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Small and Large Business Health Insurance: State Roles
On This Page
NCSL Resources
NCSL Contact
Federal Health Law and the Supreme Court
On June 28, 2012, the Supreme Court issued an opinion upholding the Patient Protection and Affordable Care Act, with limitations on penalties for states that choose not to expand their Medicaid programs. The decision did not affect other provisions. The information on this web page continues to reflect state actions addressing the PPACA.
For NCSL’s updated summary and analysis of the Court’s decision and its effects see: U.S. Supreme Court and Federal Health Law
Updated January 2013; material added May 8, 2013
Over the past decade or more, state and federal laws generally require that health coverage providers accept small employers applying for coverage. With groups such as small businesses, the insurer has determined a premium price based on risk factors balanced over the entire group, using general information on members of the group, such as age or gender. Small businesses often pay more for employee health benefits because they don't have the buying power of big employers. On average, small businesses pay about 18% more than large firms for the same health insurance policy. Health coverage providers may charge different premiums to small employers based on the industry of the employer or on the employer’s prior health claims. As both workers and small employers feel the financial squeeze, fewer are able to afford to offer, or purchase, health insurance coverage. States most often review or approve policies that are offered directly to consumers or to small employers. Most states have laws that require state-licensed health insuring organizations to provide coverage to small employers that want it, with some limitation on the rates that can be charged (e.g., restrictions on how premiums can vary based on age and health status).
The landscape is changing significantly due to the passage of the Patient Protection and Affordable Care Act -- see the section directly below.
For policymakers seeking responses, some of the following resources may be of use. Note that fairly diverse strategies have been tried and proposed in the past decade. These include:
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Health Savings Accounts (HSAs) and High Deductible Health Plans.
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Consumer-driven health insurance strategies such as cost and quality transparency.
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Exemptions or exceptions from state mandates.
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Tax credits and tax deductions for insurance costs.
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State Health Purchasing Pools or Cooperatives.
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MEWAs (Multiple Employer Welfare Arrangements) and AHPs (Association Health Plans).
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State High Risk Pools.
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Public-Private Partnerships, including subsidies.
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Universal health plans that emphasize small employer coverage.
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Small Group Insurance Reforms.
Defining small group health insurance -- An online report provides the state-based legal construct for "small group," defined as either 1-50 employees or 2-50 employees, based on laws generally enacted well before the PPACA was signed in 2010. The report by State Health Facts, titled Small Group Health Insurance Market Guaranteed Issue, 2012, is at www.statehealthfacts.org/comparetable.jsp?ind=350&cat=7
Federal Health Reform Provisions
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The Patient Protection and Affordable Care Act (P.L. 111-148) assists and affects small business in a number of ways. Beginning in 2014, small businesses will be able to participate in small business health options programs or SHOP exchanges. These programs will include new state-based health insurance purchasing pools or CO-OPs where small businesses are able to pool together to buy insurance. Small businesses are defined as those that have no more than 100 employees. States have the option of limiting pools to companies with 50 or fewer employees through 2016. Companies that are currently defined as small businesses and grow beyond the size limit will be "grandfathered in" and treated like those still within the 100 or 50 maximum.
The purchasing pools are intended to lower the costs of insurance. According to the Congressional Budget Office (CBO), exchanges are estimated to ease small business insurance costs. They forecast that premiums in the small group market will fall between 1 percent and 4 percent. The amount of coverage in the small group market is expected to rise by 3 percent.
Small Business Health Care Tax Credit for Small Employers The law also assists small businesses and small tax-exempt organizations afford the cost of covering their employees’ health insurance. If a small business has fewer than 25 employees and provides health insurance it may qualify for a small business tax credit of up to 35 percent (up to 25 percent for non-profits) to offset the cost of insurance, starting with the 2010 federal tax year. This will make the cost of providing insurance significantly lower. Starting in 2014, the small business tax credit goes up to 50 percent (up to 35 percent for non-profits) for qualifying businesses.
Eligibility Rules
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Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
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Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
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Average annual wage. A qualifying employer must pay average annual wages below $50,000.
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Both taxable (for profit) and tax-exempt firms qualify.
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Small Business Health Options Program (SHOP) Exchanges.1
Small Business Exchanges will have a framework set by federal rules, including options for how employers can provide contributions toward employee coverage that meet standards for small business tax credits. SHOP Exchanges are designed to serve as a marketplace for small employers’ with one to 100 workers, or up to 50 workers if a state chooses that approach. Small employers with less than 50 full-time equivalent employees are not required to offer health coverage.
