Health Insurance for Physicians: Options for Practice Owners and Locum Doctors (2026)

Hospital employment comes with a health insurance package you largely stop thinking about. The moment you leave — to open a practice, go locum, cut to part-time, or start a DPC model — you become responsible for sourcing, pricing, and structuring your own coverage. Done correctly, the tax treatment nearly mirrors what you had on the hospital's group plan. Done incorrectly, you overpay by thousands per year and miss deductions your CPA has to find later.

When the transition problem hits

Hospital and large practice employment typically covers 70–80% of the health insurance premium and processes the employee share through a §125 cafeteria plan so it comes out pre-tax. Four common physician transitions change this entirely:

• Hospital employed → private practice owner. You're now the employer and the employee. No group plan exists until you create one, and you're paying 100% of premium.
• Hospital employed → locum tenens (1099). Some large staffing agencies offer group benefits to contractors, but most don't. You're on your own, in multiple states.
• Resident/fellow → attending with a June gap. Training programs end in June. If your attending start date is July 1 or later, there's a coverage window. COBRA from the residency program bridges it, but individual market plans are often cheaper.
• Reducing to part-time or DPC model. Cutting below full-time employment often means losing employer-sponsored coverage. You'll need an individual plan before the change takes effect.

In all four cases, you have more options than it may appear — and the tax code compensates meaningfully for the loss of the employer contribution. The self-employed health insurance deduction (discussed below) effectively returns 32–37% of premium cost to a physician at typical attending income levels.

Your main options

1. ACA marketplace individual/family plan

The most common path for solo or small-practice physicians and locum tenens doctors. You purchase directly from your state's Health Insurance Marketplace (HealthCare.gov or your state exchange) during open enrollment (November 1 – January 15 for January 1 coverage) or through a special enrollment period triggered by losing employer coverage (60-day window from the coverage loss date).

At attending physician income levels — typically $250K–$600K for employed physicians — ACA premium tax credits phase out well below your income. Most attending physicians pay full premium without a subsidy. Two exceptions worth knowing:

• Residency-to-attending gap year: if you have a low-income calendar year (e.g., training ends in June, first paycheck in August), your annual income may be below subsidy thresholds. A marketplace plan purchased during that window may qualify for a premium tax credit based on projected income. Re-evaluate once income normalizes.
• DPC transition or leave of absence: physicians who step away from clinical income temporarily may qualify during the reduced-income year.

What to look for:

• Network coverage where you actually live and get care. Marketplace plans increasingly use narrow networks; verify your preferred hospital and specialists are included before enrolling.
• Nationwide network for locum tenens. If you practice in multiple states, a plan with national PPO network access (often a Gold or Platinum tier from a national carrier) is critical. State-specific HMO plans are essentially useless for locums.
• HDHP eligibility for HSA pairing. If you want to layer an HSA contribution on top (you should — see below), confirm the plan meets IRS HDHP thresholds.

2. HDHP + HSA: the default structure for healthy physicians

A High-Deductible Health Plan paired with a Health Savings Account is often the most tax-efficient structure for physicians who are reasonably healthy and have the cash flow to absorb a higher deductible. The 2026 IRS thresholds for HDHP qualification:¹

Once enrolled in a qualifying HDHP, you can contribute to an HSA up to the 2026 limits: $4,400 self-only / $8,750 family, plus a $1,000 catch-up if you're 55 or older.¹ The HSA is triple-tax-advantaged: contributions deductible, growth tax-deferred, and withdrawals for qualified medical expenses tax-free. After 65, any withdrawal is penalty-free (taxed as ordinary income). For a physician also maxing a solo 401(k) and cash balance plan, the HSA is effectively a fourth retirement account.

OBBBA note (effective 2026): The One Big Beautiful Bill Act expanded HDHP eligibility to allow pairing with HSAs when enrolled in bronze-tier or catastrophic ACA plans and Direct Primary Care arrangements. If you use a DPC membership as your primary care layer and pair it with a catastrophic-tier wrap plan, the combination may now qualify for HSA contributions — a significant change from prior law.⁴

For the full HSA investment and retirement strategy, see our Physician HSA guide.

