Private-Sector Coalitions to Help Small Businesses Purchase Health Insurance Show Only ‘Marginal Success,’ Study Finds

Small businesses need assistance from the public sector -- including expertise, seed money and regulatory reform -- in order to improve employees' access to health care coverage, according to a new report from the Commonwealth Fund. The report, "Business Initiatives to Expand Health Coverage for Workers in Small Firms," examines the "potential of purchasing coalitions" formed by larger businesses to help small firms make health insurance "more available and affordable," finding that such initiatives have "experienced only marginal success" (Commonwealth Fund release, 10/31). The reports looks at four business coalitions: the New York Business Group on Health in New York City, N.Y.; the Alliance in Denver, Colo.; the Alliance in Madison, Wis.; and the Pacific Business Group on Health in San Francisco, Calif. (Meyer/Rybowski, "Business Initiatives to Expand Health Coverage for Workers in Small Firms," October 2001). All four of the coalitions work to "pool risk to improve bargaining power" for smaller companies seeking health coverage. According to the report, purchasing coalitions have made improvements in the number of health plan choices available to small business employees, but have had little impact on making insurance more attainable. The report also found:

• Only 10% to 20% of the companies participating in such programs are offering insurance "for the first time," proving that most of the coalitions have "not attracted significant numbers of new participants."
• The coalitions have yet to gain "large enough enrollment" to yield lower costs through "administrative efficiencies."
• State regulations can inhibit a coalition's ability to "meet the needs of small employers."
• Coalitions face high costs in launching and managing purchasing programs, and "it can take years for the programs to become self-sufficient."
• The increase in health insurance options offered by such programs is "not compelling enough" for large numbers of small businesses to purchase coverage.