group health insurance for non employees

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Is offering health coverage to Non-Employees risky?

A frequent Compliance Corner question asks whether employers can include independent contractors in their health plans or other benefits. When dealing with contractors or temporary employees, many think they are not eligible for their health plans or other benefits such as COBRA or FFCRA. The answer to this question is more complicated than one might think. So, is offering health coverage to non-employees risky?

Most benefit experts advise against including independent contractors or other non-employees such as 1099 employees, non-employee directors, or leased employees on employer’s benefit plans.

Here are three (3) reasons why this may be inadvisable:

Complicating this decision is that some insurance carriers will allow independent contractors to be included in an employer’s health plan. But, compliance is the employer’s responsibility, not the insurance carrier’s.

The best answer to whether non-employees can be offered coverage is that employers who wish to evaluate or pursue covering non-employees should consult their legal and benefits advisors.

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group health insurance for non employees

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How to provide health insurance for non-employees.

One of the top benefits a company can offer its employees is health insurance coverage. This gives workers access to a group policy, which often allows them to secure more affordable and comprehensive coverage than they could on their own.

But what if you want to provide health insurance for non-employees, such as contractors?

While your options may be limited, there are ways to provide health insurance to non-employees. Through careful consideration of the details, you can provide contractors with a high-level benefit that will strengthen your relationship.

Before we go any further, remember this: you’re under no legal obligation to offer health insurance to individual contractors. This is a decision your company can make at its own discretion.

The best path forward is to offer contractors the same health insurance as your employees. This makes it easier to manage payroll and benefits , thus reducing the risk of error and saving you time.

If you opt to offer contract medical insurance, there are four points to keep in mind:

1. Employers can offer the same group plan

As noted above, you can offer contractors the same group plan as your part and full-time employees. You don’t have to select a different plan for contractors to access.

2. The contractor may need to declare it as taxable income

Urge your contractors to discuss the tax implications of receiving health insurance from your company. They may need to declare any employer contribution as taxable income.

3. Employers don’t have to pay any portion of the premium

There’s no requirement for employers to pay any portion of the premiums for contractors. You can do this if you want, but it’s not an obligation. That holds true even if you pay some or all of the premium for your employees.

4. Contractors may be able to deduct the premium paid

Contractors may be able to deduct any premiums paid from their income. This can help reduce the impact of the cost at tax time.

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Is health insurance for non-employees a good idea.

There’s no right or wrong answer to this question, as the situation varies from company to company and contractor to contractor. If you’re on the fence, here are some benefits of offering health insurance coverage to “1099 employees.”

Questions to ask and answer

As you inch closer to making a final decision, answering these questions can help you proceed with confidence:

Answering these questions provides insight into your situation so that you can make a more informed decision.

Oyster is here to help

Deciding for or against health insurance for non-employees is easier said than done. For that reason, you want to gather as much information and professional guidance as possible. And that’s where Oyster can help.

Oyster Health makes it simple and affordable to offer health insurance to team members in more than 180 countries. You’re not limited to offering coverage to contractors and employees in your home country.

By working directly with various health insurance carriers, Oyster can provide you with multiple quotes to help you make the right decision for your team and your company financials.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop and take care of a thriving global workforce. It lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world with reliable, compliant payroll, and great local benefits and perks. Try Oyster out with a free demo!

About the Author

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce.

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Roper Insurance Services

Licensed to sell in north carolina and south carolina.

Health insurance for your business and employees

Sole proprietor or self-employed? Find out more about your coverage options.

Learn about HRAs

You now have more ways to contribute to your employees’ health care costs — with Health Reimbursement Arrangements (HRAs). Use this guide to help you compare coverage options, like HRAs and group health plans. Find out what’s right for your business.

Sell SHOP health insurance to small businesses

The Best Way to Buy Group Health Insurance for Self-Employed Workers

Stepping out to work for yourself: ✔

Starting your own business: ✔

Getting group health insurance when you’re self-employed: in progress.

Learn the best way to take this last task from “in progress” to “complete,” whether you want to buy group health insurance for yourself or to cover your employees.

What Is Being Self-Employed?

According to the IRS , you’re self-employed if you run a trade or business as an independent contractor, a sole proprietor, or as a member of a partnership, or if you’re in business for yourself, including having a part-time business. 1 The U.S. Small Business Administration (SBA) considers a sole proprietor as an “unincorporated business owned and run by one individual with no distinction between the business and you, the owner.” 2 Both sole proprietors and partnerships can hire employees, but the owners are still legally recognized as self-employed. 3,4

Self-Employed Profile

In a 2020 small business profile report, the Small Business Administration Office of Advocacy stated that there were about 31.7 million small businesses in the U.S. and that approximately 25.7 million of those business were nonemployers—which are defined as businesses with no paid employees that are subject to federal income tax. 5,6

Buying Group Health Insurance With No Employees

If you work for yourself and have no employees, you are considered a small group of one. You can only buy group health insurance when you are self-employed through an insurance company or agent in certain states . Check with your state insurance department to verify if group health insurance policies are sold to small groups of one. In most cases, however, a self-employed person with no employees would have to buy an individual health insurance policy . 7

Buying Group Health Insurance With Employees

If you have at least one employee (someone who is not an independent contractor, your spouse, or a business partner or part-owner of the company), you can buy group health insurance through an agent, directly from an insurance company, or through the public exchange. Basically, you have more options for how you can buy a group health policy when you’re a self-employed business owner with employees.

Anther option is a stand-alone health reimbursement account (HRA). This is an employer-funded account from which you can be reimbursed tax-free for qualified medical expenses. There are several types of HRS, including the Individual Coverage HRA (ICHRA) available to businesses of any size, and the Qualified Small Employer HRA (QSEHRA), available to business with up to 49 employees. 8,9 These two types of HRAs are considered an alternative to job-based health coverage, and require enrollment in a health plan for the money to be used. 10

For a QSEHRA, the business owner sets an allowance for the QSEHRA, then employees maintain minimum essential health coverage and submit their medical expenses for tax-free reimbursement. Employees can be reimbursed up to $5,300 per year for individuals and up to $10,700 per year for families. 11

It should also be noted that most employers must meet group health plans standards under federal law, which is known as the Employee Retirement Income Security Act (ERISA). 12 ERISA requirements include providing key plan information to participants, providing fiduciary responsibilities, establishing an appeals process, and providing plan participants with the right to sue for benefits and fiduciary breaches. 13 HealthMarkets can assist with ERISA compliance.

Buying Health Insurance for Self-Employed Workers Through the Public Exchange

The public exchange for employers, known as the Small Business Health Options (SHOP) Marketplace, categorizes business owners with no employees (hiring independent contractors doesn’t count as having employees) as self-employed and those with employees as small employers. To buy group health coverage through the SHOP, you must have at least one eligible full-time equivalent employee. An eligible employee cannot be a spouse, business partner, or part owner in your company. You usually need to have no more than 50 employees (some states allow up to 100) to buy a SHOP plan. If you want to enroll yourself in the plan, at least one of your employees must first be enrolled. 14

Your small business may qualify for a tax credit of up to 50% if you have fewer than 25 employees, but this comes with certain requirements : 15

Choosing a Health Insurance Plan When Self-Employed

The type of group health plan you choose may depend on whether or not you have employees. If you have no employees, then how you go about choosing group health insurance for your self-employed business may be the same as if you were buying individual health coverage or family health insurance . If you have employees, then you have to consider things like how much you can afford to contribute toward employee premiums (most insurance companies require at least 50% of premium cost), 16 the network of providers employees would have access to, and the amount employees would have to pay for a plan that has a deductible. Of course, the goal is to pick a plan that makes financial sense for your business while also being what’s best for your employees.

The chart below shows features of different types of group health insurance plans.

