Thursday, June 19, 2008

Last One in the Pool ... May Not Make Any Difference

By Merrill Matthews, Jr.

Categories: Tennessee

In Tennessee, Gov. Phil Bredesen (D) has signed into law a bill (S.B. 4014) to allow small employers to form cooperatives to negotiate for group health insurance. Several state legislatures have considered plans in recent years to form similar business cooperatives in an effort to reduce the costs of small group coverage, but this is one of only a few such measures that has garnered sufficient political support to become law.

One key reason may be the Nashville-based National Federation of Independent Business (NFIB), which has more than 10,000 statewide members and reportedly pulled out all the stops for the bill. The cooperatives must meet several requirements, including having at least 1,000 eligible employees or at least 10 participating employers. The groups must hold open-enrollment periods at least once a year. Companies are eligible for this voluntary program if they have between two and 50 employees.

The NFIB argues that the Tennessee plan puts the state on "the cutting edge of health care reform for small businesses" by allowing employers in large market-based pools to negotiate coverages that have greater rate predictability and stability. Health carriers counter that they are already rating small group premiums based on very large combined blocks of insureds.

While I wish them well, count me skeptical. The notion of "if the government could only make a big enough pool, everyone could have affordable health insurance" has almost become "conventional wisdom." There is a lot of experience with trying to establish such pools, with most of them failing to live up to expectations. The new law will take effect in January and may jumpstart efforts elsewhere to provide for such arrangements.