CaliforniaChoice holds down premium increases, but at a cost
PR Newswire
Jun. 29, 2004
CaliforniaChoice Announces Zero to Single-Digit Increases in Health
Insurance Premiums
At a time when employers throughout California continue to experience significant increases in their health insurance premiums, CaliforniaChoice today announced a zero percent increase for one HMO carrier and single-digit increases for almost everyone else participating in their small-group health purchasing alliance. CaliforniaChoice is the state’s leading authority on small-group (employers with 2-50 employees) healthcare benefits.
Employers find purchasing health coverage an easy business decision to make thanks to CaliforniaChoice’s unique budgeting process. Instead of the health plan telling the employer how much they have to pay under the old “defined-benefit” model, it is the employer who determines precisely what they are capable and willing to spend on their employee’s health insurance. Employers establish this fixed budget — which is known as their “defined contribution” — and in doing so achieve cost controls and budget predictability.
Using their employer’s contribution as a sort of “voucher,” employees are then empowered to choose from multiple HMO and PPO carriers within the CaliforniaChoice spectrum of health plans. All of these health plans compete for business based on provider network, drug formulary, geographic convenience, reputation and, of course, price. Employees who want “richer” benefits than the employer is willing to fund simply contribute the difference out of their own pocket.
In 2002, the Health Insurance Association of America honored CaliforniaChoice with its prestigious “Innovators Award,” an annual recognition for a select company whose contributions have led to “true industry advancement.”
http://fsnews.findlaw.com/articles/prnewswire/20040629/29jun2004050042.html
Comment: Since CaliforniaChoice uses existing HMO and PPO plans, including Blue Shield and Kaiser Permanente, it functions as an additional middleman in the health care funding arena. Although they claim to reduce administrative costs, their model, as an additional administrative intermediary, is unlikely to do so.
Most small businesses that do not currently offer their employees health benefit programs are not expected to do so merely because products are available that slow the rate of premium increases. These products are still unaffordable for many, and they will not motivate employers who simply do not care about their employees’ welfare. Instead, the defined contribution products offered by CalifoniaChoice will result in a shift from coverage through traditional defined benefit programs which provide more comprehensive coverage. The current epidemic of under-insurance will explode with these newer products.
Personal bankruptcy due to medical bills accumulated by individuals who have health insurance have already become commonplace. With the increase in defined contribution products, we can anticipate a further expansion in the need for bankruptcy services. Perhaps CaliforniaChoice will now also qualify for the “Innovators Award” from the National Association of Consumer Bankruptcy Attorneys.