Health Insurance for the Self-Employed: Best Options for Freelancers, Gig Workers, and Small Business Owners

If you're self-employed, health insurance is likely your largest business expense after taxes. Without an employer subsidizing 70-80% of the premium, you're facing the full retail cost - $560+/month for individuals and $1,500+/month for families. The good news: there are strategies to cut these costs significantly.

Option 1: ACA Marketplace Plans

The ACA marketplace is the best option for most self-employed individuals, especially with subsidies. Self-employed income is reported on your tax return, and your MAGI determines subsidy eligibility. Unlike employees with steady paychecks, self-employed workers have more control over their MAGI through retirement contributions, business expense deductions, and income timing.

Key advantage: You can deduct 100% of your health insurance premiums as a self-employed health insurance deduction on your tax return. This reduces your taxable income dollar-for-dollar. A $600/month premium ($7,200/year) in the 24% tax bracket saves you $1,728 in federal income tax. This deduction applies even if you take the standard deduction.

Option 2: Health Care Sharing Ministries

Health care sharing ministries (HCSMs) like Medi-Share, Christian Healthcare Ministries, and Liberty HealthShare are not insurance - they're organizations where members share each other's medical costs. Monthly costs are typically 30-50% lower than comparable insurance premiums ($200-$350/month for individuals).

Important caveats: HCSMs are not regulated as insurance and don't have to follow ACA rules. They can exclude pre-existing conditions, deny sharing for certain treatments, and aren't legally obligated to pay claims. They don't count as minimum essential coverage for ACA purposes. We recommend these only for very healthy individuals who understand and accept the risks.

Option 3: Spouse's Employer Plan

If your spouse has access to employer-sponsored insurance, getting coverage through their plan is often the cheapest option. Employer contributions typically cover 70-80% of the premium. Even if adding a spouse costs $300-$500/month, the employer's contribution makes this dramatically cheaper than two separate marketplace plans. Compare the total family cost under your spouse's employer plan vs. two individual marketplace plans with subsidies.

Option 4: COBRA (Short-Term)

If you recently left an employer to go self-employed, COBRA lets you keep your employer plan for up to 18 months. The catch: you pay the full premium (employee + employer share) plus a 2% administrative fee. This is usually expensive ($600-$1,800/month) but can be worth it if you have ongoing treatment with in-network providers or need to bridge a gap until the next Open Enrollment.

Tax Strategies for Self-Employed Health Insurance

Maximize retirement contributions to lower MAGI. A SEP-IRA allows contributions up to 25% of net self-employment income (max $69,000 in 2026). A Solo 401(k) allows up to $23,000 in employee deferrals plus 25% employer contributions. These reduce your MAGI, increasing your marketplace subsidy. The combined effect of the subsidy increase plus the retirement tax savings can make this extremely powerful.

Time income strategically. If you can defer invoicing or accelerate business expenses to lower your annual income below a subsidy threshold, the savings can be substantial. For example, dropping from $55,000 to $50,000 MAGI might increase your annual subsidy by $1,500+ while costing you only $5,000 in deferred income (which you'll earn the following year).

Use an HSA if on an HDHP. Self-employed individuals can contribute to an HSA and deduct it from their income. The HSA contribution ($4,300 individual, $8,550 family) reduces your MAGI for subsidy purposes AND gives you tax-free money for medical expenses. This triple benefit (income deduction + subsidy increase + tax-free medical spending) makes HSAs exceptionally valuable for the self-employed.