Group Coverage Is Usually Not an Option For Independent Contractors
In the “gig economy,” where so many people work as independent contractors rather than full or part-time employees, many California employers ask whether they can or should offer health insurance to contractors.
The answer is that California businesses have no legal obligation to offer or provide health insurance coverage to independent contractors (sometimes called 1099 workers because of the IRS tax form used to report payments to independent contractors). Employers can offer coverage if they choose, but not all group health insurance plans and providers will cover such workers.
If your company does decide to offer health insurance coverage to independent contractors, the following will apply to such coverage:
- Employers do not have to pay any portion of the premiums for independent contractors, though they are free to do so.
- The independent contractor may need to declare any employer contributions to the cost of coverage as taxable income.
- Employers may offer to enroll independent contractors in the same group plan they offer employees, whether or not the employer or the contractor pays the premiums.
- If a contractor pays their own premiums, they may be able to deduct the amount from their income on their income tax return.
Options When An Employer Doesn’t Offer Health Insurance To Contractors
Independent contractors are considered self-employed for purposes of health insurance. Suppose an employer does not offer health insurance to contractors, and the contractor does not have coverage through a spouse, parent, or school. In that case, the contractor will need to obtain individual or family health insurance coverage if they want to ensure that they are not left financially devastated in the event of a significant illness or injury.
Individual insurance also refers to family health insurance coverage. Independent contractors will follow the same process for obtaining and enrolling in a plan, whether they are searching for individual or family coverage. The two options available are:
- Review and compare policy options and enroll in a plan during the Open Enrollment period each year (more on that below), directly through the Covered California Marketplace; or
- Buy coverage from an insurance company or work with an experienced individual health insurance broker to find the right plan for them, no matter when they elect to get insured.
Interestingly, even contractors that choose coverage through the Marketplace can utilize the services of an independent insurance broker to help them select and enroll in the right plan.
Obamacare Coverage For Independent Contractors
Obamacare plans offer health insurance to contractors through one of the marketplaces only during the Open Enrollment period unless the contractor qualifies for a Special Enrollment period.
Each year, there is an Open Enrollment period during which individuals can shop for and enroll in health plans through the Marketplace. Open enrollment for 2023 coverage runs from November 1, 2022, through January 15, 2023.
Outside of open enrollment, you can only sign up for an Obamacare plan if you qualify for a Special Enrollment period, which involves one of the following “qualifying life events.”.
- Birth, adoption, marriage, divorce, or death of a named insured.
- Loss of coverage due to job loss, disqualification from Medicare or Medicaid, or aging out of coverage under a parent’s plan.
- Obtaining U.S. citizenship or release from incarceration.
- Moving to an area outside of your existing insurer’s coverage.
Who Else Can Offer Health Insurance to Contractors?
Independent contractors who cannot enroll, or choose not to enroll, in an Obamacare plan can purchase private health plans at any time. Independent insurance brokers, agents, and online health insurance sellers can all offer health insurance to contractors.
These plans, sometimes called short-term health insurance, do not necessarily meet all of the requirements of the ACA, are not sold on the Marketplace, and are not eligible for any premium tax credits provided by the ACA. Though these plans may be more affordable than Obamacare-qualifying plans, they are almost always less comprehensive.
Why Independent Contractors Should Work With an Independent Health Insurance Broker
If you are an independent contractor, there are many reasons to work with an independent health insurance broker to help you choose and enroll in a plan. An experienced broker can walk you through your options, answer your questions, and propose the best health insurance solutions for you and your family.
The best part is that a broker’s services won’t cost you anything.
As an experienced California small business and individual health insurance broker, Preferred Insurance can offer health insurance to contractors personalized to their needs and budgets.
Contact Preferred Insurance today to arrange your free consultation to discuss your health insurance needs.