Having a business you can call your own has been your lifelong dream. Now that you’ve accomplished it, there are some things you realize you may have left out of the picture. Namely having the best health insurance plan in place. Is self-employed health insurance in Texas even a thing? We aim to answer this question for you, the small business owner of one. We plan to guide you on what plans are available, how you should apply to them, and what discounts you may be eligible for.
How Do You Define a Self-Employed Business?
For insurance purposes, you are considered self-employed when you own a business and work alone; a freelancer, consultant, independent contractor, or other single worker type where you do not employ other individuals. When you hire an employee, you change your self-employed status to a small business. But that is not always a bad thing. We will explain that statement towards the end of our discussion. This article intends to discuss your self-employed status and how to obtain the best health insurance plans.
How Can You Find Health Insurance for the Self-Employed?
The first thing you need to know is that you’re not alone. There are many small businesses of one. Unfortunately, if you are the only worker under the banner of your business, meaning you do not have any employees, you cannot qualify as a small business for insurance purposes. You’ll need to apply for insurance under the individual Health Insurance Marketplace to find the best health insurance plans.
Can I Save Money on My Health Insurance in Texas if I am Self-Employed?
Yes. You may be eligible for a premium tax credit on your health insurance costs. You will need to provide information on your estimated income to the Marketplace for the year you plan to obtain coverage. Although, if you are married and your spouse has health coverage through their employer, always check their insurance plan first. Families usually find the best health coverage with a spouse’s plan, and ideally, it may be more cost-effective using that method.
It is important to understand that if you elect to pursue your own coverage, expecting to receive a tax subsidy, you could be deemed ineligible for the savings under the ‘minimum value’ declaration. This stipulation states that if you have the option to obtain health insurance under a family member’s plan that the government deems affordable, then you would not be able to receive this tax subsidy.
NOTE: Under the recently passed Build Back Better Act, the ‘minimum value’ threshold has been lowered from 9.61 percent to 8.5 percent of the household income, giving the self-employed worker a greater chance of qualifying for the premium tax credit.
When applying for health insurance tax credits through the Marketplace, you are required to estimate your income for the current year. This does not mean you are giving them last year’s records; it is what you believe you will make for the entire year. This is important to estimate accurately. If you give them a lower number and they approve you for a higher benefit, when they recalculate, or ‘reconcile,’ at the end of the year based on your actual income, any overage of tax credits they paid out will need to be repaid.
Here are ways to make the most of your tax benefit situation:
- Use last year’s expenses as a measure. Give reasonable expectations, not hopeful. Consider industry standards and economic issues as well.
- If you see any changes on the horizon, update your Marketplace application as soon as possible.
As you can see, this is a lot to take in and manage. This is why we recommend seeking the advice of an accountant or tax professional to relieve the financial burden and dangers of missing something now and dealing with the repercussions later.
Risks of Tax Credits When I Am Self-Employed
There are some things to be aware of when you are self-employed and receiving tax credits. And the first we just mentioned. If your claims are inaccurate, you will reap the repercussions at the end of the year, which could place you in danger of paying back at the end of the year. Here are how these changes occur.
- If your income level increases or your family situation changes by losing a family member. Your current qualification may be less than what you are receiving.
- If your income level decreases or your family situation changes by increasing a family member. You may qualify for an increase in benefits.
As you can see, all this back and forth and number crunching can get somewhat convoluted. When you are unsure what your business will do next week, let alone next quarter, it may be wise to bring on a tax professional to guide you in the process.
Another example would be deductions. When you apply for your Marketplace health insurance, as a business owner, you are able to deduct expenses in order to qualify. A tax professional will know precisely which expenses would be allowed, or disallowed, and which ones you would get into hot water if you did not mention them.
An experienced tax professional can assist you with reviewing your history as well as planning for the future. A little money invested in them now can save you a lot of money on taxes at the end of the year.
What Can I Do If I Hire an Employee When I Am Self-Employed?
If you choose to hire employees at any point, you open the door of opportunity for health insurance. Even with as few as one, the best health insurance plans can be found in the Marketplace and a program called SHOP (Small Business Health Options Program). These allow you to offer health insurance to your employees and make contributions to the premiums if you choose. There are several levels of coverage options.
SHOP (Small Business Health Options Program) – this program can assist you with providing insurance for up to 50 FTE (Full Time Equivalent) employees. You can choose the plan, how much you would want to pay toward it, and if you plan to cover family. You can also elect if there is a probationary period before an employee can obtain insurance with your business. But if you offer the insurance to one, you must offer it to all among the class of employees. SHOP also provides a Small Business Health Care Tax Credit for employers with fewer than 25 employees.
ICHRA (Individual Coverage Health Reimbursement Arrangement) – This is another option for the small business owner. This is where an employer provides an employee an allowance for health insurance premiums. The employee then chooses the best health insurance plan on their own on the open market or ACA exchange and submits payment to an administrator. There are also options to include medical expenses up to a certain annual dollar amount.
Small business owners under 50 employees are not required to provide health insurance to their employees. However, as a self-employed business owner, you understand the value of offering such benefits. A tax professional can also help you through the process of setting up a SHOP and ICHRA.
Final Thoughts
Finding the right health insurance coverage is an essential detail often overlooked when business owners build their dreams. Other times, affordability can be an obstacle that is difficult to overcome. This is where Covermile can assist you. We are here to help you find the best health insurance plan in Texas that will fit your budget and meets Affordability Care Act with quality health insurance.
