The Missouri Chamber of Commerce may have found a way to help members buy more affordable health insuranceby carrying more of the risk themselves. The roughly 55,000 companies affiliated with 185 local chapters are being offered a program under which they would pay for workers' routine health care from their own coffers. Insurance coverage would kick in only for larger expenses.
Large employers have long self-insured for all but the most catastrophic health care costs, and "small employers should be doing what large employers do," insists Howard Danzig, the St. Louis insurance broker who put together the plan. The big difference is that while large employers may turn to an insurer for outlays of more than $1 million on any one employee, a small employer would cover only the first $1,500 under the Missouri Chamber plan. Chamber CEO Dan Mehan calls it a "pay as you go" approach.
For the past three years, Chamber members have sought help in handling the rapidly escalating cost of health care coverage, with most calling it an absolute necessity to attract workers in the tight labor market. The Chamber tried earlier to organize a health insurance buying cooperative, but didn't get bids from insurers that were low enough to represent real savings.
The new program is called Missouri Chamber CARE, for Customized Approach for Responsive Employers, to emphasize the flexibility it gives companies to tailor the scheme to their medical experience and ability to absorb risk. They can set both the amounts of copays and deductibles and the level at which insurance coverage will kick in.
The concept is that the real uncertaintyand therefore riskin medical coverage is the nonroutine care, and that is what is driving up health care outlays and coverage premiums. Danzig notes that costs for routine care, such as doctors' office visits and X-rays, have been rising no more than 2 percent a year. The percentage of workers who will use such servicesno more than 25 percent in any given monthis predictable, and because the bill is usually less than $150, it isn't red-ink time for a business even if that percentage rises more than expected in some years.
By picking up the first $1,500, Danzig has found in companies that have tried the approach, an employer can get an insurance premium that is much lower than the all-inclusive premiummore than enough savings to cover the small-bill outlays. A third-party administrator collects the claims and pays the bills, but "it's a lot cheaper to use a TPA than to hire an insurance company," Danzig says.
Even bigger savings are available by making the cutoff between self-paid and insured amounts higher, or by buying insurance for only a portion of the overage. For instance, a policy might cover half of all claims between $2,500 and $10,000 a year. The entire program piggybacks on the provider network put together by the insurer, and employers get the advantage of plan-negotiated discounts. Prescription drugs are handled through a discount card issued by a chain of pharmacies.
The small employers don't get all the benefits a big employer does from self-insuring. Because the bulk of the risk is still insured, state mandates still apply. And because Missouri does not mandate community ratings, there are no extra savings for companies with young, healthy workforces.
Daniel Moskowitz. Missouri's Chamber of Commerce finds self-insured savings. Business and Health 2001;6:16.