Insurance-pool plug pulled
By Gilbert Chan
The Sacramento Bee
August 12, 2006
Citing the pullout of three major health plans, California’s pioneering small-business health insurance pool is shutting down.
“PacAdvantage exhausted every possible approach to keep the voluntary partnership together. Unfortunately, market forces prevented that from happening,” said Peter Lee, chief executive officer of the Pacific Business Group on Health, which created PacAdvantage eight years ago after taking over the landmark small-business insurance pool established by the state in 1992.
Moving to boost employer-purchased health insurance in California, lawmakers launched the pool 14 years ago to make coverage more affordable businesses with fewer than 50 workers. Once off the ground, the law called for the program to be privatized. In the meantime, lawmakers also guaranteed the availability of coverage for small businesses.
PacAdvantage’s downfall began to take shape in the spring after Blue Shield said it was losing money in the program and announced plans to withdraw after this year.
Subsequent talks with Blue Shield, Kaiser and Health Net failed to work out a solution. With Blue Shield leaving, Kaiser and Health Net opted to follow suit.
http://www.sacbee.com/content/business/story/14294947p-15141048c.html
And…
Health Pool to Close for Lack of Insurers
By Daniel Yi
Los Angeles Times
August 12, 2006
Combining small business’ buying power has done little to increase affordability, (Marian Mulkey, an analyst with California Healthcare Foundation) said, because a voluntary program’s “fundamental flaw is that people will participate only when it is in their best self-interest.”
No amount of pooling can stop rising healthcare costs, experts said.
The only way a pool of buyers would have enough power to significantly influence costs, most sources agreed, is if it included virtually everyone in a form of universal care brought about by mandate or government subsidy.
http://www.latimes.com/business/la-fi-health12aug12,1,7477954.story
Comment:
By Don McCanne, MD
The proponents of association health plans (AHPs) claim that they will make health insurance affordable for small businesses by using the power of group purchasing in the private insurance market. The Pacific Business Group on Health, through PacAdvantage, has demonstrated that group purchasing by itself has no impact on controlling health insurance costs.
AHPs will achieve premium reductions only by stripping plans of benefits and shifting more out-of-pocket expenses to patients. Destroying the financial security provided by insurance is no solution to our nation’s health care financing crisis.
There are two important lessons from PacAdvantage’s downfall. Establishing separate pools for selected sectors creates inequities since pools that cover higher-risk individuals will inevitably fail (death spiral). More importantly, a fragmented system of multiple pools (e.g., private insurers and public programs) has almost no control over the systemic problems that result in continuing health care cost escalation. In contrast, the administrators of a single universal risk pool could use their monopsony to finally bring health care costs under control.