New York City's large private-industry purchasing coalition is creating a pool to provide health benefits exclusively for small businesses.
The small-business pool, which will cover businesses with two to 50 employees, should be operating by summer, according to Laurel Pickering, executive director of New York Business Group on Health.
The move represents a sharp departure from the group's nearly exclusive focus on large firms; it purchases coverage for 50 employers with 1 million enrollees.
The NYBGH's membership has long been open to New York's 212,000 small businesses, but the group had no specific product for them. The enormous coverage gap among large and small businesses could no longer be overlooked, however, Pickering says. She cites data compiled by the city of New York, which shows only 48% of the city's small businesses offer healthcare benefits. Among the city's uninsured, 70% are employed or live with someone who has a job.
Moreover, small businesses' costs are relatively high-about $250 per enrollee per month for coverage-compared with larger firms'. The citywide average cost per enrollee per month for an HMO is $175.70, according to benefits consulting firm Milliman & Robertson.
Although Pickering concedes that New York's community-rating laws would make it difficult for the NYBGH's purchasing pool to undercut rates offered by individual health plans, employees would be able to pick and choose among the half-dozen plans that are expected to be offered.
"Our market research has shown that choice is a strong incentive among small employers to keep their employees happy, so a lot of them have been offering a point-of-service plan so they can opt out," Pickering says. "But by offering several plans, the employers can benchmark their contribution to the lowest-cost plan, and allow the employees to pay extra for something else."
Employees would also be more likely to find the doctor of their choice among so many plans, Pickering adds.
Although the NYBGH has not projected how many enrollees would be covered through its new pool, it has received a strong response from the city's business community, Pickering says. Initially the health group will be confined to the five boroughs of New York and expanded if it proves successful, she adds.
Observers believe such a purchasing alliance is likely to increase the number of the insured in New York City, but they stress that it is not a universal solution.
"If on a scale of one to 10 small businesses are at a two, a pool like this might put them at a four," says John Tiscornia, a regional healthcare director with Arthur Andersen consulting firm. Tiscornia adds that small businesses will always likely be at a disadvantage when purchasing coverage because they won't be able to get the group discounts offered to large businesses.
David Sandman, a program officer with the Commonwealth Fund, a New York think tank that studies healthcare coverage issues, agrees that the NYBGH would not be able to fully address the cost issue. However, it would likely eliminate many of the administrative headaches small business owners face with their health plans.
"It's one piece of the puzzle . . . because many small businesses say that even if benefits were free, the difficulties they face administering them are not worth it," he says.
To address the cost issue, New York City's municipal government last month began offering low-cost coverage to small businesses as part of a two-year pilot program, according to Crain's New York Business, a sister publication of MODERN HEALTHCARE. Monthly premiums for the Small Business Health Insurance Program range from $99.80 for an individual to $235.22 for a family.
However, the plan's geographic coverage is limited to six of New York City Health and Hospitals Corp.'s 13 hospitals, their affiliated clinics, and 700 physicians in northern Manhattan, the South Bronx and northern Brooklyn.
But Sandman, whose organization is evaluating the program, says it would be expanded citywide if it proved successful.