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Why Do Groups Still Offer Small Business Health Insurance?

by John Hansen

If a group has under 50 employees, there is no penalty for not offering small business health insurance. With subsidies available and no denials for the individual and family plans, many expected a mass exodus in the small group health insurance California market. Many feared that a lot of small groups would cancel their health plans and send their employees to the exchange to get subsidies. However, far fewer groups have departed from the small business market than anticipated.

Many Ma and Pa Businesses Have Left the Market

Some groups have left the small business health insurance market, especially the ma and pa groups who had group plans with under enrolled employees. Some of these smaller groups left to get the tax credits offered by Covered CA in the California Health Exchange. Others, due to increased requirements by the Affordable Care Act (ACA) were forced off their small business medical insurance plans.

In California, the Obama Care requirements said that to qualify for group health insurance, you had to have at least one W-2 employee that was not a spouse. For many two-person groups, that requirement forced them to leave their group plan and get individual health insurance through Covered California.

No Denials “Guaranteed Issue” Coverage Now Available on Group and Individual Plans

For many smaller groups, guaranteed issue was the big draw. If you get denied for an individual health insurance plan, find a way to get small business coverage. That was one of the big attractions to small business health insurance in California. Now that the individual market also offers automatic issue health insurance with no denials, this factor no longer distinguishes the individual from the group market.

Why California Small Businesses Are Still Offering Health Insurance to Their Employees

Many groups with five or more covered employees have kept their small business health insurance plans for the following reasons:

  • Employer Perception: Many employers with five or more employees still feel they need to offer medical insurance coverage. They expect that of themselves as a compensation they are to give to their employees.
  • Employee Retention/Attraction: This is still a big factor. Current and future employees are looking for jobs that have benefits. They expect that of a good job. Employers know they need to offer a small business health insurance benefits package to attract and retain good employees.
  • Health Insurance Coverage is Required: Obama Care imposes a penalty if you do not have health insurance. Employees know they have to have coverage, and they are looking to their employers to provide health care plans.
  • Employees Want It: Employees still want their employer to provide health benefits, and they expect them to provide it.
  • Larger Networks: The individual and group markets are getting closer and closer with regard to pricing. However, still the networks are much larger for the small business health insurance plans.