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Updated Guidance on SHOP Exchanges - May 2013
The Centers for Medicare and Medicaid Services (CMS) issued new guidance on May 10, 2013 in the form of frequently-asked questions (FAQs) addressing Small Business Health Options Program (SHOP)-Only Marketplaces. The first question asked addresses whether a state may operate a SHOP while the individual market Marketplace is operated as a Federally-facilitated Marketplace (FFM)? The guidance states that it is CMS’ intention to propose through rule that, for 2014, a state that submitted a Blueprint to operate a state-based marketplace and received conditional approval may request to operate a state-based SHOP while the individual market Marketplace is operated as an FFM. All states would have the same option starting in 2015. This new approach was initiated by Utah, which sought such approval early in 2013.
This one page document also addresses the requirements for beginning operation in 2014 as opposed to 2015, and whether a State-based SHOP will be required to operate a Navigator program for the SHOP, and how requirements for a SHOP-only Navigator program may differ.
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Small Business Health Options Program (SHOP): Some Features Delayed Until 2015
On March 11, the U.S. Department of Health and Human Services (HHS) released a new final rule that delays employee choice and premium aggregation in the federally-facilitated Small Business Health Options Program (FF-SHOP) from January 1, 2014 until at least January 1, 2015. During the one-year delay, qualified employers will only have the option of providing their employees with a single qualified health insurance plan option through FF-SHOPs, instead of offering employees choices in their health insurance plan selection. The delay in premium aggregation will prevent employers from sending/receiving a single monthly payment/bill that is the sum total of all the premiums of his/her employees.
The one-year delay applies to the 33 states where health insurance exchanges will be run by the federal government. The 16 states and D.C. that are building their own exchanges may continue to offer employee choice and premium aggregation in their state run SHOP exchanges beginning on or after January 1, 2014.
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Small-Employer (“SHOP”) Exchange Issues- Institute for Health Policy Solutions, 5/2011.A report "describes and assesses distinguishing dimensions important to the design of a successful SHOP Exchange program. These include functions unique to the SHOP Exchange which will require different administrative systems. An important determinant of enrollment will be the number of low-wage small employers that obtain federal small-employer tax credits available only towards SHOP Exchange coverage. It is estimated that this initial population will be in the range of 500,000 persons. A low-wage small employer group could instead refer its workers to the individual Exchange. Which they choose to do will depend in part on their employee group’s after-tax costs for SHOP coverage compared to individual Exchange coverage, for which low-income workers not eligible for employer group coverage can receive individual federal tax credits. In general, younger employer groups would more often have lower net costs for SHOP than individual Exchange coverage."
"In sum, the SHOP Exchange should have a significant and attractive “core” population so long as small-employer tax credits continue to be available and limited to Exchange coverage. But unless extended by Congress, beginning in 2014, these credits will be available to a given employer for only two years. More generally, a significant number of persons may be expected to switch between small-employer and individual coverage. Continuity of care, as well as incentives for plans to provide effective preventive services and to participate in the SHOP Exchange, could be improved if the Exchange were to offer the same health plans in the individual and SHOP Exchanges.
Nevertheless, the premiums for the small-group plans will be different than for the individual plans for several reasons. California’s small-group and individual markets, and therefore their respective population risk pools, will remain separate for at least the first several years of the Exchange. The SHOP Exchange could uniquely allow small-employer groups to have a reference plan with an averaged premium that is the same for each worker regardless of age. Finally, even if individual and group market premiums were the same, a given person’s out-of-pocket premium contribution requirements (net of tax subsidies and any employer contribution) would usually be very different for employer coverage than for individual coverage. For these and other reasons, a separate website for the SHOP Exchange seems advisable."
> SHOPping Around- Setting up State Health Care Exchanges for Small Businesses: A Roadmap- Center for American Progress, 7/2011.
1 The CBO estimates that 24 million people will purchase their own coverage through the Exchanges in 2019. An additional 5 million people are expected to receive health insurance through the Exchanges because they work for an employer who allows all of their workers to choose among health insurance plans offered from the Exchange (though these individuals are not eligible for subsidies). While this puts the projected total number of individuals receiving coverage through the Exchanges in 2019 at 29 million, the CBO estimates consider these 5 million individuals covered by employment-based insurance.
