Health insurance for small businesses

Health insurance for small businesses – Florida Small Business Health Access Corporation

Beverly D. Lucas

“Outrageous and unreal” are words Patty lemanski uses to describe group health insurance rates for her company< Bay Area Environmental, a small business that removes sand and debris from sanitary and storm lines. Because of the cost, Lemanski says, the owners of this Tampa-based business found it "difficult," not to mention extremely costly, to offer health insurance to their 10 employees.

Lemanski and her company are by no means alone in thier plight. Her words echo the dilemma of many small business owners nationwide who, faced with sky-high premiums for health insurance plans, have opted out of health insurance altogether.

In Florida, however, concern over the growth in the number of uninsured workers, increasing pressures on providers to absorb uncompensated care costs, cost shifting from the group who don’t offer insurance to those who do, and demands for public financing of indigent care prompted the formation of an unusual coalition to solve a growing social problem.

Streght in numbers

To help solve those problems, a group of providers and businesses in the state worked with the Florida legislature to create the Florida Small Business Health Access Corporation–a private, nonprofit corporation established to pool small employers inot a single, organized buying group. Its missiion: to bring affordable health insurance plans to uninsured small businesses.

While most of the state’s small businesses did not help lobby for the coalition, they have been solidly behind it since its formation. And, so far, it appears to be successful.

The pilot program, begun in Tampa in 1989, has expanded to surrounding rural counties as well as into the Orlando area. Today, Florida Health Access services 1,000 businesses with between 2 and 19 employees, covering a total of 5,000 workers and dependents.

“We’re building an 800-lb. gorilla to take to the bargaining table,” says Rhee Sailors, the organization’s executive director. By pooling, small businesses obtain the leverage to control health care costs that none of them would have had individually.

“Sometimes, insurance companies use pooling as a handy marketing tool, selling thier policies to members of the pool but rating each company on an individual basis,” Sailors explains. “Because of its size and strenght, Florida Health Access is able instead to require the insurer to rate the group as a whole, thereby reducing premium costs.”

Another added benefit is that the coalition has been able to stabilize year-to-year price increases, so the participating businesses are not hit with 50 percent rate hikes. In 1990, members of Florida Health Access saw their rates increase by just 15 percent.

Still another advantage of the coalition is that its rates are locked in for 12 months; rates for individual small businesses are often locked in for only six months.

Subtracting the admin

In addition to pooling, the Florida program makes use of other cost-containment features, such as handling employer billing and collections. It also takes care of various marketing functions, including recruitment of sales agents who try to sign up more small businesses.

Because higher administrative and marketing costs are often cited by insurers as reasons that small businesses must pay as much as 30 to 40 percent more than larger businesses for the same set of benefits, Florida Health Access performs the administrative functions normally handled by the insurance company, markets the product through its own network of independent agents, and pays the agents’ sales commissions. Accordingly, Florida Health Access is able to give small business owners a 25 to 40 percent reduction in price, depending on the coverage selected, says Sailors. Direct and indirect subsidies from the state of $4 million annually help the organization to absorb administrative costs, instead of passing them on to the rate payers, as insurers typically do.

Another key component of the Florida plan, and one that helps make the insurance premiums more afforadable, is the requirement tha the employer pay only 50 percent of the premium for each employee, rather than the higher percentage required by many commercial insurance companies. “We found that the employers couldn’t afford to pay 75 to 100 percent, but could if you knocked it down to 50 percent. What’s more, sharing costs fifty-fifty with employees seemed psychologically fairer [to the employers],” Sailors explains.

You better shop around

Because many small business owners have neither the time nor inclination to shop in the complex world of health benefits, an important and innovative feature of the Florida Health Access program is its role as contract negotiator. Although the 18-member full-time staff of Florida Health Access performs all of the initial research, the final decision for selecting the insurer rests in the hands of its board of directors. The board is appointed by the governor and is composed of people who work in large corporations and small businesses as well as representatives from the state’s department of Health and Rehabilitative Services.

The board members typically have the kind of business expertise that enables them to make the correct decisions, says Sailors. She notes that frequently, when faced with choosing an insurance plan, many small business owners will pick the traditional 80/20 plan, because it’s what they are most familiar with. Usually, however, the only way to make such a plan affordable to the small business owner is to strip out most of the benefits, until all that’s left is catastrophic care coverage. But the end result, “dune buggy coverage,” as Sailors describes it, is not what the employees want or need.

“Employees had fear and anger at not being able to access routine health care because of the prohibitive price of insurance,” says Sailors. “So we went after a comprehensive set of services with predictable out-of-pocker expenses.”

Since comprehensive coverage is not cheap, the coalition wanted to contract with a sound, reputable company that provided the best value for the dollar.

And the winner was

With those factors in mind, Florida Health Access chose Av-Med, an IPA HMO headquartered in Tampa and Orlando, which has a network of hospital providers and physicians under contract. Benefits provided by the HMO include basic inpatient, outpatient, maternity, and emergency services as well as home health and convalescent care, mental health services family planning services, and allergy treatments. Prescriptions can be filled at either the Eackards or Walgreens drugstore chains.

Members can select a standard option or a high option plan. Benefits are the same for both plans, but under the high option plan employees pay a higher monthly premium and lower copyaments than the standard option plan. Monthly premiums for the high option plan are $78 for single coverage and $213 for family coverage. For the standard plan, monthly premiums are $68 for single coverage, and $187 for family coverage. High option copayments for a routine office visit are $5, and standard option copayments are $10 per visit. Hospitalization is fully covered under the high option plan, while those choosing the standard option plan pay $100 a day for the first five days, with full coverage thereafter.

“In the Orlando area, we went through competitive negotiations and had a number of players interested in working with us–based on our performance in Tampa,” says Sailors. “Although Av-Med won in those competitive negotiations, it was in no way automatic. While we’re not an 800-pound gorilla, we think we’re at least a 300-pound gorilla, and we’ve been able to see some of the benefits of that at the negotiating table.”

Small business reaction

Reaction from small business owners and their employees has been favorable. “This is one of the best programs we’ve seen,” says Howard Crum, general manager of Business Machines of Tampa Bay. “The Florida Health Access program was less expensive than other programs, and the doctors in the Av-Med network are respected physicians.” Adds Lemanski, “We can definitely afford to offer this plan to our employees, and they take it and they use it.”

Both Crum and Lemanski note that the only employees at their businesses who have chosen not to take the insurance are those who are covered by their spouse’s health insurance plan.

“We succeeded in designing a win/win situation,” says Sailors. “By providing expertise and technical assistance on top of a better price, we’re able to give small businesses the type of leg-up help they need. We’re not out to capture market share. We’re not out to make giant profits. For us, success in making sure that people get health insurance coverage without being taken to the cleaners.”

Beverly D. Lucas is a freelance writer specializing in health care issues. She lives in Newton, Mass.

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