Doyle's health-care depends on three groups

When Gov. Jim Doyle announced this year he was working on a new program to pool the purchasing power of small businesses to drive down their health care costs, some executives likely thought they'd heard such promises before.

In many ways, they have.

But Doyle is banking on several new wrinkles to his new proposal, which he unveiled as BadgerChoice in his State of the State address, to succeed where others have failed.

Past efforts from lawmakers in Madison to cut health-care costs for small businesses have failed for a variety of reasons, including:

• Lack of state money.
• Lack of interest from the insurance industry.
• A public unwilling to buy into what has been crafted.

Doyle has pledged to put his new proposal into the budget he will deliver to lawmakers in early 2009. To succeed, he'll have to convince lawmakers the program is worth the state subsidy that could run as high as $100 million and get the insurance industry and small business owners to buy into it.

"If it was all that easy, this would have been done a long time ago," Doyle said recently.

Other plans failed

Wayne Corey of Wisconsin Independent Business Inc. can count at least half-a-dozen proposals that have come and gone over the past 15 years with little success. Most never got past the proposal stage.

One required insurance agents selling in the small employer market to tell their clients about a state plan that "charged a lot but covered little." The public didn't buy into it.

Another included a regional pooling plan proposed by Gov. Tommy Thompson that lost its momentum when Gov. Scott McCallum vetoed the start-up funding.

"The interesting thing to me is there are people who simply have not given up," Corey said.

Phil Dougherty, senior executive officer for the Wisconsin Association of Health Plans, said voluntary purchasing pool proposals often fail because of what the insurance industry calls the "death spiral." Pools put young, healthy workers in the same group as older employees with higher health-care demands.

The younger workers end up subsidizing the care of older employees and eventually realize they can find cheaper care elsewhere. As they abandon the program, a higher and higher percentage of employees who are more expensive to insure remain and costs spiral upward.

Waiting for details

Dougherty said insurers applaud Doyle for taking a run at the small business market but are waiting for the details to evaluate the plan.

"They key is going to be what are the specifics? What are the details? What is he envisioning? How will all the components work together?" Dougherty asked.

Five years ago, Doyle signed "Co-op Care" legislation allowing the creation of health-care purchasing cooperatives, one of the few success stories from the various proposals that have come out of Madison.

Bill Oemichen, president and CEO of the Wisconsin Federation of Co-ops, said the program has succeeded where others have failed for three reasons:

• It got a federal grant of more than $4 million to get it off the ground.
• There was a market in desperate need of the program.
• The cooperative found a way to keep younger, healthier -- and cheaper -- participants in the purchasing pool, thus avoiding the "death spiral."

Those who sign up must be a member for at least three years and pay a fee that's forfeited if they leave prior to the end of that period. Oemichen said it also helps that the market served by the pool has a common bond in participants' struggles to find affordable health care.

The cooperative had hoped to have 1,000 members by April 1 but already had more than 2,000 by Jan. 1.

Half of the participants say they're paying less than they did before, while a quarter say they're paying the same and another quarter are paying more. But the common comment from all groups is that they're receiving better benefits than they did before, Oemichen said.

Plan helps farmers

For example, farmers typically can't get coverage for workplace injuries, meaning they aren't covered for any mishaps in their barns. The cooperative offers that coverage as well as a prescription drug plan, another rarity for farmers purchasing health care on their own.

"It certainly makes it a more doable program when you have an identified population that has access needs and where the access problems are faced not only by those who have more health problems but those with few if any health-care problems," Oemichen said.

The key to Doyle's new proposal is a community rating system that would set limits for the variances in costs for covering individuals within the pool. For example, an insurer may be allowed some variation based on where participants live, their gender or their age. But they wouldn't be allowed to charge a different rate for a normal 45-year-old worker vs. one the same age with diabetes.

By placing that requirement on providers, it avoids the possibility of the so-called "death spiral."

The proposal, which is still being hashed out, also calls for insurance providers to give uniform information on costs and benefits to afford employees the opportunity to pick the best plan for them. Doyle believes those factors and other details will create an incentive for insurance companies to offer competitive bids.

The rules would apply to any company offering insurance in the small business market.

Doyle said he hopes insurance providers see the plan as an opportunity to expand the small business market, though he acknowledges it could be a fight.

"I hope we can work with them in a way that they can see this is a declining market for them and by working with us, it's a way that they can actually expand that market," he said.

Previous efforts

A look at some of the health-care proposals aimed at small businesses that have come out of state government over the last 15 years:

Small Employer Plan: Dubbed the "basic benefits" package, it was introduced under Gov. Tommy Thompson and became law. It required insurance agents selling in the small employer market to tell their clients the plan was available. Critics say it didn't cover enough for the cost, and the marketplace largely rejected it.

Private Employer Health Care Coverage Program: Another Thompson initiative, the proposal was starting to get off the ground when Gov. Scott McCallum vetoed the start-up funding, which knocked out the program.

Co-op Care: It involved multiple pieces of legislation to get it going, and the program allows the creation of health-care purchasing cooperatives. Some have reported success, including the Wisconsin Federation of Co-ops, which has a pool serving farmers.

BadgerChoice: The latest proposal to come out of Madison, Gov. Jim Doyle has said he plans to put the program into the 2009-11 state budget. It would mandate that anyone selling insurance in the small business market adhere to a series of requirements. That includes a community rating system that would set limits for the variances in costs for covering individuals within the pool. It also calls for insurance providers to give uniform information on costs and benefits to allow employees to pick the best plan for them. The details are still being worked out, but the plan could require a state subsidy of as much as $100 million a year, which some lawmakers oppose.

JR Ross is the editor at WisPolitics.com.