Health Care Model : Firm Provides a Private Sector Solution for Small Companies

The recent visit to the White House was memorable for John Polk from Cleveland: An opportunity to talk to President Bush about today’s hot topic--health insurance.

“After we did our song and dance, the President said, ‘How can anybody be against this?’ ” recalled Polk, who runs an organization that buys health insurance for 8,500 small businesses.

Polk’s operation, the Council of Smaller Enterprises, has been able to assure health insurance protection for 150,000 people, including workers at small companies. And he does it while keeping annual premium increases to an average of 7% a year.

In contrast, many corporations are buffeted by increases of 20% a year for their health insurance. Small businesses often face much larger price hikes, especially if a worker or dependent has suffered a major ailment.

The performance of COSE, the small business arm of the Cleveland Chamber of Commerce, has brought it a modicum of national attention in recent months. And the spotlight is likely to grow today as Bush unveils his long-awaited health care program.

The Bush Administration will point to COSE as an important part of the private-sector solution to the health care crisis. The White House will argue that groups such as COSE should be given a boost, making it unnecessary to adopt a massive national health care program.

Specifically, the President is expected to call for the elimination of state mandates that dictate a minimum package of health benefits for insurers selling policies. Without such mandates, Administration officials said, more groups such as COSE would flourish and operate across state lines.

They further argue that such an approach would make it easier for national associations with members throughout the country to provide health benefits. The cost for basic insurance would be cheaper than the current system in which a state can require insurance companies to include in their coverage services ranging from cosmetic surgery to pastoral counseling.

Administration officials concede that COSE and similar operations are no panacea to the widespread problem of uninsured workers in small businesses.

“It’s imperfect, we admit,” one senior official said this week. “But we think it’s important and the right approach. So let’s build on it.” He acknowledged that as many as one out of five COSE applicants are rejected because of medical problems.

By buying on behalf of a big pool of people, COSE overcomes the problems faced by small firms. If a person in a small company gets sick, the next year’s insurance bill may have a staggering increase, or the coverage may be canceled. Once a company is allowed to enroll in COSE, there are no cancellations for medical problems, said Polk, the organization’s executive director. And the percentage increase in premiums will be the same for all firms.

COSE began buying health insurance for its members in 1975 and now offers 14 separate plans. These range from traditional fee-for-service, in which a person can go to any doctor or hospital, to health maintenance organizations that charge a fixed fee in advance for a member’s entire yearly health care needs.

If COSE were an independent insurance company, it would rank 70th in size nationwide, Polk said. Its 8,500 members firms have an average of eight workers. The enrollment includes 65,000 employees, and with family members, reaches a total of 150,000.

COSE doesn’t offer the cheapest rates, at least not for the first year. Commercial insurers can bid less, especially for firms with young, healthy workers. The council’s advantage comes with its ability to offer low rates for future years and to avoid sudden leaps in premium charges.

COSE’s prime supplier of insurance is Blue Cross and Blue Shield of Ohio. “We negotiate like crazy with them over the cost of administration,” Polk said.

The group’s operations have even drawn some support from Democrats, many of whom favor a broad national health care system.

“It (COSE) is generally pretty highly thought of, although it just doesn’t go far enough. But it is helping a lot of people in the Cleveland area,” said a Senate health policy expert and a Democrat.

COSE was also praised by Senate Majority Leader George J. Mitchell, who held a public hearing in Cleveland on Dec. 11, saying that he hoped to learn from various groups that were “experimenting with a number of innovative programs to improve health care delivery and expand access to care.”