The Private Employer Health Care Purchasing Alliance (PEHCPA) is a statewide effort to create a risk-sharing insurance pool for small businesses in Wisconsin.
Lawmakers and Gov. Jim Doyle’s administration are working to define how the program would work. Businesses with fewer than 50 employees would be eligible to participate in a pool that might offer:
— An exemption from some state coverage mandates, to reduce costs.
— Less stringent underwriting that may eliminate health status as a criteria.
— Subsidized premiums for low-income workers, with funds coming from the state’s Badger Care program.
— Tighter rate bands, which are restrictions on how much a premium can increase or decrease from one year to the next than the market as a whole.
PROS: Locally-focused to conform to how health care services are delivered. Some legislation is already in place, and there is bipartisan legislative support and support from the Doyle administration for implementing the pool.
CONS: Insurance interests object to some provisions of the plan, including tightened rate bands and any other rules that would apply differently to the pool than the market as a whole. These differences could lead to adverse selection, a concentration of older, sicker groups, insurers say.
Federal pools
Legislation is currently pending in the House of Representatives and Senate that would allow Association Health Plans (AHPs), which would be membership-based associations, to offer health insurance to their members nationwide.
Because self-insured plans would be regulated by federal, rather than by state commissioners of insurance, state mandates and financial requirements would be skirted.
PROS: A Small Business Administration study estimates that a nationwide pool could reduce administrative costs, which can account for 33% to 37% of the cost of insurance claims. Another study by the Congressional Budget Office suggests that AHP members might save as much as 25% on their premiums.
CONS: Opponents, including state insurance regulators, point to inadequate provisions for AHP financial reserves. A nationwide pool would force employers in geographic areas where health is affordable to subsidize insurance for companies in high-cost regions such as southeastern Wisconsin. A national pool could disrupt the effectiveness of existing small business pools in states such as California and Oregon.
