MANAGED CARE: New Insurance Option Aids Small Businesses
With insurance companies predicting "double-digit increases" in premiums, California small business owners and their employees could both benefit from a "relatively new" but "not widely known" form of health insurance called consumer-choice health purchasing groups, or CHPGs, the Los Angeles Times reports. CHPGs reduce health care costs for small businesses in two ways. Under a CHPG plan, the employer "ponies up" at least 50% of the cost of the least expensive available coverage, with employees paying the balance, including any additional coverage options they choose. Thus, the costs to the employer vary with the needs of each employee -- premiums for a single, young employee probably will differ from that for a married employee with children. Likewise, the costs for employees will vary based on their individual premiums, plus the difference for "richer" coverage options. However, the employer receives one premium bill, regardless of how many insurers cover the firm's employees. Additionally, CHPGs, by targeting employers with fewer than 50 employees and pooling risk, enable small firms to negotiate lower premiums with "the cost-cutting clout of big business."
Two CHPGs currently exist in California: PacAdvantage and CaliforniaChoice. PacAdvantage, part of the San Francisco-based not-for-profit Pacific Business Group on Health, covers 140,000 California workers employed by 9,000 small businesses. PacAdvantage developed out of 1994 legislation that allowed the government-run Health Insurance Plan of California to pool the risk of small businesses employers and employees in order to "gain clout in negotiating with health insurers." Last July, the state privatized the effort by turning the plan over to the Pacific Business Group on Health. CaliforniaChoice, the state's other CHPG, was founded in 1996 by the Orange County insurance firm Word & Brown. The for-profit CaliforniaChoice covers 135,000 workers employed by 8,400 businesses. Both PacAdvantage and CaliforniaCare offer optional insurance for dental, vision and chiropractic/acupuncture care. CaliforniaChoice also has medical savings accounts and group life insurance. Among the insurers serving the two organizations are: Aetna, Blue Shield of California, Chinese Community Health Plan, Kaiser Permanente, PacifiCare, Sharp Health Plan, CIGNA, HealthNet, Maxicare and Universal Care. (Hovey, Los Angeles Times, 10/4).