Small businesses’ health-insurance access improves

Federal, state legislation broadens availability of low-cost insurance

Whether you employ only yourself or as many as 49 others, your ability to secure reasonably priced health care in Colorado has increased dramatically in recent years with the help of heavy-hitting federal and state legislation and innovative partnerships designed to pump up purchasing power.

Choice, availability and cost of managed health-care plans have improved for employers of all sizes in Colorado, and the situation will only get better with the enactment of new federal reforms this year, said Barbara Yondorf, director of policy and research for the Colorado Division of Insurance.

The Kassebaum-Kennedy health-insurance reform law, also known as the Health Insurance Portability and Accountability Act, significantly improves on existing state legislation and will be a boon for all employers and individuals seeking health care, including small-business owners, Yondorf said.

When the law goes into effect July 1, in addition to other changes, small employer carriers will be required to guarantee issuance of all the health plans they offer to small groups of two to 50 employees. This improves on Colorado House Bill 94-1210, enacted in 1995, which guarantees the issuance and renewal of only basic and standard health-care coverage by any small-employer carrier to employer groups of one to 50.

But Colorado is still ahead of the game, Yondorf said.

“State law isn’t overturned by the Kassebaum-Kennedy law,” she said. “Colorado will continue to guarantee coverage to self-employed who aren’t covered by the federal reforms.”

While HIPAA will impose all its reforms on self-insured companies as well as commercial carriers, a step that state legislation was not permitted to take, House Bill 1210 regulates premiums to keep the plans affordable, a task HIPAA specifically left to the states to handle.

Premiums can be adjusted only within a limited range and based only on family size, geography, age, and variations of plans — not risk.

It was feared that a mandate to insure all who applied for coverage and prohibit variation of premiums based on risk would prompt carriers to seek only the healthiest groups of employees large and small and penalize employers with less-healthy employer pools.

Blue Cross Blue Shield of Colorado led the charge for a compromise in HB-1210, which called for compensation for small-employer carriers who assumed high-risk members, and a risk pool was designed for that purpose.

“By solving the one problem of companies who exclude or hike rates on high-risk enrollees, we created another, the incentive to avoid the high-risk groups all together,” Yondorf said.

“Of course, the carrier who can’t raise premiums based on risk is going to look for the company of 20-year-old snow boarders and avoid the group of 40-plus smokers,´ said Elisa Hamill, CEO of the Health Care Purchasing Alliance, a Denver-based, employer-owned health-care purchasing cooperative, “especially in a small business where low risk and high risk aren’t always well blended to create a median.”

The Health Care Purchasing Alliance, or The Alliance, as it is commonly known, was formed in 1988 by employers who banded together to purchase health care collectively. Originally limited to self-insured employers who contracted for health care directly with physicians and hospitals, The Alliance has built a membership of more than 950 small, medium and large businesses along the Front Range and developed CHIP, a Cooperative for Health Insurance Purchasing that contracts with insurance companies to obtain a choice of health-care plans for its members.

“CHIP came about after the approval of state legislation that authorized businesses of all sizes to come together for the sole purpose of purchasing insurance,” Hamill explained. “Through a bidding process, we selected four insurers, Kaiser, FHP, HMO of Colorado and Frontier, and they agreed to offer three plans: a basic and standard HMO and a point of service plan. We worked together to come up with standardized forms and rules, and each insurer agreed to participate in a performance-evaluation program.”

CHIP’s purpose is to use the purchasing power of a large group to give businesses of all sizes a choice of quality-checked health-care plans in a form that is simple to use, Hamill said.

Member employers pay a membership fee on a per-employee-per-month basis because, Hamill said, “We want our incentives correctly aligned. We’re not set up as a for-profit operation, and we don’t want to capitalize on ill health.”

The majority of employers who use the CHIP product are categorized as small businesses with one to 50 employees. The average Alliance member has 10 employees, which doesn’t surprise Hamill because most businesses in Colorado are small- or medium-sized.

People have shown a lot of interest in what we’re doing, and as a result we’re involved in several clinical studies,” Hamill said. “We stand out because we’re a private, nonprofit group that works with companies of all sizes.”

The Alliance may stand out, but it won’t stand alone for very long. The Colorado Bar Association is leading the effort to develop a second employer co-op for health-care purchasing, which will involve more employers and more insurance companies in the bulk purchase of health care.

Small businesses mean big business for insurance companies. Nearly two-thirds of companies with 10 or more employees offered health benefits last year, according to Foster Higgins’ 1996 National Survey of Employer-sponsored Health Plans, Among firms with fewer than 50 workers, 57 percent offered coverage.

In Northern Colorado, as in other areas where managed-care penetration is picking up, insurance companies eye small businesses as a prime targets for commercial growth.

FHP of Colorado Inc. and other small-employer carriers — most of the major health-insurance companies licensed in the state – are focusing plans for growth on small business, Medicaid and Medicare.

Increased competition among insurance companies for small-employer business and continued efforts by federal and state legislators to ensure their access to affordable managed care give small-business owners maneuverability when it comes to health-care purchasing. And ultimately employees will benefit from their employer’s new-found clout.