Health Insurance

Are Employers Required To Give 1099 Workers Health Benefits?

Jacqueline Slobin11 Oct 2021

1099 workers are typically hired by a company for a specific project or for a short period of time. They are not the same as employees and usually are referred to as a freelancer, or independent contractor. Since they are not employees, they are not usually eligible for health benefits from the company they are working under. The important thing to be sure of as an employer is that you’ve correctly classified 1099 workers, which we cover in this article.

While companies may not offer health benefits to 1099 workers, there are other options to access affordable healthcare such as Mira. A Mira membership offers access to low-cost urgent care visits, primary and preventative care services, telebehavioral health, discounted prescriptions, and affordable lab testing all for just $25 per worker per month. Sign up today whether you’re an employer or a 1099 worker.

1099 Workers vs. W2 Employees - Employer Requirements

There are many differences between 1099 workers and W2 employees. 1099 workers are independent contractors that are typically hired to help companies with a specific project or for a finite length of time. W2 employees, on the other hand, receive a salary and benefits from the business owner they work for and are tasked with more of a responsibility to the business.

1099 Workers

In general, 1099 workers have greater flexibility in creating schedules, accepting tasks, and methods for completing jobs. However, 1099 employees need to provide their own supplies for jobs and do not qualify for all of the same benefits as W2 employees. They’re also known as freelancers, contractors, or independent workers. 1099-MISC is a tax form that’s issued to independent contractors that have earned over $600 over the course of the tax year. They’re responsible for filing their own self-employment tax returns. 

W2 Employees

W2 employees include full-time employees and typically have set hours, less independence, and more structure than 1099 employees. They also tend to work for longer periods of time and as a result, receive more benefits from their providers, such as health insurance. W2 workers are issued a W2 Form by their employers.

Company Benefit Requirements for 1099 Workers

Companies are not required to provide health insurance for 1099 contractors or freelancers. However, if a company chooses to offer 1099 workers health insurance, there are specific rules the company and the contractor may be obliged to follow:

  • The contractor may be required to declare any employer contributions to their benefits as taxable income
  • Employers may offer contractors access to the same group plan employees have, whether the employer or the contractor pays the premiums
  • Employers are not required to pay any portion of the premiums for contractors
  • If contractors pay their own premiums, they may be able to deduct the amount from their income at tax time

Since 1099 employees are typically hired for a single project, specific, or short-term work, they are not entitled to as many benefits as W2 employees. If you are a worker completing projects under a 1099 contract, the company may decide to offer some of the following benefits. 

  • The IRS allows 1099 employees to claim costs for home-work, office, and supplies
  • Some companies may offer 1099 workers corporate discounts, and educational benefits
  • Companies may also offer support for traveling and profit-sharing

Since the benefits offered varies by company and contractor, it is important to clarify or ask about potential benefits when signing a contract. 

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How to Get Health Insurance as a 1099 Worker

If you are a 1099 worker and your employer does not provide you with health insurance, you have several options to get a health plan. 

  • Private Insurance plans can be purchased from the health insurance marketplace during open enrollment season each year. There are gold, silver, and bronze plans that you can choose between depending on your general health and how much coverage you need.
  • Catastrophic plans are plans that only cover catastrophic events and may be a good fit for individuals who are under 30 years old and in good health. Catastrophic plans tend to have much lower monthly premiums than gold, silver, or bronze.
  • Family member’s plans may also be a good option if you are a 1099 worker. If you are under 26 you can remain on your parents’ health insurance plan and if you are married you may be able to get covered by your spouse’s health insurance.
  • Joining a Union can present health insurance options. Some professional groups may offer group health insurance and function similarly to employer health insurance to provide cost-sharing or discounted rates.

1099 Worker Health Benefits Frequently Asked Questions (FAQ)

As a 1099 worker, health insurance can be confusing and overwhelming. Below we answer frequently asked questions when it comes to health benefits as a 1099 worker.

How can a 1099 worker ask a company they’re working for about health insurance?

According to John Bartleson, the owner of Health Benefits Connect, "[1099 workers can inquire about] a federal program called the Individual Coverage Health Reimbursement Arrangement (ICHRA), to offer their 1099 employees a monthly tax-free allowance for the employees to purchase an individual health insurance plan. 

“The ICHRA program provides the perfect opportunity for workers to initiate a conversation with their company about their interest in health insurance. Additionally, there are many other options for 1099 workers for individual plans, including the ICHRA benefits. This is where reaching out and discussing options with a Licensed Health Insurance Broker is helpful.  A Licensed Broker can navigate the regulations and options for both the employer and employee." 1099 workers can inquire with their company about this option by asking the Human Resources department. 

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Do 1099 workers need insurance?

According to Andrew Latham, Certified Personal Finance Counselor and Managing Editor at Super Money, “Yes, all workers need health insurance. Even if you are young and in great health and hate the idea of paying for medical services you are unlikely to use, it is a good idea to at least have a high deductible health plan and benefit from the tax perks of a health savings account (HSA).”

The reason for this is due to high-cost medical care, such as emergency room visits. If faced with a medical emergency, 1099 workers without insurance are likely to face thousands of dollars in medical bills.

There are also other types of insurance that are suggested for 1099 workers, such as, general liability insurance. This type of insurance can help cover claims of:

  • Property damage or bodily injury that your business causes.
  • Reputational harm is a result of malicious prosecution, slander, libel, and more.
  • Advertising injury, which may include copyright infringement in your advertising.

If 1099 workers are offered health benefits, should they accept them?

According to Latham, “It depends on what the [company] is offering. Getting access to a generous health insurance plan can be a valuable perk. However, you may be able to get a better deal through the Health Insurance Marketplace (i.e., Obamacare) or through freelancer advocacy groups, such as Freelancers Union or The NewsGuild. Remember, employers are not required to contribute toward a 1099 workers premiums. Compare the benefits and premiums offered by your employer and what you can get on your own or through the marketplace before you decide.”

If you’re working through a staffing agency you may also be able to receive benefits through them. They may offer 1099 contractors low-cost health insurance, supplemental insurance, life insurance, retirement savings plans, access to pay cards, training opportunities, and paid time off.

Additionally, if you are a 1099 worker considering accepting benefits through a company, you should be aware that you must pay income taxes on the value of the benefit you are receiving and the company risks losing the tax-exempt status of the plan.

The Bottom Line

There are many differences between a 1099 worker and a W2 employee. And while 1099 workers are not required to be offered health insurance from the company they work for, it’s still important to get health insurance in case of a medical emergency. There are many options 1099 workers can consider for coverage.

Mira provides an affordable health coverage option to all employees, even 1099 workers. Providing health benefits to all employees improves productivity and fewer days taken off for illness and injury. Take this quiz to see if Mira is right for your business.