Independent Contractor Health Insurance

Have you priced out a comparable Obamacare plan? You might still end up on top by switching plans

 

May not be a realistic option, but you can get group health insurance with as few as two "employees." So if you can get creative with a friend or fellow worker and start a company for the soul purpose of health insurance coverage, it may be an option. I have my health insurance through a company I own with a friend, even though I don't work hours there. I'm just part of the "group."

And yes, this scenario underscores your point of how ridiculous our health insurance is in the US.

 

As an IC you will be able to deduct your health insurance premiums. Not knowing the industry you are in and how much you will be making…you will also want to determine whether to be an LLC or S-Corp. If you go S-Corp you will end up with extra accounting fees to file an 1120 and k1. But potentially you will be able to make up those costs in savings on your FICA as you will pay yourself a reasonable salary which will have FICA taxes but your profits will just be taxed at your marginal rate.

There are a lot of advantages to being an IC. At the same time there are advantages and protections with being an employee.

Really hard to say with so little information. But with regards to health insurance. You will make out better based on the numbers you stated and being single (family different story). And the nice thing is you will get to pay it pre tax.

 

Can you build your business as an IC? This would be something to consider when deciding whether to go LLC or SCorp along with how much you will make and what a reasonable salary would be.

 

@channingcrowderhungry has a very good idea. You could check with your local Chamber of Commerce and see if membership there provides access to group insurances. As an aside, one negative effect of HIPAA is it defined groups as two people. Before HIPAA when I was alone in the company I had a policy that was a group of one.

As someone suggested you could try the Obamacare exchanges. I did look at that for one of our employees for our tiny new company, but for some reason the exchange was not available in this area.

I’m disenchanted with ACA because my son and his wife tried to get insurance through the exchanges and they were quoted $1000 per month premium with a $12,000 deductible. That meant they would have to pay out of pocket $24,000 every year before the insurance will pay one cent.

You could also try an insurance broker who has access to multiple companies’ policies. I’ve been surprised how reasonable some people have gotten single person insurance. Depending on your age and health conditions, you could get a higher deductible policy or higher co-pay, either of which would bring your premiums down.

 

I will spare you all my usual diatribe on the absurdity of your employer being the gatekeeper to your health.

I will just go straight to the punchline of this is one of the reasons aliens abduct us. Trying to figure out why in the hell an “intelligent” species would find that preferable.

Good advice here, and good luck.

 

There are positives and negatives of being an independent contractor. Economically, you might be able to charge a premium for your skills. You also may be able to work multiple places and with a variety of people. The downsides are risk of finding work, costs associated with landing contracting gigs, self-employment tax, and having your full insurance cost.

As for finding your own insurance, as others have said, look at the obamacare plans.

Get 2022 health coverage. Health Insurance Marketplace®

If you are relatively you and healthy, you might want to look at the catastrophic plans. If you have a pre-existing condition, thankfully those are covered.

I don’t know if I agree with this conclusion. Right now, employer based group insurance results in a lower cost and your employer picks up a portion of it, tax-free to the employee. It’s free money you would have to otherwise pay for — it’s additional compensation above the independent contractor route. How does this stifle creativity? Companies would line up to offload employee risk and push to a gig based economy where they can cut significant costs from their bottom line.

 

I think it depends on your age. I get my 20 yo son's insurance through blue cross marketplace, it's cheaper than adding him to the group policy at work.

 

I understand your frustration with the current system of health insurance in the US, and you are not alone in feeling this way. There is a growing movement to separate health insurance from employment.

 

Excellent suggestion regarding taxes. I've been a 1099 and have shown many people how forming a corporation and paying yourself as an employee will minimize your (FICA) tax burden.

Example:

Joe is a sole proprietor and makes $120,000/year. He will pay (roughly) $18,000 in FICA or self-employment taxes.
Joe forms a corporation and pays himself a salary of $60,000/year. His FICA or self-employment tax burden is now $9,000.
1. That saves Joe $9K -not too shabby and can fund a decent health insurance plan.
2. Remaining $60,000 is taxable for income tax (less expenses) as profit to the company.
NOTE: The IRS will frown on "Joe" paying himself a salary of only $10,000 and taking the balance as profit. Your salary has to be reasonably equivalent to what someone in your industry will make. Many doctors have been audited and busted for taking a $10,000 salary and having profit of $500,000.

If you do not have any serious health conditions consider a high-deductible plan. Best of success to you.

 

And if you sub-S it, your payroll taxes on the wages, as well as other legitimate business expenses reduce your non-wage pass-thru income. Just make sure you hit the “50/50 rule” and would probably be well served to go with a 60/40 split or higher between wages and pass-thru income.

Also, depending upon the nature of the company to whom you provide services, consider accepting restricted stock and/or non-qualified stock options as part of the comp plan and make an 83(b) election. There is risk involved so the decision to do this must be made carefully.

I’ve been consulting for the last 7 years (save some wages taken during the times of PPP loans) and it’s worked quite well except in one case where Covid killed one client.

 

RE the health insurance plan, look into the Healthcare Marketplace. Depending upon you wage, location, and size of family …. you may qualify for subsidies to reduce your monthly premiums. Plus, you will likely have a variety of carriers and cost-retention options from which to choose.

 

why carry insurance at all if you’re young single, healthy and a high wage earner?
if an emergency arises, tell the caregiver you’re self pay and watch a 10k ER visit magically shrink to what would amount to a month or two of premiums.

 

I think this is absolutely a reasonable approach. Once you have a family it is work a high deductible HSA plan imo. That said...I am not sure an ACA one is worth the premium. I am getting close to wondering if our premium for the grandfather plan is worth it.

 

Some good co-ops out there.
We have used Liberty Healthshare for years. They dont pay for every sniffle but they protect you from most costs and at a fraction of the cost of paying OOP for Blue Cross or the like.

They have some limitations, bit they really work for middle class families looking to save some money.

 

If we ever get priced out of our HSA…I will join a concierge practice and buy a catastrophic policy through an entity like Liberty.

 

I belong to a concierge practice but have regular health insurance

 

If my doctor retires. I will do the same most likely.