3. COBRA (transitional bridge coverage)

When you leave hospital employment, you're entitled to continue your former employer's group plan under COBRA for up to 18 months. You pay 100% of the premium plus a 2% administrative fee — typically $1,500–$3,000/month for a physician family — which is much more expensive than buying an individual market plan. But COBRA has legitimate uses:

• A family member has an ongoing specialist relationship or ongoing treatment and continuity of network coverage matters more than cost.
• You're mid-year and already satisfied your deductible on the employer plan — finishing the year on COBRA avoids starting a new deductible.
• You need 60 days to properly evaluate individual market options before committing.

Important: the 60-day special enrollment window for ACA marketplace plans runs from the date of coverage loss (or the date you receive the COBRA notice, whichever is later). COBRA election does not restart this window. Most physicians use COBRA for one to three months as a bridge, then transition to an individual plan. If your former employer's plan was an HDHP, continued COBRA coverage still qualifies you for HSA contributions.

4. AMA and specialty society health plans

The American Medical Association and many specialty societies (ACS, ACP, ACEP, APA, and others) offer group health plans negotiated for members. These aggregate physician buying power and can provide competitive rates relative to the individual market, particularly in states where the individual market is thin.

Pros: Group underwriting can produce better premiums; national carrier relationships familiar with physician practices; plan administration handled by the association.

Cons: Plan design options are more limited than shopping the individual market; availability and value vary widely by state; you're still paying full premium as there's no employer contribution.

Check with your specialty society and state medical association. In some markets, association plans price meaningfully below the individual marketplace equivalent. In others, they're comparable or worse. It takes 30 minutes to get quotes and compare.

The self-employed health insurance deduction (SEHID)

Under IRC §162(l), self-employed individuals — including sole proprietors, partners in a partnership, and S-corp shareholders owning more than 2% — can deduct 100% of health insurance premiums paid for themselves, their spouse, and their dependents.² This is an above-the-line deduction on Form 1040, not a business expense deduction on Schedule C. It reduces adjusted gross income, which matters for IRMAA brackets, Roth IRA eligibility, QBI deduction thresholds, and PSLF income-driven repayment calculations.

Two important limitations:

• The deduction cannot exceed your net self-employment income from the activity. If your practice had a net loss, the deduction is limited to zero for that year.
• The deduction is disallowed for any month you were eligible for employer-sponsored coverage — including through a spouse's employer plan. If your spouse has employer coverage available, you generally cannot take the SEHID even if you chose not to enroll in it.

S-corp physicians: the 2% shareholder premium trap

Most practice owners structure their medical practice as an S-corporation (or a PLLC taxed as an S-corp) for the SE tax savings. This creates a specific — and commonly botched — mechanic for health insurance premiums:

1. The S-corp must pay or reimburse the premiums. You cannot pay premiums personally and then deduct them on Schedule E through the S-corp income. The premium must flow through the business as a payment or reimbursement.
2. The premium must be added to your W-2 wages in Box 1 — but not included in Boxes 3 and 4 (Social Security and Medicare wages). This specific W-2 treatment is required for 2% shareholder health insurance under IRS Notice 2008-1.
3. Then you take the SEHID on your personal Form 1040. The W-2 wage inclusion triggers deduction eligibility; the above-the-line deduction reduces your AGI.

Locum tenens: the multi-state network problem

Locum tenens physicians face a health insurance challenge that employed attendings don't: you may practice in two or three states in a given month, but most ACA marketplace plans have geographically restricted networks. A Silver-tier HMO in your home state has no coverage when you're hospitaling in a different state — except for emergencies, which are covered at any hospital under ACA rules but are limited to true emergencies.

Options for locum physicians:

• National PPO from a major carrier. Aetna, BCBS, Cigna, and United each offer national PPO plans in most states, often at Gold or Platinum tiers. You pay more in premium but get meaningful coverage wherever you work.
• Large staffing agency group benefits. Some large locum firms (Envision, Weatherby, CompHealth, and others) offer group health benefits to their 1099 contractors. Ask explicitly — these can be competitive because they aggregate volume across physicians.
• Home-state HDHP with telehealth for routine care. A high-deductible plan covers emergency care anywhere. For routine and follow-up care during assignment, telehealth fills the gap. This is increasingly practical and cost-effective for physicians who are otherwise healthy.
• Professional employer organization (PEO) enrollment. Some locum physicians use PEOs — which pool employees across companies for benefits purchasing — to access group plan rates. This adds administrative complexity but can yield competitive rates with flexible coverage.

