Small Firms Lose Health Insurance Alternative Purchasing Alliances Going out of Business

Article excerpt

A group of third-party administrators that was supposed to provide cheaper health insurance alternatives for small employers is going out of business.

The Community Health Purchasing Alliances, or CHPAs (pronounced chippas), will not allow insurance agents to sell new policies through the alliances after May 15. Businesses that already have a CHPA policy will not be able to renew starting July 1.

Companies whose employees have an existing policy that expires before July 1 will remain with their health insurer until 2001, according to information provided by the CHPAs.

Letters were mailed to CHPA members and agents last Friday detailing the cancellation.

CHPAs were created by the state Legislature in 1993 and began selling policies in 1994. Their purpose was to offer a variety of health insurance options to small businesses at cheaper rates than the open market.

At first it seemed to work, said Connie Ruggles, a senior management analyst with the state Agency for Health Care Administration, because costs were low and many health insurance companies were offering a variety of health care plans through the alliances.

But the CHPAs could not "pool" the small businesses together to create a single, more powerful marketing group, as they had hoped. Under Florida law, only state and local governments, large private employers, certain private associations and labor unions can create a pool.

So health insurers participating in the CHPAs began looking at companies individually. If an employee chose an HMO from one health insurer and a co-worker chose an HMO from a different health insurer, they were looked at as individuals rather than a multi-person business, Ruggles said. …