For years, one-person businesses were unable to qualify for small group insurance coverage because state law defined small groups as two to 50 employees.
This meant that self-employed business owners were forced to seek out private individual insurance policies, which frequently require heal
th screenings for pre-existing conditions. Small group coverage does not usually require such screenings.
Small group policies also tend to feature better benefits, lower costs for policy holders and an application cannot be rejected based on a high-risk occupation.
But on Oct. 1, 2010, state Senate Bill 6538 went into effect. State law now recognizes sole proprietors as “groups of one” for insurance purposes. A similar federal law will not take effect until 2014.
In order to qualify under the new small-business definition, business owners must submit proof to insurers that their business is legitimate and also provide certain tax documents such as IRS Form 1040 Schedule C or F.
Business owners also must show that the business has been their “employer” for at least the past 12 months and that at least 75 percent of their income has come from that business or trade. For agricultural businesses, the income requirement drops to 51 percent.
Although businesses may opt not to provide confidential financial information to insurance companies, the insurance company does have the right to reject an application on the basis of this omission.
To further assist business owners in obtaining small group insurance, the state Office of the Insurance Commissioner has created an online, insurance-related consumer toolkit.
With these tools, business owners are able to find and compare agents in their area, examine complaints and violations against various insurance agencies and verify a company’s license and authorization to sell insurance.
The toolkit is located at www.insurance.wa.gov/consumertoolkit/start.aspx.
Companies may also search out regional health-care options online at tinyurl.com/SCBJhealth and typing in their ZIP code.
There are a few downsides to opting for small-group coverage. Should a business owner’s income from their company fall below 75 percent of their overall income after they have joined a small group plan, the insurance company is not required to renew the policy at the next renewal period.
Also, under small-group coverage, if the business owner decides to hire additional employees, they are required to offer that coverage to all eligible employees. They cannot restrict coverage to themselves.
Learn more
More information about changes in small-group business health insurance coverage is available by calling the state Office of the Insurance Commissioner at 800-562-6900.
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