One of the top benefits a company can offer its employees is health insurance coverage. This gives workers access to a group policy, which often allows them to secure more affordable and comprehensive coverage than they could on their own.
But what if you want to provide health insurance for non-employees, such as contractors?
While your options may be limited, there are ways to provide health insurance to non-employees. Through careful consideration of the details, you can provide contractors with a high-level benefit that will strengthen your relationship.
Before we go any further, remember this: you’re under no legal obligation to offer health insurance to individual contractors. This is a decision your company can make at its own discretion.
The best path forward is to offer contractors the same health insurance as your employees. This makes it easier to manage payroll and benefits, thus reducing the risk of error and saving you time.
If you opt to offer contract medical insurance, there are four points to keep in mind:
1. Employers can offer the same group plan
As noted above, you can offer contractors the same group plan as your part and full-time employees. You don’t have to select a different plan for contractors to access.
2. The contractor may need to declare it as taxable income
Urge your contractors to discuss the tax implications of receiving health insurance from your company. They may need to declare any employer contribution as taxable income.
3. Employers don’t have to pay any portion of the premium
There’s no requirement for employers to pay any portion of the premiums for contractors. You can do this if you want, but it’s not an obligation. That holds true even if you pay some or all of the premium for your employees.
4. Contractors may be able to deduct the premium paid
Contractors may be able to deduct any premiums paid from their income. This can help reduce the impact of the cost at tax time.
Is health insurance for non-employees a good idea?
There’s no right or wrong answer to this question, as the situation varies from company to company and contractor to contractor. If you’re on the fence, here are some benefits of offering health insurance coverage to “1099 employees.”
- Health insurance can help retain contractors. One of the primary disadvantages of working as a contractor is a lack of access to benefits such as medical coverage. You can help contractors by giving them access to your group policy.
- It can save you money. The more people you have on your group policy — especially if you add younger, healthier contractors — the better chance there is of reducing premiums for your entire team.
- It can help you qualify: For instance, if you’re the only employee at your company, you may need to add contractors to qualify for group health insurance.
Questions to ask and answer
As you inch closer to making a final decision, answering these questions can help you proceed with confidence:
- How many contractors do you work with?
- Do you generally maintain long-term relationships with your contractors?
- Can you afford to pay a portion of contractor health insurance premiums?
- Do you know if some or all of your contractors are interested in buying coverage through your group plan?
- Does it make sense to search for a different health insurance provider before allowing contractors to join?
Answering these questions provides insight into your situation so that you can make a more informed decision.
Oyster is here to help
Deciding for or against health insurance for non-employees is easier said than done. For that reason, you want to gather as much information and professional guidance as possible. And that’s where Oyster can help.
Oyster Health makes it simple and affordable to offer health insurance to team members in more than 180 countries. You’re not limited to offering coverage to contractors and employees in your home country.
By working directly with various health insurance carriers, Oyster can provide you with multiple quotes to help you make the right decision for your team and your company financials.
Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop and take care of a thriving global workforce. It lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world with reliable, compliant payroll, and great local benefits and perks. Try Oyster out with a free demo!