Washington Gov. Chris Gregoire has signed into law a bill that will create a state-run health insurance brokerage through which some small businesses will be able to buy group health insurance. The effort amounts to a pilot program that could lead to far-reaching health-care reforms.


House Bill 1569, referred to as the Washington state Health Insurance Partnership, is intended to pool together employer, employee, and state money so that employers with low-income workers can offer more health-care coverage options to their employees, says state Rep. Eileen Cody, D-Seattle, who introduced the bill. The goal of the program, similar in concept to one enacted by the Massachusetts Legislature last year, would be to make health insurance available to more Washingtonians, particularly those who work for small businesses, Cody says.


This would allow employers to choose plans that would be right for everybody, not have to do the work of finding plans themselves, and have better offerings for their employees, she asserts.


Some insurance brokers and business advocates, though, say they suspect the measure wont create more affordable options for employersand could cause businesses to pay more money for plans than they would pay otherwise.


Small businesses need to know that if they decide to do it, they should look at it carefully and not assume its going to save them any money, says Carolyn Logue, the Olympia-based Washington state director for the National Federation of Independent Business.


The bill Cody introduced in January was much different than the one ultimately signed into law earlier this month.


The original bill called for mandatory enrollment of all small businesses with two to 50 employees. Those businesses would have been required to buy their health insurance through a program, governed by a 14-member board set up through the state Health Care Authority. The program was dubbed the connector, after a similar program in Massachusetts. In the original bill, the board would have established procedures to broaden the pool to include individuals, people receiving state-subsidized health insurance, and state and K-12 school employees, beginning in 2012.


The bill that Gregoire signed is much more limited in its scope.


Perhaps most notably, the new law doesnt require such businesses to buy insurance through the connector. In fact, only small businesses that have at least one worker who earns 200 percent or less of the federal poverty level are eligible to buy coverage through the connector, Cody says. Also, while the connector board is charged with researching whether groups other than small businesses should be included in the pool eventually, theres no mandate that those groups must be made eligible, she says.


To buy coverage through the connector program, small businesses must have a Section 125 Plan, also called a cafeteria plan, in place, Cody says. Cafeteria plans are flexible benefit plans under the Internal Revenue Code that allow employees to select among different benefit providers and buy benefits from them with pretax earnings.


Under the new state law, a seven-member connector board, which will be appointed by Gregoire, will choose five state-approved health plans that would be eligible for state subsidies, Cody says. The board could accept any number of plans into the program, but only five could be subsidized. Employers enrolled in the connector program would decide how much money they wanted to contribute to the pool for each worker, then workers could choose which plan they wanted and pay the difference between what their employer paid and the cost of the plan as offered through the connector program. Workers who earned less than 200 percent of the poverty level could receive state premium assistance, based on a sliding scale similar to one used by the states Basic Health Plan, which provides affordable health-care coverage through private health plans to people who dont qualify for Medicaid.


Businesses also might have to pay a surcharge on plans to cover administrative fees, but an amount for that hasnt been set yet, Cody says.


Workers who have more than one job could combine the contributions from each of their employers to their premium. The plans would be portable, so workers could take their coverage with them if they changed jobs, as long as they could afford to pay the premiums on their own or with state assistance if theyre eligible.


The program would start enrolling businesses in September 2008 and would start providing coverage to workers in January 2009, Cody says. Then, by December 2008, the connector board is to submit a preliminary report to the state Health Care Authority on whether individual coverage and all small group markets should be brought into the connector program, and in September 2009 it is to submit a final report and recommendation on that subject, she says.


Paul Guppy, vice president for research at the Seattle-based Washington Policy Center, says that while the program might create options for some employers that they didnt have before, hes skeptical about its ability to provide any cost savings to businesses, especially given its limited size. If the program included individual markets, all small businesses, and public employees, that would be a larger, more attractive pool to insurers, and thus in such a case, the connector should be able to offer lower rates, he says.


My personal prediction is that it will have very little effect on businesses, Guppy says. I dont see it as a big success, because it still is a centralized, top-down government approach, rather than trying to free up a market thats already really restrictive.


Cody says, though, that shes not promising the pilot program will lower premiums. Rather, its hoped it will open up more options for employers and employees, rather than employers having to settle on one plan for all of their workers.


It will lower costs because of the subsidy available, but I cant promise it will bring down the cost of insurance through this pool, Cody says. Its a step toward that direction, though.


Logue says one advantage to the program might be that employers might save administrative costs.


The only advantage is that somebody else will search for the plans, but if you have a really good insurance broker, you might already have that taken care of, Logue says.


Brokers


Lesley Hutson, president of the Spokane Association of Health Underwriters and an account executive at Spokane-based Fidelity Associates Inc., says members of the insurance brokerage industry are pleased that the bills scope is more limited than it was originally and also that studies will be done to determine its effectiveness before its implemented on a broader scale.


We felt the connector was in a way replacing the brokerage industry, and that the government was becoming a general agent, Hutson says.


She says she hopes the program will result in more small employers being able to offer health plans. She says shed be concerned, though, if the program opened the door to state-subsidized health care for additional groups in the future.


Its a very fine balance, Hutson says. The brokerage community would certainly support everybody having access to health-care coverage, but a full-market platform would start to limit access.


Mark Newbold, a consultant with Spokanes Moloney+ONeill Benefits, which brokers plans for about 800 employer-employee groups, says that while the industry is taking a wait-and-see attitude for now on the effects of the new bill, There is a potential for a huge impact.


The Legislature has a history of passing laws that require insurers to include more types of coverage in their plans, which drives up premium costs, Newbold asserts. For that reason, among others, Newbold says hes concerned because a state board will decide which health plans to place in the connector, rather than allowing a free market to decide which plans are most affordable for customers.


Alethea McCann, owner of Spokane-based Spherion Staffing & Recruiting Inc. and part owner of Golds Gyms of Spokane Inc., says she would prefer that the state lift or loosen its mandated coverage laws rather than offer the connector program. She also would rather see lawmakers come up with ways to manage the burgeoning costs of health care, such as by rewarding businesses for their preventive health-care efforts.


McCann offers health savings accounts to her employees, which she says has saved her business considerable money and has proved to be an affordable option for her employees.


Im not interested in joining (the health-insurance partnership) because I feel my choices would be limited and my costs would go up, McCann says. The Legislature is trying to figure out how to pay for everything without looking at other alternatives.


Newbold says groups affected by the measure hope to schedule a meeting, possibly for next month, to discuss how to respond to the new program and what to tell lawmakers regarding its implementation. That meeting likely would be held in the Seattle area, he says.


Amy Johnson, vice president of work-force health and education at Greater Spokane Incorporated, says the economic-development group will inform its members about the benefits of the program and how they can enroll in it.


Contact Emily Brandler at (509) 344-1265 or via e-mail at emilyb@spokanejournal.com.