Self-employed business people could be left out of insurance pool
By Charles Rathmann, SBT Reporter
Doyle, a strong proponent of the Private Employer Health Care Purchasing Alliance (PEHCPA) vetoed by his predecessor, Gov. Scott McCallum, is intent on the pool including not only small businesses with up to 50 employees, but farmers and perhaps other self-employed people.
"I am directing state government to develop a health insurance purchasing pool to allow small businesses and farmers to take advantage of the buying power of state government to purchase more affordable health care coverage for their employees and their families," Doyle said in his State of the State Address Jan. 30.
"Throughout the state, small businesses have told me they want to do the right thing for their employees, but the rising cost of insurance premiums is making it harder every day, especially in troubled economic times." Doyle said. "Farmers tell me of the fear of being one accident or illness away from financial ruin."
However, a report prepared by Rick Curtis, Rafe Forland and Ed Neuschler of the
Institute for Health Policy Solutions, Washington, D.C., concludes that a pool that includes individuals in addition to small groups could damage the risk profile of the insurance pool, making it impossible for the pool to compete in the market.
"The pool would be put at an inherent disadvantage if it is required to accept some applicants on more preferential terms than carriers in the rest of the market," the report said. "For example, if the pool and only the pool is required either to accept self-employed individuals on the same terms as employer groups, or to give the same rates to all participating employers, it will inevitably be what is sometimes referred to as a ‘risk magnet.’ Those who are healthy and can obtain a lower price elsewhere will do so."
Curtis told Small Business Times that such inclusions have sunk insurance pools in other states. The same market forces that make it undesirable for the pool to treat self-employed persons like small groups also means that another portion of an earlier PEHCPA plan would be invalid – tightened rate bands.
"The pool will succeed only if the same rules apply inside the pool as they do outside," Curtis said. "If things like tighter rate bands apply to the pool and not the rest of the small group market, costs would be higher in the pool than out."
Feb. 21, 2003 Small Business Times, Milwaukee
