Sole proprietors with small group plans might be surprised when they are notified that their current health insurance company will be discontinuing their coverage in 2014. With the advent of guarantee issue individual and family plans under the new Affordable Care Act (ACA), some carriers have already decided to discontinue issuing small group plans to sole proprietors.
Sole proprietor small group offered health insurance alternative
California insurance provisions allow for an owner-operator or sole proprietor with no employees to participate in a guarantee issue small group health plan. Small group plans must usually have at least two employees to qualify. For a small business owner, his or her spouse or their child who had a pre-existing condition and were denied an individual or family plan, the more expensive small group plans were the only option to get health insurance.
Owner-only plans obsolete?
Since the new individual health plans offered under the ACA mirror small group plans, are all guarantee issue and maybe eligible for a tax subsidy, there are few reasons for sole proprietors to continue with their existing small group plans. Along the same lines, there are few incentives for carriers to continue offering small group plans to sole proprietors.
More options for small business owners
It’s not that the insurance companies don’t want the business; it might become to burdensome to continue servicing a dwindling part of their business as their sole proprietor members migrate to Covered California or other state health insurance exchange for equivalent health plans. The big incentive for sole proprietors will be the potential of qualifying for an Advanced Payment Tax Credit that will reduce their monthly health insurance premium.
No owner-only small group in SHOP
Kaiser Permanente in California has already indicated that owner-only or husband and wife, wholly owned by both spouses, businesses will not qualify for small group plans. Western Health Advantage is no longer extending group coverage to sole proprietors. In order to qualify for group coverage, an employer must submit either a DE9-C or a Schedule K1 substantiating a partnership. Other insurance carriers are looking at similar changes to their small group plans. The Covered California small group program (SHOP) for business and nonprofits will not be offering a sole proprietor option. All insurance companies participating in the Covered California market place must help migrate their existing individual members to new plans that mirror plans offered in the exchange. This might extend to sole proprietors in small group plans as well.
Carriers studying options for husband and wife businesses
Possible scenarios will be that some insurance carriers will continue to offer and support existing sole proprietor small group status outside of the state exchange. Other companies may decide to close them to new business or discontinue them altogether. If you have a sole proprietor small group plan, and your carrier decides to make changes to eligibility, you’ll be receiving a letter in the near future or close to your renewal date notifying you of the changes.
New ACA plans may have better benefits, lower premiums
Sole proprietors in a small group plan should evaluate the benefits and coverage of their current plan with the new plans offered through Covered California or their state exchange. In addition to the possibility of a lower health insurance premium with the tax credit, individual and family health plans under the ACA may offer better benefits in terms of copayments, maximum-out-of-pocket expenses and better prescription drug coverage.