Large Employers and Exchanges (updated March 2013)
States can choose to enact stronger consumer protections than these minimum standards for rating and selected other consumer protections. Starting in 2017, states have the option of allowing health insurance issuers that offer coverage in the large group market to offer such coverage through the marketplace. For states that choose this option, these rating rules also will apply to all large group health insurance coverage. These rules standardize how health insurance issuers can price products, bringing a new level of transparency and fairness to premium pricing. (Source: CCIIO/CMS Fact Sheet, February 2013)
Employer Requirements to Offer Coverage
Medium and Large Employers
(with 50 or more full time employees)
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Employers with 50 or more employees , including for-profit, non-profit and government entity employers, generally are required to offer health insurance to each full-time employee. A The offered insurance must meet the minimum essential coverage (MEC) requirement, defined as "Bronze level" where the health insurer plan will pay at least 60 percent of the cost of each health service or treatment; higher levels of coverage include "Silver" with 70% insurer payment, "Gold" at 80% insurer payment and "Platinum" at 90% are permitted.
Such employers who do not offer coverage and do have at least one full-time employee who receives a premium tax credit will be assessed a fee of $2,000 per full-time employee, but this excludes the first 30 employees from the assessment. Such employers that offer coverage but that have at least one full-time employees receiving a premium tax credit (available up to 400% annual FPL) will be required to pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees. These provisions are effective January 1, 2014.
IRS Proposed Regulations, Issued December 28, 2012; released December 31, 2012: [Includes excerpts]
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Treasury Department and the IRS proposed regulations (REG-138006-12) on the Employer Shared Responsibility provisions [full text = 144 pages]
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Starting in 2014, tax code Section 4980H, added by ACA, will require employers with at least 50 full-time and/or full-time equivalent employees to offer affordable health care coverage that provides a minimum level of coverage, or pay a penalty. According to Section 4980H, an employee is considered to be full time if he or she works at least 30 hours per week, and the proposed regulations “would treat 130 hours of service in a calendar month as the monthly equivalent of 30 hours of service per week.”
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“Coverage for an employee under an employer-sponsored plan is affordable if the employee’s required contribution for self-only coverage does not exceed 9.5 percent of the employee’s household income.”
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Under the rules, employers must offer coverage to employees in 2014 and must offer coverage to dependents as well, starting in 2015. The proposed regulations define an employee’s dependents for purposes of section 4980H as an employee’s child who is under 26 years of age. “Dependent does not include the spouse of an employee.” [Source: Proposed Regs, p. 56]
If an employer offers MEC under an eligible employer-sponsored plan to its full-time employees (and their dependents), it will not be subject to the penalty under section 4980H(a), regardless of whether the coverage it offers is affordable to the employees or provides minimum value.
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“A number of employers currently offer coverage only to their employees, and not to dependents. For these employers, expanding their health plans to add dependent coverage will require substantial revisions to their plans.” [Source: NY Times, 1/1/2013]
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The IRS plans to grant a one-year reprieve to employers who fail to offer coverage to dependents of full-time employees, provided they take steps in 2014 to come into compliance.
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Footnotes and explanations |
A - To be subject to the Employer Shared Responsibility provisions, an employer must employ at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50 (for example, 40 full-time employees employed 30 or more hours per week on average plus 20 half-time employees employed 15 hours per week on average are equivalent to 50 full-time employees). Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year. For example, if an employer has at least 50 full-time employees, (including full-time equivalents) for 2013, it will be considered a large employer for 2014. [Source: Q & A, Question #4, by IRS, 12/28/2012]
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Under 50 employees |
PPACA exempts all employers with up to 50 full-time employees from any of the penalties or taxes applied above to 50+ employers. |
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Over 200 Employees |
PPACA requires employers with 200+ employees to automatically enroll employees into health insurance plans offered by the employer. The employees may opt-out of enrolling in such coverage. |
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Notices to Employers |
On July 2, 2012, HHS published notices of its intention to collect data on four ACA-related topics, and requested public comment on these data collection efforts. Data collections covered by this notice include: |
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Links to HHS notices |
Information that individuals must provide to support eligibility determinations for premium tax credits, Medicaid, and Children’s Health Insurance programs, and for enrolling in insurance through the exchanges. |
Sources: CMS/CCIIO notices and guidance, 7/2/2012; Summary of New Health Reform Law, Kaiser Family Foundation 4/15/2011
Federal Health Reform News
Large Employers: Requirements as of 2014
Protecting Complaining Employees Against Retaliation (Updated February 2013)
On February 22, 2013, the Labor Department also published interim final regulations. These rules provide protections for employees — of health insurers and other employers — who may have been subject to retaliation for 1) reporting violations of the ACA’s consumer protections, or cooperating in the investigation or prosecution of such violations, or 2) receiving premium tax credits, thereby exposing their employer to liability for failing to provide adequate and affordable health coverage. The rule includes procedures and time frames for employees to make complaints to the Occupational Safety and Health Administration (OSHA) and for investigations by OSHA, appeals of OSHA determinations to an administrative law judge (ALJ), review of ALJ decisions by the Administrative Review Board (ARB) (acting on behalf of the Secretary of Labor), and judicial review of the Secretary’s final decision.
