Coalitions Can Cut Insurance Costs
Do you employ more than 50 people in your business? Do you find it harder to provide them with good health insurance than when you started out?
The solution to your problem may lie in the experience of a handful of innovative employers in the Bay Area who in 1995 formed a purchasing group to negotiate with insurers for group health coverage in much the same fashion as the consumer-choice health purchasing groups, or CHPGs, described here last week.
As an alternative, you may find a solution in a program offered by five California insurance brokerages--a proprietary purchasing alliance for small and mid-size employers set up in 1996. One of these brokerages, ABD Insurance & Financial Services, recently began selling the program in Southern California out of offices in Torrance and Westlake Village.
Both programs work much like California’s two CHPGs, which give firms with fewer than 50 employees real clout in negotiating with health insurers. The CHPGs, however, focus exclusively on small employers, so companies with growing payrolls need an alternative.
With that in mind, 14 Sonoma County companies formed the North Bay Employers Coalition on Health Care five years ago, seeking to do for themselves what CHPGs do for small employers. The companies included some of the high-tech firms expanding into Sonoma County from the Silicon Valley in recent years, among them Cisco and Oracle, with local payrolls ranging in size from 100 to more than 1,500.
The employers’ coalition duplicated the success of CHPGs in nearly every sense:
* It persuaded four insurers--Aetna, Kaiser Permanente, Health Plan of the Redwoods and HealthNet--to offer coverage at favorable rates.
* It avoided the one-size-fits-all conundrum facing many small employers. Employees may choose the coverage they want from the carrier they want, depending on their needs.
* It gave the employers the ability to share the costs of health insurance with their employees. Thus employers may choose to pay only for bare-bones coverage, leaving it to the individual employee to “buy up” to richer coverage depending on need and the employee’s own pocketbook.
* It offered streamlined operations--one bill for each employer no matter how many insurers actually provide coverage, and online administration.
The purchasing alliance offered by five California brokers works in much the same way. Business owners may offer their employees coverage under as many as four insurers--Blue Shield, Cigna, United HealthCare and Kaiser Permanente, with a fifth, HealthNet, due to come on line soon.
In addition, employees may choose HMO, point-of-service or preferred-provider coverage; and, although employers must pay a minimum share of the premium cost for each employee, they may allow employees to step up coverage at their own expense.
Jim Hall, president of employee benefits services for ABD Insurance & Financial Services in Torrance, estimates that employers buying health coverage through the benefits alliance may cut premium costs by 5% to 10%.
The negotiating clout of employer groups also helps to limit increases in premiums, according to Stirling Somers of the Pacific Business Group on Health, which runs one of the two CHPGs operating in California. Somers also serves as executive director of the employers coalition in Sonoma County.
“Employers of 50 to 250 workers are in a really tough place,” Somers said, “and coalitions can help them out from a purchasing standpoint by leveraging the numbers. But there’s a fair amount of work involved in setting one up.”
Like others in the health insurance industry, Somers expects premiums to increase by as much as 20% in coming months. CHPGs may keep increases to 9% to 13% for their participants, she said.
Information on the Sonoma County employers group is available from the Pacific Business Group on Health in San Francisco (https://www.pbgh.org). Information on the benefits alliance program is available from the insurance brokerages that formed it--ABD Insurance & Financial Services in Torrance and Westlake Village (https://www.cybersure .com); Saylor & Hill Co., Oakland (https://www.saylorhill.com); Woodruff Sawyer & Co., San Francisco (https://www.woodruff-sawyer.com); Benefits Planning Insurance Services Inc., Larkspur, Calif. (https://www.bpihq.com); and Colt Employee Benefits Insurance Agency, Walnut Creek, Calif. (https://www.coltexpress.com).
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.
