Sole Proprietor Health Insurance



On behalf of our 4,000 business, chamber of commerce and employer trade association members, The Business Council of New York State urges the Assembly to pass S.7360 (Seward), an act to amend the insurance law in relation to group health insurance for sole proprietors.

The small business community in New York continues to face a crisis. Access to affordable group-rated health insurance is becoming increasingly more scarce for the smallest of businesses – sole proprietors.

Under the Community Rating/Open Enrollment law in New York, small groups are defined as 2-50 subscribers. This law states that health insurers do not have to offer a group-rated, or lower priced, product to individuals in business for themselves. However, since the inception of the CR/OE, most health plans in the state have offered group-rated products to sole proprietors who purchase health insurance through a chamber of commerce or other association.

Historically, the relationship between health insurers and chambers of commerce and other associations was good when it came to sole proprietors. In return for a small fee, the chambers and associations marketed the plans' products, handled all administrative activities and policed the applicants to ensure they were, in fact, real businesses. While quite burdensome to small associations, all of this extra work was accepted by the organizations as a modest price to pay for the ability to offer their members the much needed product of affordable health insurance.

Within the past two years, the relationship between health plans and the chambers and associations that sell their products has evolved. Some plans throughout the state, have pulled out of the sole proprietor market. In some regions of the state, there is one or no plans who find they are able to offer health insurance to sole proprietors.

The trend of eliminating sole proprietors' longstanding access to group-rated coverage has resulted in some small businesses being forced into the "direct pay" market. In some areas of New York, the direct pay rate for family health insurance coverage is approximately $1,200 per month. Throughout the state, the rate is substantially higher than the group-rate other small businesses pay.

This legislation is the result of much discussion between chambers and associations and the health plans in the state. In addition to changing the definition of a small group from the current 2-50 to 1-50, it also imposes important policing measures:

  • The intention of defining the term "chamber of commerce" for the purpose of selling health insurance is to eliminate the practice of setting up a "chamber of commerce" for the single purpose of getting a better rate for their clients; and

  • By requiring that sole proprietors submit certain tax and business documents to their chamber or association before they are able to purchase health insurance, simply ensures that only legitimate businesses are purchasing insurance.

The chamber of commerce and business trade communities are willing to accept extra administrative burdens for the right to allow their members to continue to purchase health insurance at reasonable rates. Sole proprietors are not looking for preferential treatment, but rather to be treated the same as all other small businesses in the state.

The most important aspect of this legislation is that it will allow sole proprietors to continue to purchase health insurance. The failure to pass this measure, could result in more sole proprietors forced to go uninsured or turn to government programs for insurance for themselves and their families.

For all the above listed reasons, The Business Council urges the Assembly to pass S.7360.