Health Insurance for Startup Founders, Before and After the Raise

The bridge out of your old job

Most founders reach me a few weeks before they resign, and that is the right moment. Employer coverage usually ends on the last day of the month you leave, though some plans stop on your final day of work, so ask HR for the exact date in writing before you sign anything.

Losing job-based coverage opens a 60-day special enrollment period for the Marketplace. Federal COBRA applies to employers with 20 or more employees, lasts up to 18 months and can cost up to 102 percent of the full premium, which means you now carry the share your employer used to pay plus a small administrative fee. For a founder watching every dollar of runway, that number tends to get attention.

Here is the order I suggest:

1. Confirm the end date of your current coverage before you give notice.
2. Apply for a private plan set to begin on the first of the following month, so there is no gap if you are approved.
3. Treat COBRA as the safety net while underwriting runs. You have a window to elect it, and once you elect and pay, it applies back to the date the old plan stopped.
4. If anyone in the household has a health condition that makes private approval unlikely, pick a Marketplace plan inside the 60 days instead.

The COBRA alternatives guide goes deeper on that comparison.

Why I usually start with a private plan

A private, medically underwritten plan is priced on your age, ZIP code and health. Your income, your cap table and your burn rate never enter the calculation. You answer health questions to apply, approval depends on those answers and is not guaranteed, and if approved, coverage can begin on the first of a month you choose rather than waiting for an enrollment window. Many private plans use national PPO networks, which matters if you split time between a home base and investor meetings in other cities.

Private plans are not ACA Marketplace plans, and benefits and pre-existing condition rules vary by plan. I put every option next to a Marketplace quote so you can see the trade-offs before deciding.

Pre-funding: the year you live on savings

Before a raise, plenty of founders pay themselves little or nothing. On paper that can look like a household that qualifies for a Marketplace credit. Look closer before you count on it. The credit is based on household income for the whole calendar year, so the salary you earned at your old job before you left counts, and so does a working spouse's pay. If you sold vested shares from your previous employer that year, those gains count too, because the credit uses modified adjusted gross income.

Savings you spend down are not income, so a founder can feel broke and still land above the line. Here is how the 2027 rules play out:

• Prices are rising. KFF's review of 2027 filings from 276 Marketplace insurers found a median proposed increase of 15 percent, on top of a steep rise for 2026.
• There is a hard cutoff. For 2027, help stops at 400 percent of the federal poverty level: $63,840 for one person, $86,560 for two, $109,280 for three and $132,000 for four. Go a dollar past it and the credit disappears.
• The bill comes at tax time. If you take an advance credit on an estimate and actual income ends up above the line, you repay the entire advance on Form 8962.
• Local networks. Many Marketplace plans are HMO or EPO designs with little or no coverage outside the network except emergencies.
• A big worst case. The 2027 out-of-pocket maximum is $12,000 for one person and $24,000 for a family.
• A fixed calendar. Open enrollment runs November 1, 2026 to January 15, 2027, with December 15 the deadline for a January 1 start. Those are HealthCare.gov dates; states that run their own exchange set their own. Outside that window you generally need a qualifying event.

Runway also tends to run longer than founders expect. In the Bureau of Labor Statistics Business Employment Dynamics data through March 2026, 78.9 percent of private-sector establishments that opened in the year ended March 2025 were still operating a year later, and 47.2 percent of those that opened in the year ended March 2021 were still around five years on. Plan coverage for a multi-year build, not a single quarter.

Founder salary versus equity

Fundraising changes the income picture fast. A seed or Series A round often comes with a board asking you to put yourself on payroll. If that salary starts in June and you enrolled in January on a low estimate, the year's total may cross the line, and the advance credit comes back on your return.

Equity works on a different clock. Holding shares or options is one thing; selling them in a secondary sale, a tender offer or an acquisition creates gains that count toward modified adjusted gross income in the year they happen. How and when equity is taxed is a question for your CPA, but the coverage lesson is simple: a big liquidity year and an income-based credit rarely mix. With a private plan, your premium is not recalculated when your salary or your equity value moves.

Post-funding: small-group or individual coverage

Once you hire, you face a real fork.

• A small-group plan is one policy for the company. In most states you need at least one eligible employee besides the owners and their spouses, and the insurer sets participation and contribution minimums that vary by state. ACA small-group plans cannot turn anyone down for health, which helps if a hire has a condition. Everyone picks from the same menu, and a rate increase at renewal hits the whole group at once.
• Individual coverage lets each person choose a plan that fits their own household and location. Founders often keep their private plans, while each employee buys a private or Marketplace plan on their own.

For an early team of three to eight, I usually price both, along with the reimbursement options below.

ICHRA as the team grows

A reimbursement arrangement lets you fund coverage without picking one plan for everyone:

• QSEHRA is for employers with fewer than 50 full-time equivalent employees and no group plan. It has an annual IRS limit and reduces any Marketplace credit an employee receives.
• ICHRA works for employers of any size, has no federal dollar cap and lets you set different allowances by class, such as full-time versus part-time staff or hires in different states. Employees must be enrolled in individual health coverage to be reimbursed.

The ICHRA affordability test is the rule to respect. If the allowance makes the least expensive silver plan in an employee's area cost no more than 10.22 percent of household income for 2027, that employee cannot take a Marketplace credit. Being offered an ICHRA also opens a Marketplace special enrollment period, so a new hire is not stuck waiting for November. Once you approach 50 full-time employees, you also need to check the employer mandate. Our ICHRA guide covers setup, and the small business owner guide compares it with a group plan.

Entity type and your own premiums

Whether you can join your company's arrangement depends on how the company is organized. Partners in a partnership and owners of more than 2 percent of an S corporation generally cannot participate as employees. Founders of an LLC or S corporation may instead use the self-employed health insurance deduction, which is tied to the business that establishes the plan, limited by that business's net earnings and not allowed for any month you could have joined a subsidized employer plan, including a spouse's. Founders of a C corporation who are on payroll are treated differently, so ask before assuming either rule fits. General information, not tax advice — confirm with your CPA based on your specific entity structure.

When the Marketplace is the right home

I will tell you if a private plan is the wrong move. If you, a spouse or a child has a significant health condition, the Marketplace cannot decline you or price you on health. It is also the stronger choice in a lean year when total household income will honestly land under the line for your family size, because the credit may make the Marketplace the better value.

Getting your numbers

I work by phone and video, in English and Spanish, and I am licensed in 31 states, including Florida, Texas and North Carolina. Send me your ZIP code, the ages on the plan, a short health summary and roughly when your current coverage ends, and I will lay private options next to the Marketplace. You can get a quote or call (786) 218-2384. If you are still deciding whether to leave, the tech executive guide covers the employer-plan side.