Health Coverage for the Self-Employed

If you’re self-employed, the individual Health Insurance Marketplace® provides flexible, high-quality health coverage tailored to individuals who run their own businesses.

Who is Considered Self-Employed?

You’re considered self-employed if you operate a business that generates income but does not have any employees. This includes freelancers, consultants, independent contractors, and other self-employed workers without employees.

If your business has employees (excluding yourself, a spouse, family members, or an owner), you might be eligible to use the SHOP Marketplace for small businesses to offer coverage for yourself and your employees. To determine whether you’re self-employed or a small employer, check the guidelines on the Health Insurance Marketplace® website.

Coverage Options for the Self-Employed

When you apply through the Marketplace, you’ll discover if you qualify for premium tax credits and other savings on a health plan, based on your income and household size. Additionally, you may qualify for free or low-cost coverage through Medicaid and the Children’s Health Insurance Program (CHIP) in your state, depending on your financial situation.

The Marketplace offers several coverage categories, ranging from plans with lower premiums that primarily protect against worst-case scenarios to plans with higher premiums but lower out-of-pocket costs for healthcare services.

Estimating Self-Employment Income for Marketplace Savings

When filling out your Health Insurance Marketplace® application, you’ll need to estimate your net self-employment income for the year you’re seeking coverage. Marketplace savings are calculated based on your projected net income for the coverage year, not on the previous year’s income. Estimating future income can be challenging, but there are resources available to help you make an informed estimate.

Frequently Asked Questions

How do I know if I’m self-employed or a small employer?
You are considered self-employed if you run a business that generates income and has no employees. Hiring independent contractors doesn’t make you an employer; “employees” typically refer to workers whose income is reported on a W-2 form.

What if I leave my job, lose my job-based coverage, and become self-employed?
If you lose your job-based health coverage, you qualify for a Special Enrollment Period. This allows you to enroll in a health plan outside the annual Open Enrollment period. If you qualify for a Special Enrollment Period, you may be able to start your coverage sooner than usual.

What if I’m self-employed and then get a job that offers health coverage?
You can cancel your Marketplace plan at any time to enroll in your employer’s insurance. However, once you receive an offer for job-based coverage, you typically no longer qualify for premium tax credits and other savings on a Marketplace plan, even if you choose not to enroll in the job-based plan. In rare cases, if your employer’s coverage is not affordable or doesn’t meet minimum standards, you may still qualify for savings on a Marketplace plan.

What if I’m self-employed and my spouse has coverage through a job?
If your spouse’s plan offers coverage for spouses and dependents, you typically won’t qualify for premium tax credits and other savings on a Marketplace plan. However, if your spouse’s job-based insurance doesn’t cover spouses and dependents, you can purchase a Marketplace plan for yourself and your dependents. Eligibility for premium tax credits depends on your household income, and you generally need to file a joint federal tax return to qualify for these savings.

What if I have COBRA coverage?
If you currently have COBRA continuation coverage, your options differ depending on whether you’re enrolling during the annual Open Enrollment period or outside of it. Explore your options regarding COBRA and the Marketplace to ensure you make the best decision for your health coverage.

For more detailed information, visit the Health Insurance Marketplace® or consult a health insurance advisor.

Reporting Self-Employment Income to the Marketplace

When applying for health coverage through the Health Insurance Marketplace®, you must estimate your net self-employment income for the coverage year. Your eligibility for Marketplace savings is based on this estimate, not on the previous year’s income.

Estimating Income

Estimating your self-employment income can be challenging, especially if your income fluctuates. Use your past experience, realistic expectations, and industry standards to make the most accurate estimate possible. If your income projections change during the year, update your Marketplace application promptly.

Important Considerations

• Income Changes: If your actual income ends up being higher than your estimate, you may have to repay some or all of the premium tax credits you received. Conversely, if your income is lower, you might qualify for additional savings. It's crucial to update your estimated income as soon as your business circumstances change.

Filling Out Your Application

On your Marketplace application, report your net income from self-employment, which is also referred to as "profit."

• Net Profit: If your income exceeds your business expenses, report this net profit.
• Net Loss: If your expenses are higher than your income, report a net loss.

Your reported net income should match the amount you declare on Schedule C of your federal tax return. For more details, refer to IRS guidelines.

Confirming Self-Employment Income

You may be required to verify the income information provided on your application. This can typically be done by uploading a “self-employment ledger” or other supporting documents. The ledger should provide a detailed and accurate record of your self-employment income and expenses.

Reporting Other Income

When applying for Marketplace coverage, you must report income for all members of your household, even those not seeking coverage. Ensure you understand how to accurately report all income sources as required by Marketplace rules.

For further guidance, consult with a tax professional or refer to IRS publications.