HIPC: Two Firms Battle Over Contract To Run Small Business Pool
"Two nonprofit corporations are slugging it out in Sacramento over who should run" the Health Insurance Plan of California, "a 5-year-old, relatively obscure state-run public-private insurance pool of 7,400 small businesses statewide." The Los Angeles Times notes that state law requires HIPC to convert "to all-private ownership and operation," and the current dispute involves the state's decision to award that contract to the Pacific Business Group on Health. Ben Davidian, an attorney for Provider Choice filed a protest against the PBGH after it won the state contract, and now "an oral hearing must be held" to address the attorney's concerns. The Times notes that the "battle's outcome could affect thousands of small businesses statewide and their ability to get affordable health insurance for their workers."
One of the reasons Davidian objects to the PBGH contract centers on a conflict of interest between PBGH and the state Managed Risk Medical Insurance Board, which "oversees the program and contracts out the day-to-day running of the pool." Sandra Shewry, executive director of MRMIB, also sits on PBGH's board of directors. And while Shewry "removed herself from the seven-member committee evaluating the" HIPC bids, Davidian notes that "four of those committee members were her direct employees." Shewry was out of town and could not be reached for comment by the Times. Davidian has raised other objections to PBGH receiving the bid: that PBGH did not submit the proper loan agreement, that "PBGH lacks the appropriate nonprofit status to run the insurance pool" and that the group's "projected operating and administrative costs of $4.5 million are unrealistic" compared with Provider Choice's $6.1 million figure. PBGH's Emma Hoo said PBGH "will contest Davidian's arguments at the hearing," adding, "The strength of PBGH's proposal lies in the work we have done in improving quality and managing cost for both our members as well as the public at large."
Upping The Ante
Meanwhile, the state Legislature is considering a bill that could "make the battle over the small-business insurance pool even more prolonged, heated and significant for small businesses." Sponsored by state Sen. Herschel Rosenthal (D-Los Angeles, SB 393 would "expand the small-business pool to employers with up to 100 workers;" the pool is currently open to businesses with 50 or fewer employees. The measure "is expected to face opposition from Gov. Pete Wilson." A MRMIB official said the agency gets frequent inquiries about HIPC from employers with more than 50 workers. "They want to split the company to qualify for HIPC ... so there is a demand out there, I believe," said MRMIB deputy director Peter Anderson (Torres, 8/26).