The ACA provides that employees of employers who fail to provide health coverage to their employees, or who provide inadequate or unaffordable coverage, may apply for premium tax credits and cost-sharing reduction payments. Large employers whose employees take this course of action are subject to penalties. This may in turn cause the employer to retaliate against the employee.
Employers (including insurers) may also retaliate against employees who complain to the employer or to the state or federal governments alleging that the employer has violated the ACA’s consumer protections, who testify at or otherwise cooperate in proceedings against the employer, or who refuse to take illegal action required by the employer. The ACA provides that such retaliation is a violation of the Fair Labor Standards Act. This provision has been in effect since the enactment of the ACA, but its importance will be enhanced when the employer responsibility provisions come into effect in 2014. [Full analysis by Tim Jost, online at Health Affairs]
Employers Must Offer Family Health Care, Affordable or Not. "In a long-awaited interpretation of the new health care law, the Obama administration said on December 31 that employers must offer health insurance to employees and their children, but will not be subject to any penalties if family coverage is unaffordable to workers. The requirement for employers to provide health benefits to employees is a cornerstone of the new law, but the new rules proposed by the Internal Revenue Service said that employers’ obligation was to provide affordable insurance to cover their full-time employees. The rules offer no guarantee of affordable insurance for a worker’s children or spouse. To avoid a possible tax penalty, the government said, employers with 50 or more full-time employees must offer affordable coverage to those employees. But, it said, the meaning of 'affordable. depends entirely on the cost of individual coverage for the employee, what the worker would pay for 'self-only coverage.' " Published: by the New York Times, January 1, 2013
D.C., Vermont May Require Small Employers to Use Only Exchanges
To ensure that their exchanges have enough enrollees to be viable, the District of Columbia and Vermont might require small employers to participate in their insurance exchanges. Revenue needed to operate state exchanges likely will come from an assessment or tax on participating health plans, which will be based on the number of enrollees. Excerpted from Inside Health Insurance Exchanges 9/18/2012.
Tax credits spur health coverage: Thousands of small business employees in Kansas already benefiting from health reform- Kansas Health Institute, 1/10/11.
Oklahoma is challenging an IRS rule allowing federal-run health insurance exchanges to provide subsidies to help individuals purchase coverage. Attorney General Pruitt claim is that employers will be subject to additional fees or assesments than if only state enchanges offer subsidies. 9/19/2012.
State Examples and Initiatives from the Past 10 Years
For more recent state examples, please visit Health Insurance Reform Enacted Laws Related to the ACA, 2011-2012.
Source: State Health Facts, Kaiser Family Foundation online
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Description/ Additional Information |
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Colorado |
Colorado enacted the Fair Accountable Insurance Rates Act, H 1389; it requires individual and small group health insurance carriers to file with the Commissioner of Insurance a detailed description of their rating, underwriting and renewal practices; requires approval by the commissioner for certain rate increases. It was signed June 5, 2008. |
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Florida |
Florida Rolls Out Health Plan Comparison Web Site- Florida launched an insurance comparison Web site that allows residents to check the benefits and premiums for small employer health plans offered in the state, the South Florida Business Journal reported on June 26, 2006. |
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Kansas |
Existing Kansas Tax Credit Complements New Federal Credit. Businesses may qualify for the state credit if they employ between two and 50 people and have not contributed to health insurance premiums or health savings accounts for their employees in the preceding two years. The credit can be worth $70 per month per employee for the first year, $50 for the second year and $35 for the third and final year of eligibility. This benefit can be added to the federal tax credit that eligible small businesses can claim starting this year.
