PACIFICARE: Launches Online Insurance for Small Business Owners
PacifiCare of California is now offering a new line of health insurance for small employers that is available online at reduced rates, the Sacramento Business Journal reports. The new Premier plans are targeted at businesses with 2 to 50 employees and are priced 10%-12% below market rates. Businesses can enroll in HMOs, PPOs, POS and group life plans through PacifiCare's Web site, www.pacificare.com, through online insurance channel eHealthInsurance.com or through traditional brokers, who receive a flat 3% commission. The Premier plans offer the same benefits and physicians' networks available in PacifiCare's other small-group products, but the pharmacy copayment is $5 more, allowing PacifiCare to offer a discounted rate. PacifiCare recognizes the "value of going online to contain rising health care costs," Rich Roge, PacifiCare vice president of commercial sales and marketing, said. He added, "2000 is going to be a watershed in terms of rate increases, and small employers are one of the most sensitive markets. Less than half offer insurance." The new plans are PacifiCare's attempt "to leverage technology to reduce the cost of healthcare to the consumer," Roge said.
Most other large health plans in California have begun to investigate Internet options. But unlike PacifiCare, many insurers continue to offer the same products through traditional broker channels. Dean Forman, a Sacramento-based financial and employee benefits consultant, said: "Everyone is wondering where this is going. This new product is offered all-Internet, do-it-yourself, or through a broker who adds value. It positions PacifiCare for both markets." Sacramento broker Dale Waters added: "It's a reduced-premium, reduced commission push onto the Internet. It positions them to hope the market will go along. There will be a backlash from brokers not selling or renewing the products." Other insurers, including Kaiser Permanente, Health Net and Blue Cross, have ventures on the Internet, ranging from information only to allowing online purchasing for individual and family plans (Robertson, 2/7).
Many brokers are "chafing" at PacifiCare's new plan "because, although businesses can buy the new Internet plans through them, their commission would only be 3%, compared with 10% or more earned on PacifiCare's other, traditional plans." The brokers maintain that "the commissions are too low to provide any profit." Joe Maioriello, a health insurance broker in Irvine, said, "PacifiCare will feel a backlash like never before. Every agent I know will go out of their way not to write PacifiCare business, and do everything they can to move it." However, some brokers might find it difficult to avoid PacifiCare business, as PacifiCare revised brokers' contracts -- forcing them to keep clients with the insurer for an extended period. If brokers do not comply, they risk losing their commissions. Some brokers charge that PacifiCare "forced them into the new contracts to prevent a mass exodus to other insurers." Dorothy Cociu, president-elect of the California Association of Health Underwriters, said: "It was sneaky. If it weren't for the new contracts, PacifiCare wouldn't be able to deliver the product at reduced commission levels. Agents feel PacifiCare wasn't straight with them. It's a trust issue." But Roge said, "Don't shoot the messenger -- we didn't invent the Internet. There is a long term role for brokers, but you can't afford to ignore the dynamics that the Internet creates in terms of cost savings" (Crabtree, Orange County Register, 2/8).