Insurance alliances slow to start in N.H.
There's much more to forming a purchasing alliance than pulling together a group of small businesses to go on a shopping trip for health insurance
Promoted as a way of bringing health insurance costs under control, Senate Bill 408 — passed earlier this year by the New Hampshire Legislature — allows small businesses to form health insurance purchasing alliances to drive down premiums.
But while the alliances were depicted as a way to address ever-rising cost of health insurance, the devil, as they say, is in the details, and thus far no group has been officially formed.
Perhaps the biggest problem is that the new law allows pooling of claims, "but the rating of the group stays subject to the small-group rating," said Leslie Ludtke, health-care policy analyst for the New Hampshire Insurance Department. That means, she said, "20 small groups of five are not a group of 100."
Another touted benefit of the alliances was the consolidation of administrative functions, such as collecting and processing premiums for members, but Ludtke said this does not leave much room for cost savings because "carriers are really good at administration already."
The opportunity for cost savings for health-care purchasing alliances really lies in stronger buying power: Those 20 groups of five members combine to speak louder than several disassociated smaller groups.
At least that's the hope of Mary Ann Wells.Wells, a partner in Web-Kare LLP, a Raymond-based Web marketing firm for industrial businesses, said her business of three employees recently saw a premium increase of 69 percent.
While both she and her business partner are covered by their husbands' policies, they wanted to cover their single employee. The employee is in his early 30s, and the cost of covering him, his spouse and baby, jumped from $912 last year to a payment of $1,557 due this coming Nov. 1.
"That 69 percent was the median price I was quoted," Wells told NHBR. "One insurance carrier quoted me a price that was 157 percent higher than last year, another's was 71 percent, and another's was 51 percent higher."
She said she can only pay a portion of the premium, so her employee has to pick up the rest of the cost.
"And that makes his paycheck that much smaller," said Wells.
In an e-mail, Wells said, "The 69 percent rate increase from my 2009/2010 policy to the upcoming 2010/2011 policy is making it impossible for me to give my employees a raise. In fact, it makes it impossible to add any new employees."
After this last increase, Wells said she decided to ask other businesses through her local chamber of commerce if they wanted to form a purchasing alliance.
So far, four other area companies have shown an interest.
She said she is still looking for other companies to join an alliance.
"Then we have to form an entity and submit all the paperwork to the state," she said. "That probably won't happen for several months yet. There's a lot to discuss."
Wells is right.
There's much more to forming a purchasing alliance than pulling together a group of small businesses to go on a shopping trip for health insurance.
For example, SB 408 stipulates that the entity has to prepare an annual budget, develop enrollment procedures, prove the entity is actually a team of employers or a trade organization and not a shadow group formed simply for insurance, and must submit quarterly financial statements to the insurance commissioner.
Another issue looming on the horizon is the impact of insurance exchanges mandated by the new federal health reform law.
"We just don't know yet how this will affect purchasing alliances," said the Insurance Department's Ludtke. "We don't even know what the exchanges in New Hampshire will look like yet."