(Report by Kansas Health Institute News, 1/10/2011) |
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Kentucky |
Kentucky's House passed HB 445 & HB 380 in 2006, as the Insurance Coverage, Affordability and Relief to Small Employers (ICARE) Program to make health insurance more affordable for small employer groups; including state subsidies, aimed as a four-year pilot project for employer groups with 2 to 25 employees. |
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Maryland |
On November 19, 2007, the Working Families and Small Business Health Coverage Act (Senate Bill 6) was signed into law, offering subsidies to small businesses to offset the cost of providing coverage to employers and expanding Medicaid eligibility to certain adult populations. Provisions included in the new law include:
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The provision of subsidies to small employers and employees of small employers if the employer: a) has not offered a health benefit plan within the prior 12 months; b) has two to nine eligible employees; c) meets certain low-wage requirements to be established through regulation; d) establishes a Section 125 payroll deduction plan to allow for pre-tax premium contributions; and e) agrees to offer a wellness benefit that is designed to prevent disease, reduce poor clinical outcomes, and promote health behaviors and lifestyle choices.
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The expansion of Medicaid eligibility up to 116 percent of the Federal Poverty Level (FPL) for parents and caretaker relatives with a dependent child living at home.
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The phase-in over four years of Medicaid eligibility up to 116 percent FPL for childless adults—enrollment may be capped and benefits may be limited based on available funding; and
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The legislation is financed through a combination of general funds, hospital uncompensated care savings, a one-time surplus from the state's high risk pool, and federal funds. The availability of general funds for the childless adult expansion depends on the adoption, through public referendum, to add a new article to the Maryland Constitution to authorize video lottery terminal gaming (slot machines) in the state.
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The state wanted to focus on its smallest businesses because that is where the lack of health insurance is most acute, says John Colmers, secretary of the Maryland Department of Health and Mental Hygiene. Reimbursement goes directly to the health insurer, so agents still get full commission on their sale, but the employer gets a bill that's half the size it would otherwise be.
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As of January 2009, about 550 individuals are enrolled; the department is hoping to enroll 1,500 businesses during the year.
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In addition, the Governor, through an October 2007 executive order, created the Maryland Health Quality and Cost Council.
Health care help: New for 2009- CNN Money, 1/09. |
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Montana |
Insure Montana is the program launched in January 2006 to begin addressing the problem of uninsured Montanans. This is a two part program that is designed to assist small businesses with the cost of health insurance, whether they have provided health insurance previously or not.
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Small businesses with 2-9 employees that are currently providing health insurance to their employees are eligible for refundable tax credits.
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For businesses that were previously unable to afford health insurance for their employees, Insure Montana provides health insurance coverage through a small business purchasing pool.
Over 1550 small businesses were enrolled and 10,000 lives were covered as of August 2007 and a new applicants waiting list was started due to funding constraints.
As of January 2009, both the tax credit and purchasing pool programs were at full capacity because of limited funding. Small businesses applying for either are being put on a waiting list. The program is entirely funded through increases in Montana's tobacco tax, but that's not enough. The state auditor's office has requested additional funding - about $12.5 million for the next two years to cover those waiting and new applicants.
Health care help: New for 2009- CNN Money, 1/09. |
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New Hampshire |
New Hampshire governor signs HealthFirst insurance plan. The HealthFirst initiative will require major insurance carriers to offer a standard wellness plan for businesses with up to 50 employees. Premium costs will be controlled by focusing on prevention, managing chronic conditions and promoting best practices. A committee whose members include small business owners will design the wellness plan with a target premium of 10 percent of the prior year's median wage, currently about $262 a month. An actuary will assess whether the plan can be offered for the target price before insurers are asked to provide it, starting October 2009, 5/08.
The New Hampshire Small Employer Health Reinsurance Pool selected Pool Administrators Inc. as the administrator for the New Hampshire Small Employer Health Reinsurance Pool. Small Employer Health Carriers are able to reinsure with the pool effective January 1, 2006. |
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New Mexico |
New Mexico State Coverage Insurance- A 2005 law for uninsured employed adults. A unique public–private partnership that provides affordable health insurance products for small employers (with 50 or fewer employees) who have previously been unable to afford coverage for their employees. Employers are expected to contribute $75 per employee per month, and employees pay premiums up to $35 per month and copayments. 37,000 individuals were enrolled as of June 2009.
