you go with an ACA plan, join a group health program, or explore private insurance, the important thing is to protect yourself from the unexpected.

Your options with Remote

A global HR platform typically manages key employment duties for employers, including access to benefits like health insurance through collaborations with insurance providers.

Platforms like Remote Contractor Management specialize in:

• Navigating local labor laws

• Ensuring regulatory compliance

• Understanding diverse healthcare systems

Contractors who are signed up with Remote can get access to health insurance options at a discounted price, but there are some important details to keep in mind.

Contractors are responsible for applying for and paying for their own plans⁠. Remote provides access to these benefits at discounted rates, but does not pay for the insurance directly⁠. 

Remote has partnered with SafetyWing to offer global health insurance plans for contractors. These plans include various coverage options such as outpatient care, screenings, vaccines, wellness programs, and maternity care⁠.

⁠Coverage may be subject to local health insurance restrictions in certain countries, and it's the contractor's responsibility to ensure their coverage is legally appropriate for their situation⁠

Are you ready to learn more about how to secure the best health insurance as a 1099 contractor? Check out our comprehensive resources on health benefits for contractors and take the next step toward protecting your health today!