BENEFITS, HEALTHCARE & WELLNESS
Insurance For The Self-Employed
Getting coverage for yourself as a business owner or entrepreneur
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ederal and/or state law mandates a variety of insurance products that employers must carry for employees. If you are self-employed, are you required to have the same coverage? Can you have the coverage if you want? Here are three types of coverage to think about if you are a sole proprietor, independent contractor or freelancer: 1) Health Coverage 2) Unemployment Insurance 3) Workers’ Compensation Health coverage A self-employed individual must satisfy the individual mandate to maintain minimum essential health coverage or pay a penalty. Coverage can be obtained through such options as a private policy, spousal coverage through a working spouse’s employer’s plan, Consolidated Omnibus Budget Reconciliation Act (COBRA) from a prior employer or through a government exchange. Self-employed individuals must use the individual marketplace. They cannot use the Small Business Health Options Program (SHOP) as this venue is limited to businesses with 50 or fewer employees seeking coverage for these employees. Medicare is also an alternative option. As a self-employed individual you can be eligible for Medicare, which typically provides health benefits starting at age 65. You pay toward this coverage while self-employed through self-employment tax. As a self-employed individual, you pay what would effectively be the employer share (1.45 percent of wages) and employee share (1.45 percent of wages). In other words, as a self-employed person you pay 2.9 percent of your net earnings from self-employment (although you get a tax deduction for half of this tax). You continue to pay this tax as long as you have net earnings from self-employment, even if you are already on Medicare and/or collecting Social Security benefits. Once you begin receiving Medicare benefits, you pay monthly premiums. Find information about Medicare premiums from Medicare.gov. Workers’ compensation This type of coverage protects employees from work-related injuries and illnesses. The coverage pays medical bills and lost wages when an incident occurs. Because a self-employed individual is not an employee, workers’ compensation is not mandated for a sole proprietor, freelancer, or independent contractor. However, if you are self-employed, you may still want this coverage because the nature of your job is high risk for injuries (e.g., you work construction) or you may need the coverage as a condition of a contract you have to provide services for another business. 22
MEADOWLANDS USA
meadowlands.org
AUGUST 2016
Please visit http://lwd.dol.state.nj.us/labor/wc/wc_index. html for more information about workers’ compensation insurance in New Jersey. If you can’t get traditional workers’ compensation coverage but want protection, you can patchwork your own workers’ compensation solution by having medical coverage to take care of doctors’ bills for a work-related injury and a disability policy to cover lost income because of the injury. Unemployment insurance Unemployment insurance is a federal-state program designed to provide income to workers who are involuntarily terminated from a job (assuming no serious wrongdoing) and are seeking reemployment. As such, this type of coverage is not available to a self-employed individual. A self-employed individual cannot opt into the program. If you are self-employed and a project ends or your business fails because of economic conditions in the community or a natural disaster, you may be eligible for financial assistance from your state as dislocated worker. For example, one county in Georgia allows a self-employed individual to be treated as a dislocated worker if economic conditions in the county result in: • Failure of one or more businesses for which the self-employed individual supplied a substantial portion of products