"Small Business Participation in the New Mexico State Coverage Insurance Program: Evaluation Results." - The Hilltop Institute (University of Maryland) Analysis Brief, 2/9/10. |
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New York |
New York's HealthPass offers small businesses and sole proprietors a wide range of attractive health insurance options that enable eligible employees to choose a plan that best fits their medical needs and budgets. HealthPass serves small businesses and non-profit organizations in New York City, Long Island, Westchester, Rockland, Orange, Dutchess, and Putnam counties. More than 2,500 employers currently offer HealthPass plans to their employees and families. It operates as a partnership among the New York Business Group on Health, the City of New York, and the health insurance industry; enrollment surpassed 20,000 members as of 7/9/2008.
Healthy New York: a program to provide publicly-funded or other type of financed reinsurance for private coverage to assume a portion of insurer's high-cost claims. The state subsidizes cost for high-cost people using more the $5,000 per year, with the goal of lowering premiums for all, based on the knowledge that 20 percent of people account for 80 percent of health care spending. The state requires all HMOs to offer the Healthy NY product. Applicants may now choose a benefit package with a limited prescription drug benefit or one without prescription drugs. Small firms with low-wage workers, low income self-employed and uninsured workers without access to employer sponsored insurance may enroll. |
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Ohio |
Rep. Jim Raussen reported that SB 5 initially would have allowed small employers to offer health care plans that didn't include all of the state's coverage requirements, in hopes of creating a more affordable health insurance product for small businesses. Those so-called "mandate-lite" provisions have been removed from the bill because other states' experience showed few businesses bought the product, and the savings were only about 3 to 5 percent, Raussen said. Senate Bill 5 now mostly includes provisions to allow small businesses to create alliances to buy health insurance. This bill became law in March 2007. |
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Oklahoma |
Governor Henry signed a law on June 4, 2007, targeting working Oklahomans by expanding "Insure Oklahoma," a program that helps small businesses provide health insurance for their employees. Under House bill 1225, the law expands eligibility in the program from businesses with 50 employees to those with 250 or fewer workers. Under the program, the state pays 60 percent of the insurance costs, the employer pays 25 percent and the employee pays the remaining 15 percent. The bill also would expand eligibility in the program to workers who earn 185 percent of the federal poverty level to a 250-percent threshold. As of September 2008, the program has about 10,000 employees enrolled — most of whom were uninsured before — that is far below expectations for a program that could accommodate four times that amount.
The Oklahoma Employer/Employee Partnership for Insurance Coverage (O-EPIC) program was created to assist small businesses in offering their employees health insurance. Participating employers with 250 or fewer employees must contribute 25 percent of the employee’s premium and must offer a qualified O-EPIC plan. The state funds 60 percent of the insurance costs, and the employee pays the remaining 15 percent. Participating employees have incomes below 250 percent of poverty. Qualifying O-EPIC plans are required to cover state-defined basic benefits and have maximum out-of-pocket spending limits. |
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Rhode Island |
On July 3, 2007 Senate Bill 448 was signed into law, establishing a state-wide requirement that employers offer employees the opportunity to buy health insurance with pre-tax income. The state Insurance Commissioner notes that 39 percent of Rhode Island workers do not have access to employer-sponsored insurance. Neither the state nor employers are required to contribute to the purchase price, but the state estimates a savings of "up to 40 percent" of the premium cost, depending on tax bracket. |
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South Carolina |
Governor Mark Sanford on February 19, 2008 signed a bill, S.588 (Act No. 180), that gives small businesses more flexibility to provide health insurance for their employees. The bill allows a group of at least 10 small businesses to join together and negotiate cheaper insurance rates than an individual business. Current state law allowed businesses to join together for health insurance but sets a minimum of 1,000 employees. The new law defines small business as 2-50 employees, and permits an employer of one to qualify subject to separate pricing terms. Gov. Sanford Praises Passage of Small Business Healthcare Bill, News Release, 2/19/08. |
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Tennessee |
In Tennessee, SB 4014 of 2008 allows small businesses of 2 to 50 employees to pool together for the purpose of negotiating better insurance rates, creating a small business cooperative. The bill is designed to encourage more small employers to purchase health insurance and to give them predictability and stability in health-insurance rates. It was signed May 28, 2008.
