Health insurance for the self-employed and small businesses
If you're self-employed with no employees, you typically buy an individual Marketplace plan (where you may get premium tax credits) and may be able to deduct premiums with the self-employed health insurance deduction. If you have employees, the main options are a traditional group plan (including SHOP for small employers), a CHOICE Arrangement (formerly called an individual coverage HRA, or ICHRA) that reimburses employees' own individual plans, or, for small employers with no group plan, a QSEHRA.
Self-employed with no employees
- Marketplace coverage: HealthCare.gov treats self-employed people as individuals. You estimate your net self-employment income for the year, which determines any premium tax credit.
- Self-employed health insurance deduction: eligible self-employed people may deduct health insurance premiums, figured on IRS Form 7206. Generally, you can't take it for any month you were eligible for a subsidized plan through your own or your spouse's employer. Coordinate it with any premium tax credit; a tax professional can help.
- HSA: with an HSA-compatible plan (including Marketplace Bronze plans from 2026), you can make tax-deductible HSA contributions. See HSA basics.
- CHOICE Arrangements aren't for owners alone. HealthCare.gov notes they are only for employees, not self-employed individuals; an employer needs at least one employee who isn't the owner or the owner's spouse.
Small employers: your main options
| Option | How it works | Good to know |
|---|---|---|
| Group plan / SHOP | You choose a group plan and contribute to premiums. SHOP is the Marketplace's small-business program. | Enrolling in SHOP coverage is generally the only way to get the Small Business Health Care Tax Credit, worth up to 50% of employer contributions for 2 consecutive years, if you qualify. |
| CHOICE Arrangement (formerly ICHRA) | You reimburse employees tax-free, up to an amount you set, for individual-market premiums and other qualified medical costs. | Employers of any size can offer one. No minimum or maximum contribution. Amounts can vary by employee class and by age (up to 3:1) and family size. Employees must have individual coverage or Medicare (not short-term plans). Give written notice 90 days before the plan year. |
| QSEHRA | Small employers that don't offer a group health plan reimburse employees for premiums and medical costs, up to IRS annual limits. | Employees must have minimum essential coverage. The QSEHRA amount reduces any premium tax credit the employee can get. |
How a CHOICE Arrangement affects employees' subsidies
Affordability is the key test. For 2027, a CHOICE Arrangement is considered affordable if, after the employer's reimbursement, the employee's cost for the lowest-cost self-only Silver plan in their area is less than 10.22% of 1/12 of household income. If it's affordable, the employee and household can't get the premium tax credit, even if they decline the arrangement. If it isn't, the employee can choose either the arrangement or the tax credit, but not both. HealthCare.gov provides an affordability tool for employers.
Choosing
- Want a predictable budget and to let employees pick their own plan? Compare a CHOICE Arrangement or QSEHRA.
- Want one shared plan and a possible tax credit? Look at SHOP and group coverage.
- Talk to a licensed broker and a tax professional before you commit; plan rules and tax treatment are detailed.
Frequently asked questions
Can a self-employed person with no employees use a CHOICE Arrangement (ICHRA)?
No. HealthCare.gov says CHOICE Arrangements are for employees, not self-employed individuals, and an employer needs at least one employee who isn't the owner or the owner's spouse.
What is a CHOICE Arrangement?
It's the new name for an individual coverage HRA (ICHRA): an employer-funded, tax-free reimbursement for employees' individual health insurance premiums and qualified medical costs, up to an amount the employer sets.
Can self-employed people deduct health insurance premiums?
Eligible self-employed people can generally deduct premiums using IRS Form 7206, but not for months they were eligible for a subsidized employer plan. Coordinate it with any premium tax credit.
What's the difference between a QSEHRA and a CHOICE Arrangement?
A QSEHRA is only for small employers that don't offer a group plan and has IRS annual limits. A CHOICE Arrangement can be offered by employers of any size, has no contribution limits, and can vary by employee class.
Is there a tax credit for small businesses that offer insurance?
The Small Business Health Care Tax Credit, worth up to 50% of employer premium contributions for 2 consecutive years, is generally available only through SHOP coverage for eligible small employers.
Sources
- HealthCare.gov: Health coverage for self-employed people (accessed October 28, 2026)
- IRS: About Form 7206, Self-Employed Health Insurance Deduction (accessed October 28, 2026)
- HealthCare.gov: Small business health insurance (SHOP) (accessed October 28, 2026)
- HealthCare.gov: CHOICE Arrangements (formerly individual coverage HRAs) (accessed October 28, 2026)
- HealthCare.gov: Individual coverage HRAs (for employees) (accessed October 28, 2026)
- HealthCare.gov: Qualified Small Employer HRAs (QSEHRAs) (accessed October 28, 2026)
- IRS: Guidance on new HSA benefits under the One, Big, Beautiful Bill (Notice 2026-05) (accessed October 28, 2026)