On behalf of our more than 4,000 business, chambers of commerce and employer trade association members, The Business Council of New York State urges strongly passage of S.3795/A.7413 (Seward/Morelle), an act to amend the insurance law in relation to group health insurance.
The small business community in New York is facing a crisis. Access to affordable group-rated health insurance is becoming increasing 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, products 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.
Until recently, the relationship between health insurers and chambers of commerce and other associations was quite 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 small price to pay for the ability to offer their members the much needed product of affordable health insurance.
Within the past 18 months, the relationship between health plans and the chambers and associations that sell their products have changed dramatically. Systematically throughout the state, plans are pulling out of the sole proprietor market. In some regions of the state, there is one or no plans willing offer health insurance to sole proprietors.
The current trend of health insurance providers eliminating sole proprietors' longstanding access to group-rated coverage has resulted in some small business 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.
The chart below compares direct pay to small group rates, from the same company, for family plans in various regions of the state. The source for the direct pay rates is the New York State Department of Insurance and the source for the group rates is the local chambers of commerce in each area.
Monthly Health Insurance Premiums for Individual Proprietors- Family Plans
Monthly Health Insurance Premiums for
Individual Proprietors- Family Plans
REGION GROUP RATE DIRECT PAY*
Western New York
Central New York
New York City
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, by some insurance agents, 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 businesses, and not retirees or the working uninsured, 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. To force them to pay higher insurance rates because they cannot afford to hire an employee, is a discriminatory practice the state must end as soon as possible.
The most important aspect of this legislation is that it will allow sole proprietors to continue to purchase health insurance. If we don't see passage of this measure, more and more sole proprietors will be forced to go uninsured or turn to government programs for insurance for themselves and their families. A much more sensible option is to allow the marketplace to work, an approach which will cost the state nothing.
For all the above listed reasons, The Business Council urges passing of S.3795/A.7413.