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HealthCare Checkup

The Seattle Times health-care team tracks the local impact of the Affordable Care Act.

December 16, 2013 at 3:59 PM

Demystifying health insurance for small businesses

Insurance exchange home page for small businesses.

Insurance exchange home page for small businesses.

Small employers seeking health insurance for their workers are caught in a confusing morass. Before passage of the Affordable Care Act, insurance was available through one of two imperfect arrangements. Now, there are three options, and it’s gotten even more complicated. I wrote an article about the issue that ran Sunday, but it still felt like there was room for a Small Biz Health Insurance 101.

So we’re going to break it down as simply as possible, listing each option and how it looks before and after Obamacare. Drum roll please: Now introducing health insurance options for small employers (1 to 50 employees) in Washington state.

1. Small group market: In the small group market, health insurance prices are the same for everyone and insurers cannot raise a company’s rates if their claims go up if, for example, one of their workers gets sick. This market will not see dramatic changes come Jan. 1 in terms of costs or what’s available. This has been a good option for employers with older, less healthy workers. Its shortcoming is that because the prices are uniform and based on everyone in the insurance pool, they are typically higher because it covers sicker people. About 140,000 workers and their families are insured through the small group market.

2. Association or trade groups: These groups have formed — sometimes very loosely — around certain occupations, such as construction, technology or food service. Small businesses could become a member of one of these association or trade group and buy insurance from them, often for prices that were lower than the small group market.

However, if a member company had one of its workers get sick, the insurer could raise the prices for that single company; rates for all the other members of the trade group would stay the same. The insurer could also do health screenings to determine the costs for a member company based on the health of the workers.

This has been the most popular insurance option in the state with 490,000 workers and their families insured through associations and trade groups.

But come Jan.1, the rules are changing for associations and trade groups, potentially raising insurance costs for members.

The Affordable Care Act makes it illegal for an insurance company to deny coverage for someone based on their health. That means no more screenings and no more changing health insurance premiums if someone gets sick. Also beginning next year, the members of the association and trade groups really truly have to work in the same field. If you’re a builders association group, your members must actually be in the construction industry. Also, the associations and trade groups cannot be created simply to sell health insurance — they have to offer other legitimate benefits to their members as well.

Some associations and trade groups are rejiggering themselves to meet the new rules, while others are breaking up into smaller groups or going away. State officials predict that half of the 490,000 people insured through these groups will be getting insurance elsewhere come next year.

3. Small Business Health Options Program, or SHOP: The SHOP is the new kid on the block. Just as there is the health insurance exchange for individuals and families to buy insurance, small employers also get their own exchange. Except in Washington. But first, let’s explain what SHOP is.

SHOP offers insurance to small employers and has a program where businesses that meet certain criteria can get a tax break to help pay for their insurance premiums. Businesses with 25 or fewer employees who bring in on average $50,000 a year or less and which pay for at least half of their workers’ insurance premiums are eligible for the tax benefits (businesses can get breaks of up to 50 percent of the premiums, and nonprofits can get up to 35 percent).

Without SHOP, there is no way for a small employer to get tax credits.

In Washington state, only one insurance provider decided to sell insurance on the SHOP exchange in 2014 and only in two counties, Clark and Cowlitz. We are the only state in the nation that essentially lacks SHOP, and that means nearly all small employers here are left out of the deal.

My story Sunday went into more detail as to why that is — it seems mostly to do with our unusually heavy reliance on associations and trade groups, and the insurance industry’s anxiety about who will buy insurance where come next year, plus the challenge of creating a set of new plans and prices for SHOP insurance policies.

If you are a small employer trying to navigate the world of health insurance, you have my sympathy. But hopefully this spells out your options a little more clearly. And there is help available through insurance brokers who can help you find your way.

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