CoverTennessee - A market based public/private partnership plan for small employers and uninsured workers with incomes below 250 percent of FPL. ($25.5k /yr for 1; $51.6k for family of 4). Cover Tennessee is guaranteed access to basic, major medical coverage for $150 a month with the cost shared equally by the individual, employer, and state government. Tennessee tripled its tax on cigarettes to produce $239 million in new revenue for FY 2008. The premium for coverage is shared among the employer, employee, and state, with each party contributing 1/3 of the costs of the premium. CoverTN plan benefits are "very limited in nature compared to traditional insurance. For instance, these plans do not have an out-of-pocket maximum, and therefore do not protect against the potential of catastrophic medical costs. In other words, there is no limit to the amount of medical bills a member might have to pay for a major illness or injury, such as disease treatment, or injuries sustained in an automobile accident for example. Therefore, CoverTN is not a low-cost alternative to traditional insurance coverage."
2008 Expansion: Beginning Jan. 1, 2008, more Tennesseans will be eligible for CoverTN, the premium subsidy program for the working uninsured. When CoverTN was launched nearly six months ago, it covered workers who earned up to $41,000 in small businesses with 25 employees or less. The state pays one-third of the premiums, the employer may choose to pay one-third and the employee one-third. If the employer chooses not to participate, the employee may pay two-thirds. Premiums for the basic benefit plan are about $150 a month and coverage is portable. The state plans to expand the program by opening it to individuals with annual incomes of up to $43,000, and in companies with up to 50 employees. About 13,000 Tennesseans are currently enrolled, and administrators hope to increase enrollment to 100,000 by 2010. |
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Texas |
In 2007, the Senate passed and a House committee gave favorable recommendation to SB 922, which would encourage counties to test models for small business coverage. Intended to maximize flexibility and local control, the legislation would enable county commissions to establish local or regional health-care programs, which could offer insurance or health services. The state Health and Human Services Commission would use general revenues to provide start-up grants to seven of these programs, which could include health savings accounts and high-deductible plans. The grants would average $150,000 each, for a total cost of $1.05 million in FY 2008. In addition, the local/regional programs could apply for additional funds from a “health opportunity pool,” created under an 1115 waiver from Medicaid. It is expected that employers, employees and the state would jointly share the cost of premiums or health-care services. The programs would be required to allow any individual who receives state premium assistance to enroll. The bill did not pass the House.
Incentives could boost employee health care- Senate studies tax breaks to help small firms provide insurance. The incentive under consideration will probably be in the form of larger tax deductions for companies that offer health care plans to their employees. Dallas Morning News, 2/1/07. |
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Utah |
Program Assists Uninsured to Get Health Coverage. Because of passage of HB276 in 2006, the Utah Department of Health launched a new rebate program for health insurance premiums that would reduce the number of uninsured citizens in Utah by helping workers pay for their employer- sponsored health insurance. Qualified workers can receive rebates up to $150 per adult and $100 per child to help pay the monthly premium of an employer-sponsored health care plan. HB276 provided $267,000 in state funding for the program and allows matching federal Medicaid money.
Utah also created the Utah Health Exchange, an internet-based state program, comparing insurance options and providing greater transparency of insurance plan benefits, serving the individual and small group markets. The exchange allows employees to combine defined contributions from one or more employers along with pre-tax personal contributions to purchase insurance that also is portable. All small employers with two to 50 people will have access to the exchange January 1, while large employer groups will have to wait until 2012.
Utah’s exchange differs from so-called health insurance purchasing cooperatives set up by groups of small employers in some states to use their collective purchasing power to reduce premiums. Many of those cooperatives remained small and did not last long. As report by Workforce Management, “As the premium went up and the good risk left the group, you’d end up in this death spiral and the group died,” says Larry Boress, president of the Midwest Business Group on Health. The Utah exchange is intended to do what the purchasing cooperatives could not—simplify health plan administration, offer employees more choice and keep health care costs fixed. “What’s revolutionary about the Utah exchange is the defined-contribution piece for business,” says Samuel C. Gibbs, a senior vice president with Mountain View, California-based eHealth, an online health insurance portal. Utah is using eHealth’s Internet platform for a similar insurance exchange for individuals. Utah's law now allows employers to contribute a fixed-dollar amount to a person’s health insurance, enabling them to customize their contribution for each individual, and send one check once a month to the exchange administrator.
A separate part of this reform creates NetCare, a low-cost mandate-free insurance option for insurers to offer to the individual and small-business markets and for those eligible for COBRA, mini-COBRA or conversion coverage." Enrollment launched August 19, 2009, based on HB 188, enacted into law in March 2009. In the two-week enrollment period that closed at the end of August, 136 businesses employing a combined 2,333 workers signed up. The average size of companies enrolled is 17 employees.
