.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} The Iowa Association of Business and Industry has formed what may be the state’s first association health plan, a move it hopes will generate long-term reductions in health-care costs and improved health for its members.

The statewide organization, which represents more than 1,300 businesses employing more than 300,000 Iowans, lobbied successfully earlier this year for legislation that allows insurers to provide health coverage to employees of small businesses that belong to qualified associations. By pooling into larger groups for coverage and encouraging wellness programs, small employers hope to achieve better rates for health insurance.

Rising health-care costs have driven double-digit percentage increases in health insurance premiums over the past several years, with small businesses experiencing much larger increases than larger companies.

Association health plans are uncharted waters, however, and it’s unclear just how many of Iowa’s small business owners are ready to jump in. Wisconsin passed similar legislation in late 2003 authorizing cooperative-based health insurance pools, and amended it last year after existing rules were found to be too restrictive. The first two cooperatives formed there just began insuring members earlier this year, though more co-ops are now being organized.

Iowa’s law, signed by Gov. Chet Culver on April 10, allows trade, industry or professional associations to offer group coverage to small business members and their immediate family members. The association must have been in existence for at least five years and not been formed solely for the purpose of providing insurance.

The new law also allows insurers to transfer small employers to a lower-cost rate class, provided they establish wellness programs or show they’ve improved their employees’ health. Health insurance companies may also offer premium credits or discounts to small employers that offer wellness programs.

Michael Ralston, ABI’s president, said his association is already seeing “great interest” from its small business members. Those businesses, however, will have to be patient to realize lower health-care premiums, he said.

“We are really focusing on the wellness side; we think that’s how we’ll get at the rate issue,” he said. “What we’ve said to members is that they shouldn’t expect short-term savings, but over the long term, four to six years, they’ll see stability in rates. At this point, we’re asking employers to approach this as improving health for their employees.”

Of ABI’s membership, 565 companies have 50 or fewer employees, and those employees represent more than 7,700 of its individual members. Ralston said approximately 130 of the group’s member companies responded to a survey indicating they would be interested in possibly joining an association health plan through ABI.

Iowa Insurance Commissioner Susan Voss and Wellmark Blue Cross and Blue Shield were among those who had opposed federal legislation that would have allowed association health plans of related industry groups on a national scale. However, the Iowa Insurance Division had no objections to the state legislation, whose provisions guard against “cherry-picking” of healthier employees.

Voss said the voluntary pooling will be arranged completely between the associations and the insurance companies, which must decide whether to grant an association a uniform risk rating for purposes of setting premiums.

“So we wouldn’t know who’s doing what,” she said. “It really allows them the flexibility of putting their groups together.”

ABI’s association health plan, which will be available to employees and families of any of its member companies with 50 or fewer employees, will be offered through Principal Financial Group Inc., and should be ready to begin enrolling members within the next 30 days, Ralston said.

Iowa’s legislation is “a first step in the right direction,” said Joe Teeling, president of TrueNorth Cos.’ Des Moines division, which will market ABI’s plan.

“I think it’s just a beginning, and if we can show some success here, the legislators will work with us to do more,” Teeling said. “We’re very hopeful that with what ABI is going to do to promote this to its membership, we think it’s going to take off. We have to have something that’s sustainable and that changes behavior. Those are the keys here.”

Teeling said he has spoken to the largest health insurance underwriters in the state, “and they all have an interest. So we were pretty delighted that the response from the insurance industry was pretty strong. And I think they want to do it for the right reasons, and I think they will be fairly picky about the ones they’ll work with, to ensure that the intent is right.”

Matthew Shaffer, a sales vice president for Wellmark, said his company is currently designing an association health plan for another “very large, statewide association,” and has been approached by several other associations about possible plans. Shaffer said Wellmark’s first association health plan should begin insuring members by January 2008.

Shaffer said Wellmark’s efforts in many cases have outpaced the steps the state has taken to address health-plan affordability for businesses.

“We’ve been very measured in how we’ve approached this, because a lot of the provisions (in the legislation) are already part of what we provide in the small-employer market,” he said. “We already employ a wealth of wellness programs for our customers. We’ve gone to great lengths to keep these plans affordable for small groups. We’ve revamped our entire product portfolio, called Real Solutions for Small Businesses, which is a very broad portfolio. That portfolio has already drawn 30,000 new members (of small groups) in Iowa.”

It’s still too early to say whether association health plans will represent a large portion of Wellmark’s business, he said. “But since we try to lead the market, a lot of the provisions in this bill don’t necessarily create any more cost savings than we already have.”

Dave Daniel, a vice president of sales with Principal, said other associations have contacted his company about establishing group health plans, “but at this point they have been more inquiries than active work,” he said.

The association health plans represent not so much new business as a rearrangement of the market, Daniel said. “I think there’s a hope that association health plans will bring more opportunities for employers to offer affordable health insurance,” he said. “We would expect that going through the process and if it’s done correctly, that that can be achieved.” Combining the plan with Principal’s health and wellness initiatives should enable those savings to be achieved sooner than with a group plan alone, he added.

The only other state in which Principal operates that is actively pooling employer groups is Wisconsin.

In Wisconsin, legislation enacted four years ago divided the state into five regions in which associated businesses could form cooperatives to offer health insurance to their employees. Two cooperatives in the state are enrolling members under that program, said Katie Mnuk, a project coordinator with the Wisconsin Federation of Cooperatives. Two other cooperatives, one for physicians and clinic employees and another for small businesses, are now being formed.

One of the existing cooperatives, the Farmers’ Health Care Cooperative, has enrolled more than 1,400 individuals since it began offering insurance on April 1, she said. “We’ve been very pleased with the reception that we’ve had with Wisconsin farmers and agribusinesses so far,” Mnuk said.

Another cooperative, Healthy Lifestyles Cooperative of Brown County, focuses on insuring small businesses. Employees were rated based on health statements they completed, which were then compiled by the insurer as one group with 12 rate tiers. Participating companies were then assigned premiums. Similar to Iowa’s law, the Wisconsin cooperatives program incorporates a wellness incentive, with better rates assigned to companies that adopt wellness programs.

Healthy Lifestyles began enrolling companies last year and in January began insuring a pool of 135 companies, covering just under 3,000 employees and family members. An additional 141 companies have signed up to form a second pool of companies, said Sherry Freeman, the cooperative’s sole staff member. “They will get their rates in just a couple of weeks; then they’ll have the opportunity to opt in or opt out of the insurance,” she said.

Phil Dougherty, senior executive director for the Wisconsin Association of Health Plans, expressed disappointment with his state’s initiative.

“It has not taken off; it has not been a silver bullet,” he said. One issue was the difficulty in finding insurance companies willing to cover the voluntary pools, “because we’ve seen in many parts of the country that voluntary pools don’t work. Those who need the insurance tend to stay in the pool, and those who can get lower rates tend to leave, and that creates a death spiral.”

One way the cooperatives have tried to address that potential problem is by instituting premium capitalization requirements. For instance, Farmers’ Health Cooperative participants must pay 10 percent of the three-year premium with the first month’s payment, which they forfeit if they leave the cooperative within the three-year period. Under Wisconsin’s law, the cooperative’s insurer must also commit to providing coverage for at least three years.

ABI’s Ralston said his organization hasn’t yet considered possible incentives to keep companies enrolled in the association health plan. “That’s something we may look at in the future,” he said. “Right now we’re looking just at the wellness portion.”