Health insurance for contractors

Hiring an independent contractor comes with its perks – it saves cost and overhead expenses and brings specialized expertise to the table. However, there are drawbacks too; the most common one is having to look for one contractor after another because they move from job to job. So, how do you ensure contractor loyalty? By offering them certain additional benefits.

Health insurance is one such attractive benefit offered to regular employees. However, you cannot offer the same to your independent contractors. You can provide them with the required guidance, proper educational resources, and even workshops and sessions. This gives your company a competitive advantage during hiring and earns you contractor loyalty. 

Wondering how to solve the health insurance puzzle for your contractors? Here’s a detailed guide on health insurance for IT contractors, which talks about health insurance for contractors, plan types, factors to consider, and much more.

How does health insurance for IT contractors work without traditional employment?

As companies increasingly rely on contractors, especially in the IT and digital sectors, it is essential to understand how health insurance works for them. Unlike your regular employees, these non-employees are responsible for their own insurance. 

Here are a few things to know about contractor health insurance:

1) No employer-sponsored plans

Since contractors are not employees, they are not eligible for traditional employer-sponsored insurance. It helps an employer avoid administrative burdens and the added expense of group benefits. However, it can also impact contractor retention and satisfaction. So, you can guide your contractors to self-funded coverages.

2) What is “self-funded” health coverage?

If the contractor funds their health insurance, it is self-funded health coverage. In this case, the contractors are responsible for: 

• Researching and choosing their insurance plan
• Paying premiums and other deductibles
• Browsing through provider networks
• Understanding policy restrictions

3) Legal and compliance boundaries

As an employer, you may be willing to help out your contractors. While it is natural to care for their well-being, it is also important to be compliant. Here are some details of dos and don’ts.

What you can do	What you can’t do
Guidance to insurance-related education resourcesRecommend benefit providers, but contractor participation is optional.	Offer health insurance like you do for regular employees.Any participation in your contractor’s health plan.

Why does employer support still matter?

Legally, you cannot provide contractor health insurance. Yet, that doesn’t mean you are powerless. Your support still matters greatly, not through direct benefits, but by fostering a supportive ecosystem. Your support should promote contractor well-being, focus on their satisfaction, and long-term collaboration. 

Contractor turnover is a costly affair and can hamper the work culture of your organization. The primary reason for contractor churning is financial instability, and high insurance costs often contribute to this issue. 

As an employer, you can shoulder this burden by keeping a constant flow of projects. You may also provide educational resources on tax planning, long-term savings, and other relevant topics, which demonstrates care and empathy. When contractors see that an organization is invested in their success and well-being, even within legal boundaries, they’re more likely to prioritize work with that client.

Healthcare for contractors: what plans are available?

While independent contractors enjoy the freedom of choice, where to work, and when to work, they also have additional liabilities. 

These include the responsibility of managing their health insurance plans. As an employer, you can neither interfere with such a decision nor can you offer to sponsor a plan. However, you can guide your contractors to various attractive healthcare plans available in the market. 

Here are a few standard independent contractor insurance plans (This information is for general awareness only and should not be considered legal, tax, or financial advice.):

1) Individual health insurance

Since contractors aren’t eligible for any employer-sponsored health insurance, they can opt for individual insurance programs. The Health Insurance Marketplace is the go-to option in this scenario, where contractors can explore various plans that cover essential health benefits.

2) Professional group plans

Some freelance groups, unions, or associations, like the National Association for the Self-Employed (NASE), offer a group healthcare plan. They also offer negotiated or reduced rates for independent contractors. These plans offer numerous benefits, including competitive prices and additional community support. It may also include additional benefits, such as coverage for dental or vision care.

3) ACA plans and subsidies

ACA stands for Affordable Care Act, also known as “Obamacare” or officially as the “Patient Protection and Affordable Care Act.” It provides financial assistance in the form of subsidies to eligible citizens. The subsidies reduce the overall premium cost, deductibles, and any other expenses. Here are the eligibility criteria:

• The contractor’s income must be within 100-400% of the Federal Poverty Level.
• They must buy the health plan through an exchange or the marketplace.
• Should not be eligible for any employer-sponsored coverage.

Health insurance for IT contractors: key factors to consider

When educating your non-employees about the importance of healthcare plans, here are a few factors to keep in mind about health insurance for IT contractors:

1) Monthly premiums and deductibles

For anyone considering a healthcare plan, cost is the primary factor that they’ll consider. Regular employees will get benefits from the company they work for. However, contractors pay the full premium out of their own pockets, making affordability a significant concern. As an employer, you can guide these non-employees toward reputable organizations like the Health Insurance Marketplace. 

You can also invite financial wellness experts. These experts offer workshops on estimating annual health costs and planning accordingly.

2) Coverage limits and exclusions

Many lower-cost plans come with significant coverage limitations or exclusions. These exclusions can range from no maternity care, mental health services, or prescription drug coverage. Contractors must thoroughly review the plan to ensure it meets their specific needs. It is essential to review what the policy covers and ensure it aligns with the individual’s goals.

3) Provider network access

Another critical aspect to consider when choosing health insurance for contractors is access to a provider network. Before choosing the policy, individuals need to check which hospitals, clinics, or doctors accept that insurance plan. A larger network means: 

• More choice
• Better access to specialists
• Reduced likelihood of paying out-of-pocket for out-of-network care. 

4) Portability and flexibility

Health insurance portability and flexibility are essential for independent contractors. This is because their work and income can change frequently. 

They aren’t tied to a single employer or location, so their insurance must move with them. A portable plan may ensure continuous coverage regardless of client, geography, or project status.

Simplify contractor management with Payoneer Workforce Management

Offering guidance on healthcare for contractors may provide you with a competitive advantage when hiring. However, managing your global network of independent contractors can become a tough job. 

From cross-border payments to mitigating misclassification risks, things can turn tricky very quickly. 

We help make this process simple with our comprehensive solution for contractor management.

Benefits of Payoneer Workforce Management include:

• Support to streamline contractor onboarding in 160+ countries
• Seamless payments in 70 currencies
• Support to reduce misclassification risks

Book your demo now!

FAQs

1) How does the non-availability of health insurance affect a contractor?

Here’s how the non-availability of health insurance affects contractors:

• They may face health or financial stress. 
• It often leads to missed deadlines or sudden unavailability.
• It can affect focus, productivity, and availability.

2) Can I invite an insurance consultant to speak to my contractor team?

Yes, you can. Bringing in a neutral consultant to conduct an informational session is a commendable effort. It is a great way to support their decision-making. It often makes your non-employees feel valued and appreciated.

3) Does helping with insurance violate independent contractor classification rules?

No, it does not. However, you should always be cautious and consult legal guidance. Providing education or resources does not violate classification rules. However, offering actual benefits might lead to legal issues.