Uninsured rolls haven’t decreased, but premiums have been held down
Even hobbled by legislative leg irons, Florida’s purchasing alliances have spurred competition and helped keep down health insurance premiums in the small-group market. That’s the good news.
On the other hand, five years into their experiment with managed competition, Florida officials also conclude that the alliances have done little to expand coverage to the state’s 2.8 million uninsured residents. At least that’s the word in a recent report by the Office of Program Policy Analysis and Government Accountability (OPPAGA), the policy analysis arm of the state legislature.
"They’ve had a small impact, based on my analysis," says Monica Rutkowski, the OPPAGA senior policy analyst who conducted the study.
But others in state government and Florida’s business community say the community health purchasing alliances (CHPAs) have had a very positive impact. The alliances have held down the cost of all small-group insurance policies and thus made coverage more accessible even to businesses that don’t choose to buy through them, supporters say.
Alliance of paper tigers
The purchasing alliances were set up along the lines proposed in the Clinton health care reform proposal, with boards made up of local government officials, consumers, and business owners. By pooling participating businesses’ employees into larger groups, the alliances would have the ability to attract insurers and get better prices, at least in theory. But in setting up the CHPAs, the Florida legislature decided against giving them the ability to negotiate premium prices with insurers, largely because the insurance industry lobbied against doing so.
The lack of negotiating ability, two OPPAGA reports have since concluded, is a key stumbling block to getting more people insured through the purchasing alliances.
"CHPAs’ inability to negotiate or select health plans that provide the most competitive products and prices among various health plans" limits their effectiveness, the October report found. As it had two years earlier, OPPAGA recommended giving that authority to the alliances. But key legislative staff says that’s not something lawmakers have even seriously considered.
Agency calls for changes
The larger and more serious problem is that employers in the alliances are not allowed to pool their purchasing power, says an official response to the OPPAGA report from the Agency for Health Care Administration (AHCA), which has administrative oversight over the CHPAs.
"Even worse," AHCA director Doug Cook wrote to OPPAGA director John W. Turcotte, "[CHPAs] break already small groups into smaller ones." Under the CHPA structure, a single employer may offer several plans, all of which are treated by insurers as separate employer groups.
"This has the effect of skewing actuarial studies and reducing agent commissions. Neither of these outcomes is productive in expanding coverage for small businesses. Therefore, you can see that any statutory change to allow negotiation must be accompanied by language to pool CHPA enrollments and make changes in the commission structure," Mr. Cook wrote.
As of last March, according to the report, about 90,000 people were covered by CHPA insurance policies, half of them individuals who had never had health insurance before. This represents only 1.6% of the 2.8 million Floridians who do not have health insurance, according to the study.
"The OPPAGA report made it sound like a bad thing that half the people covered through CHPAs had insurance before," says Connie Ruggles, AHCA senior management analyst. "We were looking at it the other way: Half of them never had insurance before."
Marjorie Silberman, executive director of the District 9 CHPA in West Palm Beach, agreed: "One hundred thousand people is nothing to sneeze at."
But just north of West Palm Beach, officials at the Orlando CHPA are coping with the defection of several insurers. Executive director Terry McCorvie called for legislators to allow CHPAs to pool employer groups in order to better spread risk and reduce plans’ administrative costs after four plans announced their departure in late November.
Companies announcing they will not renew policies as they come due are Aetna, Foundation Health, and United HealthCare Corporation. Blue Cross and Blue Shield of Florida says it will pull its preferred provider organizations out of the alliance next April but will continue to offer its health-maintenance organization.
Thirteen insurers, including Humana and Prudential Insurance Company of America, remain in the Orlando CHPA. The 11-county CHPA area that includes Orlando and Jacksonville has about 18,600 enrollees. The departure of the four plans affects about 3,500 people.
Information forces competition
Both Ms. Silberman and Ms. Ruggles argue that CHPAs have been very effective in one critical area: By compiling and distributing information about what insurers who sell to purchasing alliances charge in premiums, they’ve also forced all small-group insurers to keep prices down to compete.
"We’ve been influential in raising awareness," Ms. Silberman says. "Whether people signed up with us or not is not the issue. We’ve helped further development of the market. A lot of people signed up and got coverage outside the CHPAs because thanks to our providing information, they woke up and saw, There’s hope for me. I can afford this.’"
The head of the state organization that represents small business agrees that you can’t judge the CHPAs just by how many people they’ve signed up for coverage.
"They’re a new competitive force in the market, and from that perspective they’re successful," says Bill Herrle, state director of the National Federation of Independent Business. "Every carrier that wants to sell through the CHPAs must sell a standard, basic, identical policy.
"For the first time, small businesses can shop apples to apples and oranges to oranges. That was absolutely impossible before, because an agent would always be able to point to some bell or whistle to justify charging $10 more."
While most small businesses don’t buy the basic CHPA policy, Mr. Herrle noted that they use it "as a litmus test for what every policy should have, and then they buy upscale from that."
While it seems very unlikely that the legislature will approve OPPAGA’s proposals for expanding the number of people covered through the purchasing alliances, Mr. Herrle and government officials say it is equally unlikely any action will be taken to eliminate the CHPAs—especially since they’ve been financially self-sufficient since June 1997. State expenditures for administration of the CHPAs since their inception in 1993 through 1997 were $8.1 million.
Contact Mr. Cook and Ms. Ruggles at (850) 922-5871 and Ms. Rutkowski at (850) 488-0021.