What Utah's Health Reform Means to Small Business - BusinessWeek, 9/04/09.
Utah Exchange May Offer New U.S. Health Care Insurance Model- Workforce Management, 9/17/09. |
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Washington |
A 2007 law, HB 1569 established the Washington Health Insurance Partnership. Similar to the “Connector” mechanism created in Massachusetts, the Partnership will offer benefits administration to small employers that have at least one employee who earns less than 200 percent of the federal poverty level (FPL). The Partnership also will provide sliding-scale premium subsidies to individuals who earn less than 200 percent of the FPL. It also authorizes evaluating the inclusion of additional health insurance markets in the health insurance partnership and studying the impact of health insurance mandates. It became law 5/2/07 as Chapter No. 2007-260. Program implementation has been halted due to a budget deficit. (as of August 2009) |
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West Virginia |
West Virginia Small Business Plan - A 2004 law (S.B. 143) intended to help uninsured small businesses provide coverage for their employees. This is a public-private partnership between the West Virginia Public Employees Insurance Agency (PEIA) and participating insurance carriers by allowing carriers access to PEIA's provider reimbursement rates. The design of this plan included coverage in both primary care and major medical at a cost that is 20-25 percent lower than the retail rates. |
State Subsidized Enrollment: Result Are Mixed
In the summer of 2007, NCSL compiled an informal survey summary of actual numbers of residents who enrolled in state initiated small-business programs. Enrollment experience is different state-to-state. Historically, employer participation in government created subsidized programs has not been extensive. States have had more success with enrolling individuals at the employee level and not going through the employer. Participation is also very much related to outreach and marketing. For more information collected by NCSL's Primary Care Project, please visit State Programs to Subsidize or Reduce the Cost of Health Insurance for Small Businesses.
NCSL Online Resources
Additional Expert Resources and Opinions (Includes archives)
NOTE: NCSL provides links to other Web sites from time to time for information purposes only. Providing these links does not necessarily indicate NCSL's support or endorsement of the site.
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Small Group Health Insurance in 2006: A Comprehensive Survey of Premiums, Consumer Choices, and Benefits (Slides)- A comprehensive survey of member companies offering coverage in the small group health insurance market, with premium and benefit data from more than 650,000 small groups covering 4 million workers and 3.2 million dependents. Published by AHIP, 9/06. [28 pages, PDF]
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"Employers' Views of Incremental Measures to Exapnd Health Coverage"- Despite fast-rising health care costs, employers that offer health benefits to their workers say they are committed to the current employer-based health insurance system. Commonwealth Fund Report, 11/06.
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Small Group and Individual Health Insurance Markets – Information on trends in Minnesota’s small group and individual health insurance markets. It includes information on enrollment trends, premium growth, benefit sets (deductibles, copayments, etc.), and health plan market shares. Updated 7/07. PowerPoint | PDF [31 pages]
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"Small Business Is Latest Focus in Health Fight"- By Reed Abelson, NY Times, 7/10/08. (Includes NCSL Material)
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Employer Healthcare Mandate Would Wipe Out 1.6 Million Jobs- Statement by NFIB, 1/28/09.
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Small Business Health Insurance- Brief Analysis, National Center for Policy Analysis, 2/09.
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Small Group Health Insurance Market Guaranteed Issue, 2010- Kaiser Survey
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Can A Small Business Insurance Marketplace Take Root In Florida?- Kaiser Health News, 10/24/11.
Notes to Data:
#1 - This HHS application is for employees of small employers that may be qualified employers eligible for participation in the SHOP. This application will assist these eligible small employers in facilitating the enrollment of their employees in QHPs offered in the small group market. Therefore, this collection of information potentially impacts small employers and their employees. To minimize the burden of this collection on small businesses or other small entities, HHS is developing a single, streamlined form that employees will use to determine SHOP eligibility, QHP selection, and enrollment of qualified employees and their dependents. Additionally, the availability of an online application process will allow applicants to more quickly and efficiently apply for coverage, as well as receive a determination of SHOP eligibility in real-time in many cases.
Compiled by Richard Cauchi, Steve Landess and Katie Mason, NCSL Health Program-Denver. Enrollment data, 2007 compiled by Laura Tobler.
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