Self-employed individuals, unlike large corporations, cannot fully deduct the cost of their health insurance as a business expense. At issue is the 15.3 percent tax that self-employed individuals must pay on their employer-provided health insurance costs to which nobody else is subjected.  
This significant tariff comes in the form of the FICA payroll taxes—the self-employment tax rate on net earnings is the sum of 12.4 percent for Social Security and 2.9 percent for Medicare. Since 2003 small-business owners have been able to deduct the cost of health care from their income, however, that income already has been exposed to the payroll taxes. Thus, the self-employed effectively pay the self-employment tax on income used to purchase health care.