Self-EmploymentIntermediate5 min read

Health insurance when self-employed

Leaving a W-2 job means leaving group health coverage. Here's the landscape.

One of the biggest practical obstacles to self-employment in the US is health insurance. Without an employer plan, you're on your own. The good news: the ACA marketplace has made this much more workable than it used to be, and self-employment comes with specific tax breaks that soften the cost.

The main options

ACA Marketplace (healthcare.gov or state exchange) — the default. Subsidies scale with income and can make coverage very affordable for moderate earners.
Spouse's employer plan — the cheapest option if available, especially with a family plan discount.
COBRA from your former employer — full group coverage for up to 18 months after leaving. Expensive but zero disruption.
Professional association plans — some freelance and professional groups offer member health insurance, worth shopping around for.
Short-term plans — cheap but limited coverage, generally a bridge rather than a solution.

The self-employed health insurance deduction

If you're self-employed and pay for your own coverage, you can deduct 100% of health insurance premiums (for yourself, your spouse, and dependents) as an above-the-line deduction. That means it reduces your AGI even if you take the standard deduction. This single rule can save thousands per year.

HSAs become even better

If you pick an HSA-eligible high-deductible plan on the marketplace, you can contribute to an HSA just like a W-2 employee would. Same triple-tax advantage. Same long-term investment strategy. Self-employed + HDHP + HSA is one of the most powerful retirement-building combinations available.

Put this into practice

Worth tracks your accounts, budgets, and goals — so the concepts in this article aren't just theory.

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