New York City, Texas roll out purchasing alliances to broaden health coverage among small businesses
New purchasing alliances are sprouting this summer in New York City and Texas, where one such effort has already failed, as private businesses seek to expand health insurance for their employees.
A New York nonprofit purchasing alliance and five health insurance providers hope to offer multiple health care coverage choices at big-group rates to employees of New York City’s small businesses. The New York Health Purchasing Alliance (NYHPA) formed in August as a subsidiary of the New York Business Group on Health, with a grant of $1 million in seed money and in-kind assistance from New York City. In designing the alliance, city officials drew on market research that identified cost, choice, and administrative infrastructure as barriers to health care coverage among small businesses.
NYHPA estimates New York City has more than 200,000 businesses with two to 50 employees. Assuming five employees per business, the alliance counts its potential covered lives at one million employees and dependents. The launch is set for July 15.
The alliance will create an aggregate buying pool, receive a percentage of the premium from the insurers, and pay the insurance brokers who sell the four-plan, five-company product on NYHPA’s behalf.
City officials say brokers are key to marketing the plans. "This product needs to compete with all the other health insurance products out there," says Anne Heller, NYHPA executive director and senior health care advisor in the mayor’s office. "Our sales staff will support brokers, do sales with brokers, and service brokers." In addition to performing all front-end administration, NYHPA will do business eligibility determinations and enrollment.
The alliance’s primary goal is enabling small employers to offer a choice in health plans, outranking even the pursuit of low rates.
"For most people who work in small business, it’s been take it or leave it’—your employer picks a plan, you’re stuck with it," says Ms. Heller. "We wanted complementary networks, lower-cost plans, higher-end plans. I think we’ve achieved the largest network of providers in the city. It’s very exciting to be able to both offer employers affordable and easy health insurance and satisfy their employees with a wide range of choices."
New York’s efforts fall in the shadow of the failure of a similar effort in Texas. The Texas Insurance Purchasing Alliance (TIPA), created in 1993 as a way to get a jump on the national development of managed competition, becomes defunct on July 31.
The National Federation of Inde pendent Businesses (NFIB) hopes to pick up where the TIPA left off. Responding to the majority of members who offer no health insurance for their employees, the NFIB in Texas this spring is launching four basic plans for individuals and employers with fewer than 100 employees.
NFIB received approval in May for four products: an individual health policy for sole proprietors and individuals; a group product for two to 99 employees; a life, vision, and dental option; and a program that allows pretax payment of health insurance premiums similar to the "cafeteria plan" offered by large employers, for businesses with three or more employees.
"We’re hoping that our program will get people to buy insurance for themselves and their families for the first time," says Jamie Amaral, the organization’s national director of health care. The working uninsured dominate the NFIB membership, with about 56% of members lacking coverage for both themselves and their employees, Ms. Amaral says.
The Texas effort is similar to a program the organization has sponsored in seven other states. As of last October, the product was up and running in Florida, Tennessee, North Carolina, and New Jersey. Alabama, Georgia, and Michigan rolled out the product in early 1999.
NFIB is backing a congressional proposal to allow any bona fide association, from a church group to an advocacy organization, to pool its members as a single group to create an association health plan (AHP). The AHPs would be exempt from state regulation, similar to self-insured employers who take advantage of the savings clause of the federal Employ ment Retirement Income Security Act of 1974.
Picking and choosing benefits
"Most states require a richer base level of benefits than what many small employers want," says Ms. Amaral. "We think a lot of small employers haven’t got coverage because they haven’t been able to pick and choose benefits."
NFIB’s push for AHPs comes on the heels of a disappointing three-year effort to develop medical savings accounts (MSAs) among its members.
"We would like to offer a catastrophic plan with an MSA that would provide a low level of premium and allow employers to prepay’ into a medical savings account that could be used over time. We’d like to see catastrophic plans and MSAs be nationally uniform," Ms. Amaral says.
The stumbling block is that many states don’t recognize catastrophic coverage as an insurer product.
The intent of the small group reform initiative focused on expanding employee choice in insurance coverage. TIPA was modeled after the Texas state employees insurance program, which offers multiple insurance carriers and coverages from which state employees can choose, says Clark Jobe, executive director for the alliance. TIPA started as a pilot project in 1994 and went statewide in January 1995.
"The idea was that the insurance carriers didn’t have to worry about where people were actually employed —they could just put them all in one big group. If a carrier received 500 enrollees through us, they might have 500 different rates within a particular group. Unfortunately, not all carriers’ systems were sufficiently flexible to handle the multiple rates we had across geographic territories."
Though TIPA was created to offer coverage throughout the entire small business landscape, the insurance market soon began treating the alliance as a high-risk pool, says Mr. Jobe, because of a series of small-group reforms in Texas approved around the same time as the creation of the alliance.
Texas in 1993 required insurance carriers to issue and renew health coverage for small businesses regardless of employees’ health risks. The law made coverage available to many more employees who were high risks for carriers. In turn, carriers let insurance agents know they didn’t want to write policies for these people, who then wound up obtaining coverage through TIPA. "Once the market began using us as a [high-risk] pool, the carriers, who wouldn’t voluntarily write this business to begin with, decided they didn’t want to write our business at all."
Contact Ms. Heller at (212) 788-2898, Ms. Amaral at (800) 274-6342, and Mr. Jobe at (512) 472-3956. See related story on purchasing alliances in Florida, State Health Watch, December 1998, p. 7.
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