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Small Business Employee Benefits and HR Blog

Small Group Laws are hurting small employers

Traditionally, employer-sponsored health insurance has come in the form of group plans.  For various reasons, employers are starting to switch to plans that let them help the employees pay for their own individual insurance.small group laws

The move to personal policies has critics and supporters just like anything in life, but there's a specific injustice that I have a hard time imagining anyone could defend.  I'm talking about discrimination against small companies.

There are several states that are basically trying to prohibit companies with under 50 employees from reimbursing for personal policy premiums.  Let me say that again:  Some states think that large companies should be able to offer their employees individual insurance, but small companies shouldn't be able to.  State laws (referred to as "Small Group Laws") put unreasonable restrictions on insurance carriers if they offer policies to individuals that will be reimbursed through their company.  This in effect prohibits many small employers in these states from offering health benefits to employees.

Well, that's not entirely true.  You see, in order to enforce these Small Group laws, state governments would have to violate federal guidelines themselves.  Because of this, the states don't actually enforce these discriminatory laws.  Instead they try to bully insurance agents, carriers, and small employers into following these rules despite the federal mandate contradicting the state laws.  I'm not a lawyer, but this practice seems illegal.  At best, it's incredibly shady.

Colorado in particular is a state where the department of insurance is trying to prevent small companies from offering benefits that are perfectly fine for large companies.  I can't even begin to guess how an elected official thinks that harassing small companies qualifies as serving his constituents.

Luckily, as I mentioned, these state laws are un-enforceable.  Small employers are well within their right to help their employees pay for individual insurance and we (Zane Benefits) have many clients in the state of Colorado doing just that.  Still, this is an issue that needs to be fixed.

We've got a whole series of posts about this including the steps we're taking to make sure there is no more confusion about these issues in the future.  If you're interested in protecting the rights of small business, or you just want to see some more consistent laws, check back here over the next couple of weeks for more on this.  I'd love to hear your questions and thoughts.

Photo credit: Hubspot

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