Sole Proprietor Legislation Helps Small Business Owners Purchase Health Insurance

There is good news for the smallest of business owners in Virginia who have been forced to purchase their health insurance in the Healthcare Marketplace over the last five years. Escalating costs, fewer health insurance options, and no subsidies for most small business owners who make too much money, have found health insurance unaffordable. Effective July 1st, 2018, the General Assembly and the insurance commissioner required every small business insurer to offer sole proprietor coverage.
There are certain guidelines that must be met. For example, the new options will only apply to people who have led a registered LLC for a full calendar year. Any new LLC’s for 2018 won’t be eligible for coverage until the year 2020. Also a husband/wife sole proprietor is considered two employees and also may not be eligible. Listed below are the underwriting guidelines for a sole proprietor:

Self-Employed Individual Groups
As defined by the Virginia code, a “Self-employed individual” means an individual who derives a substantial portion of his income from a trade or business (i) operated by the individual as a sole proprietor, (ii) through which the individual has attempted to earn taxable income, and (iii) for which he has filed the appropriate Internal Revenue Service Form 1040, Schedule C or F, for the previous taxable year.

In determining whether a corporation or limited liability company employed an average of at least one individual during the preceding calendar year and employed at least one employee on the first day of the plan year, an individual who performed any service for remuneration under a contract of hire, written or oral, express or implied, for a (i) corporation of which the individual is its sole shareholder or an immediate family member of such sole shareholder or (ii) a limited liability company of which the individual is its sole member or an immediate family member of such sole member, shall be deemed to be an employee of the corporation or the limited liability company, respectively.

Each enrolling Self-Employed Individual group will furnish:

· A completed Group Application
· A completed Anthem Enrollment Spreadsheet for each enrolling owner/partner/proprietor (Employee Application also acceptable)
· Check for first month’s premium
· Small Group Eligibility Form; and
· If a proprietorship, most recent Schedule C or F (from Form 1040)
· If a partnership, S corporation or LLC, most recent Schedule K-1 for the sole partner/member
· If a C corporation, copy of most recently filed Virginia Employment Commission’s

Employer’s Quarterly Tax Report (VEC) or W-2
Note: An IRS Form 1099 is not acceptable as a group comprised entirely of 1099s is not eligible (see page 8, Types of Organizations Ineligible for coverage). Partnerships, S corporations or LLCs with more than one partner/member must enroll as and meet the guidelines of a regular group as opposed to a Self-Employed Individual group.

In summary, the sole proprietor legislation is welcome news for folks in Virginia. Health insurance is unaffordable in the individual health insurance market for anyone who doesn’t get a premium tax subsidy. In certain parts of the state, health insurance premiums on an individual basis are 70% higher than in Roanoke or Richmond. Allowing a one person company to buy group health insurance may very well be the difference in having health insurance or not. At the end of the day, shouldn’t this be the goal of our government, state, and the insurance industry as a whole? We certainly think so.

Burman S. Clark

Burman S. Clark, RHU, CSA is the President of Muneris Benefits and a licensed insurance broker and consultant. His independent practice and focuses on employee benefits, individual life, disability, medical, and senior products. Burman has traveled extensively and provided guidance to large employer associations with regards to the Affordable Care Act.