*A referral from a PCP is not needed for emergencies and routine care from an in-network obstetrician or gynecologist. 20

Self-Employed Health Insurance Deduction

If you work for yourself, you could be eligible for a self-employed health insurance deduction . If so, you may be able to adjust your gross income when filing your tax return by deducting 100% of your health insurance premiums—including dental and long-term care—for your household (you and your dependents). To find out if you’re eligible, you should consult with a tax professional. If you are allowed to take the self-employed health insurance deduction, this will not prevent you from taking advantage of the Affordable Care Act’s premium tax credits, if you are eligible for those as well. 21

Using HealthMarkets to Buy Health Insurance When Self-Employed

With HealthMarkets, you get access to a wide variety of health insurance plans. Having lots of health insurance rates to compare when you are self-employed can make it easy to find health insurance for yourself or your small group.

Another reason why you would want to work with HealthMarkets is to maximize your time. As a self-employed business owner, you may wear many hats—acting as the human resources, accounting, and creative team all in one. Juggling so many roles may not allow you the luxury to fully analyze all the different group health plans out there. You may also need to find out what health benefits employees are looking for . Again, time may not afford you the opportunity to meet with each employee.

Working With HealthMarkets May Help With Employee Satisfaction

Because HealthMarkets can provide employees with a greater level of service by assessing their health coverage needs, explaining different plan options, and even identifying where supplemental insurance can help , this may create better employee satisfaction and retention.

A 2020 Workplace Wellness study conducted by EBRI revealed that 54% of employees are very or extremely satisfied with their health insurance plan. 22

A satisfied employee may also be more likely to recommend your company to job seekers. Offering group health insurance that meets your employees’ needs can also help with recruiting future employees.

More Choices for Group Health Insurance for Self-Employed Workers

HealthMarkets works with recognized insurance companies across the country to give small businesses access to their choice of health insurance plans. When shopping for a small business health plan, it’s important to reach out to an agent who specializes in this area. If you are interested in finding a plan for you small business, call a licensed insurance agent at (800) 827-9990 today.

Going the solo plan route? HealthMarkets can also help you review your individual health plan options. Start comparing health plans online now.

Small Business

Who is eligible for group health insurance, by vaughn himber updated on october 21, 2022.

As a small business owner, you may be wondering whether you and your company are eligible for group health insurance. Typically, a business needs at least one qualified, full-time equivalent employee besides the business owner in order to be eligible for group health insurance.

Also, depending on your situation, other factors that help determine if a business can enroll in group coverage may include business type, employee status, and the level of workforce health plan participation.

Continue reading to learn about how eligibility works for group health insurance.

Group health insurance coverage basics

Group health insurance, also known as small group insurance or small business health insurance, is available to companies seeking to provide medical coverage to their employees under one policy.

By federal law, qualified small businesses are guaranteed group health insurance if they decide to buy it. If you own a small business, you also cannot be denied coverage based on the health of your employees if you’re enrolling in an ACA-compliant plan.

Group health insurance eligibility requirements

Generally, to be eligible for group health insurance, a business must fulfill two main requirements:

According to the Affordable Care Act (ACA), a small business is defined as a business having between 1 to 50 employees. By having at least one qualified employee (who is neither yourself nor a spouse), your business would likely be eligible for group health insurance.

While the definition of a group or employee varies by state, it is important for you to know that a qualified full-time or full-time equivalent employee is usually considered to be someone who works at least 30 hours per week, according to the IRS .

As a small business owner, you also have the option of offering an Individual Coverage Health Reimbursement Arrangement (ICHRA) in leu of group health insurance or along with group health insurance (as long as you do not offer both options to the same employees. To learn more about ICHRA, see our article entitled, Individual Coverage Health Reimbursement Arrangement Plans

Rules for offering health insurance to employees

Once a business is enrolled in a health plan, the employer must contribute to employee premiums as part of the plan’s cost-sharing arrangement. Generally, most states require employers to pay at least 50 percent of the monthly premiums for their employees.

Oftentimes, the insurer requires that a minimum percentage or number of employees must participate in a group health insurance plan.

Generally, if an employer decides to offer health insurance to any full-time employees, then the employer must offer health coverage to all full-time employees (defined as those working 30 hours or more per week on average) .

The employer also has the option of offering coverage to part-time employees (defined as those working 20 to 29 hours per week). Typically if the employer offers coverage to any part-time employees, all of them must be offered coverage.

