Coverage Can Be Tailored to Suit Workers, Employers

Premiums for health insurance are likely to increase in the coming months, but if you can entice your employees to share the costs of their coverage, you can offer them something valuable in exchange--and keep the damage to your own budget to a minimum.

Health insurers aren’t ready to say so publicly yet, but they know that the cost-containment benefits of managed care have just about run their course.

Privately, they say they see double-digit increases in health insurance premiums in the offing for businesses of all sizes, mirroring the increases already showing up on workers’ compensation insurance and many property-casualty risks.

The good news comes in the form of something relatively new to the insurance industry but not widely known among employers--consumer-choice health purchasing groups, or CHPGs, of which two now operate in California.

For business owners, the attraction of CHPGs is that they make employees share the costs of health insurance. For employees, the attraction is that they can tailor their coverage to suit their needs and pocketbook.

CHPGs target employers of fewer than 50 people and, by pooling risk, give small-business employers the cost-cutting clout of big business in negotiating premiums and coverages with health insurers. In essence, CHPGs enable small businesses to negotiate with health insurers as if they were big buyers.

In fact, one of California’s two CHPGs, PacAdvantage,

(https://www.pacadvantage.org) is a unit of the San Francisco nonprofit Pacific Business Group on Health, which negotiates health insurance packages for such big employers as the California Public Employees Retirement System, the University of California, Bank of America and Chevron.

Like its private-sector competitor, CaliforniaChoice, launched in 1996 by the Orange insurance firm Word & Brown, PacAdvantage has its roots in 1994 legislation intended to remedy two problems:

* Many small businesses don’t offer their employees health coverage at all because they can’t afford it.

* Those that do offer coverage commonly get it from one carrier--a one-size-fits-all solution that doesn’t meet the needs of many employees.

The 1994 legislation established the government-run Health Insurance Plan of California to test whether small-business employers could gain clout in negotiating with health insurers by pooling the risk. The state privatized the effort by turning it over to the Pacific Business Group on Health a year ago last July.

PacAdvantage has seen little growth since then. It covers 140,000 California workers employed by 9,000 small businesses--numbers not much different from those of a year ago, according to Charles Kiskaden, director of marketing and sales.

CaliforniaChoice (https://www.californiachoice.com), however, has seen growth in recent months. It covers 135,000 workers employed by 8,400 businesses, up from 115,000 employees and 7,500 businesses as of May 15, according to John Word III, a principal of Word & Brown.

The programs of both organizations allow employees to tailor their coverage--say, bare-bones coverage for single young adults or rich coverage for families with children. Among their insurers: Aetna, Blue Shield, Chinese Community Health Plan, Kaiser Permanente, PacifiCare, Sharp Health Plan, CIGNA, HealthNet, Maxicare and Universal Care.

Both follow a simple idea: The employer ponies up at least half of the cost of the cheapest coverage available to each employee, and the employee, fashioning coverage to fit his or her needs, pays any balance. Thus, if the cost of bare-bones coverage for a single young adult comes to $100, the employer pays $50 and the employee the rest. The employee, however, may choose richer coverage so long as he or she pays the difference.

Similarly, if the cost of bare-bones coverage is $400 for a married employee with children, the employer pays $200 and the employee the rest. Here, too, the employee may “buy up” to richer coverage.

Thus the cost to the employer varies with the needs of each employee, depending on age and family status. The cost to the employee also reflects the need.

In addition, the employer gets only one premium bill no matter how many different insurers actually cover his or her employees. The paperwork is simpler too; you can avoid much of the paperwork involved with health insurance by administering your plan online.

Both plans also offer optional insurance for dental, vision and chiropractic/acupuncture care. CaliforniaChoice adds medical savings accounts and group life insurance. Details on both plans are available through their Web sites.

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Recent Financing and Insurance columns are available at

https://www.latimes.com/finin. Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.