Changes to The Small-Business Health Market

Several thousand of the nation’s smallest business owners—sole proprietors and the self-employed—were kicked off their small-business plans by carriers earlier this year. That is because new guidelines define “employers” as having at least two full-time employees, not including a spouse, in order to be eligible for group plans.

In all, more than 78% of the estimated 28 million small businesses in the U.S. have no employees, according to the Small Business Administration. These business owners must now seek coverage as individuals, or face fines.

Many consumers and small-business owners are finding affordable plans on the individual market, according to government health officials and insurance brokers. But at least some of the business owners who were excluded from group plans as a result of the health law are struggling with higher premiums, less robust benefits or uncertainty within a new, unfamiliar network, says Scott Lyon, vice president of the Small Business Association of Michigan.

In December, the association’s own group plan, which currently has 4,000 small-business members and covers about 40,000 workers and their families, was forced to kick out 700 sole proprietors, he says.

Here’s a closer look at recent changes for three different businesses with fewer than 50 employees:

Raymond Pezonella currently receives health coverage for himself and roughly 30 workers at his Reno, Nevada, engineering firm through a local builders’ association. He pays about $9,000 a month into the plan, known as an Association Health Plan, or AHP.

The plan includes 220 other local businesses, from carpenters to painters and plumbers, covering more than 5,000 workers and their families. His employees pay around $1,800 each in monthly premiums.

By pooling together with other employers, Mr. Pezonella says he was able to save nearly 14% on annual insurance costs for his company, which designs foundations for homes, schools and other buildings. “You want to do right by your team, not just to keep them around, but to keep them healthy, too,” he says, adding that his firm has been on the group plan for more than two decades.

But earlier this year, his policy, administered by the Builders’ Association of Northern Nevada, was defined as a “small group” plan under federal guidelines, because none of its members have more than 50 employees and each pay separate rates, says Mike Dillon, the builders’ group executive director.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary