What Happens to Your Benefits When You Go Independent as a Pediatric Therapist
The benefits question is one of the most common reasons therapists stay in W-2 positions longer than they want to. It feels like a big unknown. This post breaks it down clearly.
Health Insurance
When you leave a W-2 position, your employer-sponsored health insurance ends. Your options:
ACA Marketplace plans — available during open enrollment (November 1–January 15) or within 60 days of losing employer coverage as a qualifying life event. Premiums vary widely by market, age, and income. At moderate income levels, premium tax credits can significantly reduce costs.
COBRA — lets you continue your current employer plan for up to 18 months, but you pay the full premium (employer share + employee share) plus a 2% admin fee. This is expensive but useful as a bridge while you get your independent income stabilized.
Professional association plans — ASHA, APTA, and AOTA each offer group health plan options for members. Quality and pricing vary by state; worth checking before defaulting to the marketplace.
Spouse or partner coverage — if available, this is typically the most straightforward and often the least expensive option.
At a sustainable independent caseload (18–22 sessions/week), most therapists find that the income differential from independent practice more than offsets the cost of self-purchased health insurance.
Retirement
Leaving an employer plan doesn’t mean losing access to retirement savings — it actually unlocks better options.
Solo 401(k) — for self-employed individuals with no full-time employees. You can contribute as both employee (up to $23,000 in 2024) and employer (up to 25% of compensation), for a combined maximum of $69,000 annually. This is significantly higher than most W-2 employer plans allow.
SEP-IRA — simpler to set up than a Solo 401k. You can contribute up to 25% of net self-employment income, up to $69,000 in 2024. Good option if you want a straightforward vehicle without the administrative complexity of a 401k.
Traditional and Roth IRA — available to anyone with earned income regardless of employment type. Contribution limit is $7,000 in 2024 ($8,000 if over 50).
Your existing employer 401k balance stays with the plan or can be rolled into an IRA or new Solo 401k without tax consequences.
Paid Time Off
Independent therapists don’t get paid when they don’t work — that’s the honest reality. But there are two ways to think about this.
First, you set your own availability. You decide when you work. There’s no accrual, no requesting time off, no coverage arrangements. You simply close your schedule.
Second, building your target income at a caseload that leaves room for time off — rather than working every possible hour to maximize income — is how most sustainable independent practices operate. A therapist earning $90,000 at 17 sessions per week has more scheduling flexibility than one earning $85,000 at 22 sessions per week in a clinic.
Professional Liability Insurance
Your employer’s malpractice coverage ends when you leave. You need your own individual professional liability policy before seeing a single patient independently.
Individual malpractice coverage for OTs, SLPs, and PTs typically runs $500–900/year through HPSO or CPH & Associates. Coral Care providers are covered under Coral Care’s professional liability policy at no cost — one less thing to manage and pay for.
Taxes
Self-employment tax — 15.3% on net earnings — is the most significant tax adjustment when going independent. This covers both the employee and employer portions of Social Security and Medicare that your W-2 employer previously split with you.
The good news: half of self-employment tax is deductible. Business expenses (home office, equipment, continuing education, professional dues, mileage) reduce your taxable income. And retirement contributions through a Solo 401k or SEP-IRA provide significant tax deductions.
Set aside 25–30% of every payment from day one. Read our 1099 tax guide for pediatric therapists for the full picture on taxes and self-employment income alongside the benefits conversation.
Frequently Asked Questions
Do independent pediatric therapists get health insurance?
Not through an employer, but there are solid options. ACA marketplace plans, professional association plans through ASHA or AOTA, and a spouse’s employer plan are the most common paths. At 20 sessions per week, a high-deductible plan with an HSA is often the most tax-efficient choice for independent therapists.
What happens to my 401k when I go independent?
Your existing 401k balance stays with the plan or can be rolled into an IRA. Going forward, a Solo 401k lets you contribute up to $69,000 annually (2024) as both employee and employer — significantly more than a traditional W-2 employee can contribute. The tax savings can more than offset the loss of an employer match.
Does Coral Care provide benefits for therapists?
Coral Care covers professional liability insurance, which eliminates one of the most common costs for independent practitioners (typically $500–900/year). For health insurance and retirement, Coral Care providers are independent contractors and set up their own plans — which for most therapists means more flexibility and potentially better tax outcomes than a standard employer plan.
How do I handle paid time off as an independent therapist?
You set your own availability. When you don’t work, you don’t earn — but you also aren’t asking anyone for permission. Most independent therapists build their target income at a caseload that leaves room for planned time off without income stress.