The key mistake to avoid: defaulting to a narrow-network marketplace HMO because it has the lowest monthly premium, then facing $15,000 out-of-network bills at a hospital in another state. Emergency care is covered, but the coverage is typically at the plan's out-of-network benefit level, which in an HMO may be zero except for the federal minimum protections under the No Surprises Act.

Covering your medical practice staff: QSEHRA and ICHRA

If you have W-2 employees and don't want to set up a formal group health plan, two Health Reimbursement Arrangement structures let you reimburse their individual market premiums tax-free:

QSEHRA (Qualified Small Employer HRA)

For employers with fewer than 50 full-time equivalent employees who do not offer a group health plan. You reimburse employees for ACA-qualified health coverage premiums and qualified medical expenses up to IRS annual limits.³

Employees must have qualifying minimum essential coverage to receive reimbursements tax-free. Reimbursements reduce an employee's ACA premium tax credit dollar-for-dollar, so you need to coordinate with staff who receive marketplace subsidies. QSEHRA works well for solo or two-physician practices where staff costs vary and you want a simple, predictable per-employee benefit without plan administration.

ICHRA (Individual Coverage HRA)

ICHRA has no employer size restriction, no dollar limit, and allows you to offer different benefit levels to different employee classes (full-time vs. part-time, physicians vs. clinical staff vs. admin). Employees must be enrolled in individual market coverage — not a spouse's group plan — to use ICHRA funds. For growing practices where employee health needs vary significantly, ICHRA offers more flexibility than QSEHRA at the cost of somewhat more administrative complexity.

When does a group plan for the practice make sense?

Most solo physicians and small practices (under 5 employees) are better served by individual market coverage for the physician-owner plus a QSEHRA or ICHRA for staff. A formal group plan starts to make sense when:

• You have 5+ full-time clinical or administrative staff and competitive hiring makes employer-sponsored benefits a real factor
• Your state's small-group market offers competitive rates (varies significantly by state)
• You want to use a Section 125 cafeteria plan to allow employees to pay their share pre-tax via payroll deduction, which requires a formal group plan
• You're building toward a multi-physician group or preparing to add partners, where standardized benefits simplify employment negotiations

Group plan premiums the practice pays for employees are fully deductible as a business expense and excluded from employee wages. The physician-owner's premium — for yourself and family — does not follow this path; it flows through the W-2 + SEHID mechanism described above regardless of whether the practice offers a group plan to employees.

Decision framework by transition scenario

How health insurance interacts with your broader physician financial plan

• PSLF and income-driven repayment: the self-employed health insurance deduction reduces your AGI, which directly lowers your IDR payment under IBR or RAP. For a physician with $400K in student loans on PSLF, a $22,000 family premium deduction reduces AGI by $22,000 — at 10% IDR discretionary income calculation, that's $2,200/year in lower payments that also count toward PSLF. See our PSLF guide for the full payment mechanics.
• IRMAA planning: the SEHID reduces MAGI, providing a small buffer against IRMAA surcharges in retirement. It won't offset a large practice sale, but for physicians with a high-income year near Medicare enrollment, every MAGI reduction matters. See our IRMAA guide.
• HSA as a retirement account: the full strategy — invest-not-spend, receipt accumulation, post-65 withdrawal mechanics — is in our Physician HSA guide. Health plan selection and HSA contribution are inextricably linked.
• Practice sale transition: if you sell your practice and join a hospital or DSO as an employee, you may transition to their group plan. If the sale year leaves you self-employed or on COBRA during a transition, plan your coverage accordingly before the sale closes.
• Disability insurance: health insurance covers medical costs; disability insurance replaces your income if you can't practice. These are separate products with different tax treatment. See our physician disability insurance guide for own-occupation definitions and specialty-specific considerations.