These rules apply regardless of the medical condition of the employees. In other words, an eligible employee can’t be denied coverage based on a pre-existing medical condition.

Generally, coverage must be offered to an employee’s legal spouse and dependent children. Under the Patient Protection and Affordable Care Act, group insurance plans are required to extend coverage to adult dependents through age 26.

Qualified dependents can only enroll in a group health plan if an employee is already enrolled in the plan. While small business employers have the option to decide whether they will contribute to the cost of health insurance premiums for dependents, employees can still add dependents to their plan.

Employers may opt to extend health benefits to unmarried domestic partners of employees. If an employer chooses to offer coverage to domestic partners, the coverage must mirror the coverage extended to spouses. Employees and their domestic partners must sign an affidavit of domestic partnership to establish that they are living together in a committed relationship, and intend to stay that way indefinitely.

Employee requirements in group health insurance

An employer can cover any employee who is on the payroll and for whom he or she pays payroll taxes. Eligible employees generally include those who are on paid vacation, maternity or sick leave. With few exceptions, employees who are on unpaid leave are ineligible until they return to active work.

The following individuals are usually not eligible for small group medical coverage:

Who is usually not eligible for group health insurance?

A sole proprietor with no employees usually would not be eligible for group health insurance. The self-employed owner of a sole proprietorship could still enroll in an individual health insurance plan.

If you have a family business and are looking for group health coverage, a spouse typically cannot count as the company’s only employee. However, if the business has other employees (who may also be members of your family), your spouse can enroll in the plan.

Finding affordable group health insurance

Although all health plans have different terms and conditions, these group coverage basics may help you in deciding if your small business is eligible for group health insurance.

If you have questions about whether your group is eligible for small business medical coverage, you can call eHealth’s licensed health insurance agents with no obligation or cost to you. Our representatives can help answer your questions and provide you with unbiased advice for choosing the right health plan for your business. You can also get free quotes on small business health insurance from us.

We are also committed to supporting you after you have purchased your group health insurance plan by serving as the communication point between you and the insurance company.

With our free group health insurance quotes, eHealth empowers you to compare health plans from multiple health insurance companies so you can find the best option for your budget and coverage preferences. Compare group health insurance plans for free at eHealth.com today.

This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.

Resources

Health insurance for your business and employees. Healthcare.gov. Centers for Medicare & Medicaid Services at https://www.healthcare.gov/small-businesses/

How the Affordable Care Act affects small businesses. Healthcare.gov. Centers for Medicare & Medicaid Services at https://www.healthcare.gov/small-businesses/learn-more/how-aca-affects-businesses/

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COMMENTS

Caution of Offering Health Coverage to Non-Employees • PF
The best answer to whether non-employees can be offered coverage is that employers who wish to evaluate or pursue covering non-employees should consult their
Health Insurance for Non-Employees: Details to Consider
Oyster Health makes it simple and affordable to offer health insurance to team members in more than 180 countries. You're not limited to
Group Health Plans: Owners, Non-Employees & Domestic Partners
The theme that should be starting to recur is that only employees can participate in the group health plan on a pre-tax basis. Non-employees
Two Ways For Non-Employees To Get A Group Health Insurance
All you have to do is contact an agent of the insurance company to sign up for it. Even if you're not an employer, some insurance companies provide group health
Health coverage for self-employed
Generally, if you run your own business and have no employees, or are self-employed, your business won't qualify for group coverage.
Health Care Insurance Coverage for Self-Employed Individuals
null If you're self-employed with no employees you're not considered an employer. You can use the Health Insurance Marketplace® to find health coverage for
Small Business Health Options Program
Health insurance for your business and employees ... Offering health benefits is a major decision for businesses. Use HealthCare.gov as a resource to learn more
How to Buy Group Health Insurance for Self-Employed Workers
If you work for yourself and have no employees, you are considered a small group of one. You can only buy group health insurance when you
Who is Eligible for Group Health Insurance?
Employees covered under a collective bargaining agreement · Employees of unrelated organizations · Independent contractors · Non-employee directors
Group Health Insurance through Trade Organizations
Consider this: You may be eligible for a group health plan through a professional, trade or membership organization. The members of such groups share the