Small and Large Business Health Insurance

Over the past decade or more, state and federal laws generally required 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 paid about eight to 18 percent 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. 

    

Small Business Snapshot: Beginning in 2014, small businesses are able to participate in small business health options programs or SHOP exchanges. These programs include new state-based health insurance purchasing pools or CO-OPs (in about one-half of the states) 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.

Small Business Health Options Program (SHOP) Exchanges.¹ 

Small Business Exchanges 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.
The ACA reformed small group market underwriting and coverage, imposing the same guaranteed issue, modified community rating, and comprehensive coverage requirements on the small group market that it imposed on the individual market. The ACA further created the SHOP exchanges to pool the enrollment of small employers, potentially reducing administrative costs, and to offer individual employees a choice among health insurance plans. Finally, it created a new program to make tax credits available to small employers through the SHOP exchanges that would reimburse up to half of employer contributions towards premiums to pay for employee coverage.