Understanding Health Insurance Options for Self-Employed Californians: A Comprehensive Guide

While most California residents get their health insurance through their employers or state services, health insurance options for self-employed Californians are a bit more complicated. But one thing is clear: you need a California health insurance plan that fits your business budget and your (and your employees’) health needs.  

You can choose from a wide range of plans on the marketplace, work with an insurance broker, and decide best-fit options based on how your business is legally structured. Learn more about how to shop around for affordable health insurance in California, including both individual health plans in California and group health insurance options.  

Navigating the California Health Insurance Marketplace 

First, self-employed individuals need to understand their legal obligations to provide or participate in health insurance plans. As a Californian, you may face penalties for not having coverage; as a business owner, the size and type of your business will determine if you have to offer benefits to employees.  

As a starting point in understanding health insurance options for self-employed Californians, all self-employed people should cover themselves. Many start their search at Covered California, the California health insurance marketplace. This state-run platform organizes ACA-compliant major medical insurance in California. 

But self-employed individuals have more options. If you don’t like the plans available on Covered California or you want help determining the right decision, working with a private insurance company or a broker can break down different options and give you access to additional coverage options. 

Individual and Family Health Insurance Options 

If you are self-employed and don’t have the 50+ employees that require you to offer health insurance coverage, you have more flexibility in the options you provide. For someone without any employees besides yourself or your spouse, you can choose exactly the right plan for your needs.  

Choosing the Right Plan for Your Health Needs 

These are some of the most popular types of health insurance for independent contractors and self-employed people:  

• ACA Marketplace plans
• High-Deductible Health Plans (HDHPs) that include access to a Health Savings Account in California for additional investments and savings opportunities
• Catastrophic health plans for medical emergencies
• Indemnity plans that operate similarly to health insurance coverage 

Every plan type has different areas of coverage. Also, different providers within each plan category offer different advantages.  

Coverage Options for Families and Dependents 

Even individual health plans in California can cover your spouse, your dependents, and your family. Freelancers, independent contractors, and self-employed business owners can get Covered California plans or plans through private health insurance companies based on what fits their entire family’s medical needs. 

For married business owners, carefully consider whether family health insurance in California through your spouse’s employer is a good fit. While they may offer lower premiums depending on the plan, choosing your own can give you “behind-the-scenes” tax advantages and savings. You can also have more control over what your health insurance provides.  

Private and Group Health Insurance Alternatives 

You can also explore non-traditional options that employers typically don’t give access to. These include options like Association Health Plans (AHPs) that allow regionally or industrially affiliated self-employed people to apply for insurance as a group. You can also consider health care sharing ministries (HCSMs) that may meet California qualifications for health coverage.  

Telehealth and Virtual Care for the Self-Employed 

An emerging aspect of modern health insurance plans for self-employed and general residents is telehealth services in California, with virtual programs and benefits. Users can get remote care through virtual appointments, online prescription services, and more. Some telehealth programs even offer convenient access to specialists.  

Telemedicine services and programs can be helpful for business owners who travel frequently but still need reliable access to medical services from providers they know. They also offer mental health services that are more accessible. 

Tax Breaks and Financial Assistance 

Health insurance is valuable in its own right, and it’s generally required for all Californians. But having your own insurance plan can also offer self-employed people unique financial advantages. Consult with your tax accountant or financial advisor to make sure you’re accessing valuable tax breaks and available financial assistance.  

The more you know about taxes, subsidies, and potential aid or assistance programs, the better you can weigh finances in your decision-making process. 

Health Insurance Premium Deductions for Self-Employed Individuals 

The biggest savings are that self-employed health insurance premiums are a 100% federal tax deduction. This means you don’t pay federal income taxes on the premiums, even if the plan includes your spouse and dependents. California also deducts medical insurance premiums and related medical expenses from your income for state income tax calculations.  

This is where a conversation with your tax advisor can also come in handy. Depending on whether you have an LLC or other formal business structure, your health insurance premiums may be neatly categorized as a business expense that doesn’t factor into your personal income tax considerations at all. 

ACA Subsidies and Tax Credit Eligibility in California 

You may also be eligible for tax credits through the Affordable Care Act (ACA), depending on your individual or household income. If your medical expenses are more than 7.5% of your adjusted gross income, you may be eligible for additional tax deductions for health insurance.  

Because self-employed individuals tend to itemize their taxes or have a pass-through business structure that files its own taxes, subsidies become much easier to access. 

Tips for Choosing the Best Plan 

As you navigate the marketplace, consider these tactics:  

• Work with an experienced insurance agent who can walk you through legal obligations, different coverage types, and the real costs. They can also help you navigate different sources of insurance, including the general market, insurance through professional organizations, and insurance plans direct from insurers. They can also provide speedy service if open enrollment is coming to an end.
• Consult with your financial advisor to ensure your health plan qualifies for tax advantages and is a business expense to reduce your out-of-pocket costs. 
• Look for new policies frequently. Every year, consider switching to a new plan based on pricing and changing areas of coverage. This is especially important as your life circumstances change, such as having a new dependent. You may also need to consider new options for small business health insurance in California if your business grows to have more than 50 employees. 
• Consider joining an association in your industry or region. This resource can help you learn more about how to run your business, how to manage administrative and business decisions like implementing health insurance benefits, and complying with complex California obligations. 
• Glance at options for short-term health insurance in California. If your side gig is becoming your primary income but you’re searching for a new job, there are short-term options to keep you and your family covered without relying on COBRA. 

Over time, you’ll gain more and more understanding of the marketplace, your obligations as an employer (especially as your business grows), and the potential health benefits of self-employed insurance coverage.  

Health Insurance for the Self-Employed? We’ve Got You Covered 

Self-employed individuals have a lot of freedom—and that includes more freedom to choose the right insurance plan from a wider range of options. But navigating the marketplace and comparing different plans can be overwhelming. Cost-U-Less Insurance can help you navigate the marketplace and select levels of coverage that fit your unique circumstances. 

Ready to get your own coverage without working through an employer? Reach out to Cost-U-Less today by getting quotes online or calling for personalized support at (800) 390-4071. You can also stop by a local office to get answers in person. 

FAQs 

What are the best health insurance options for self-employed individuals in California? 

The best health insurance options for self-employed individuals in California are the ones that meet your unique health insurance needs. You can choose ACA-compliant plans, get private health insurance in California, or find other alternatives.  

Can self-employed individuals deduct health insurance costs on their taxes?  

You can deduct health insurance costs from your taxes as a self-employed person. They are regarded as a business expense, and this can significantly reduce your quarterly or annual tax bill. 

How do subsidies work for the self-employed purchasing health insurance? 

Self-employed individuals who purchase ACA-compliant plans are potentially eligible for ACA subsidies. Based on your household income, you may receive a subsidy, or discount, on your monthly premiums.