"Yes," says George Morrow, principal and health-practice leader with William M. Mercer Inc. in Minneapolis. "Self-funded companies have gotten all the ink, but in fact it's the small employer who will have the greatest long-term impact on the delivery of health care. Why? Because most people in this country are employed by small companies. By far the greatest percentage of health costs is picked up and paid for by small employers."
Smaller companies can impact the cost and delivery of care in their communities the same way that large employers do: by uniting and using their combined purchasing power to get the attention of the insurance and provider communities. The only difference is that it takes many more small companies to make a statement.
In Cleveland, the Council of Smaller Enterprises (COSE) has more than 11,000 individual business members. These members buy health insurance for 70,000 workers and more than 105,000 dependents.
On behalf of its members, COSE has been able to buy coverage from a number of carriers—Blue Cross & Blue Shield of Ohio being the largest—at prices 25% to 50% lower than members can individually. This is because the group's large size allows insurers to predict utilization patterns reasonably well, i.e., the number of births, appendectomies and so on. The current annualized premium is worth nearly $200 million, making COSE the largest single customer of Blue Cross in Ohio, explains John Hexter of Hexter and Assoc. Inc. in Cleveland. "It wasn't this way when we started, however. It took 20 years to get this many small businesses together."
By joining forces to collectively buy health insurance, the small employers in Cleveland have become a model for health-insurance purchasing cooperatives, or HIPCs. Federal lawmakers are pushing HIPCs as a way to enhance the accessibility and affordability of health insurance for small employers. As found in Cleveland, HIPCs offer members competitive premium pricing and the flexibility to choose from a variety of carriers.
HIPCs can help address the small-employer's concerns about the cost of care, but what about quality issues and the importance of structural reform? Small employers can have an impact there too, Morrow says, by joining with larger employer-based health-care coalitions. "Initially, you'll see small employers focused on cost, because that has defined their relationship to the delivery system. But small employers also are more prepared to pursue radical reform and to create more competition in the health-care marketplace. That's because they're so preoccupied with competition," says Morrow.
In Cleveland, COSE members have addressed the issue of health-care competition and quality by uniting with the Health Action Council of Northeast Ohio, a coalition of large and mid-sized employers concerned about health-benefits issues.
"By joining with some of the larger purchasers," Hexter says, "we were able to bring along our 105,000 covered lives—added this to their pool of 250,000 covered lives, and we created an organization that now has some tremendous clout in the medical community. Our common interests allow our organization to work beautifully."
Because of the group's efforts, providers in Cleveland now are compiling data on patient satisfaction and clinical outcomes on high-cost treatment. This will allow both direct buyers of care and managed-care organizations to direct patients to the most cost-effective and efficient providers.
Although COSE has been building its membership steadily since 1973, other small employers can learn from the examples that it provides: that it's much harder to influence health costs individually than it is to do it collectively in a health-care coalition.
"This isn't hard," Hexter says. "Just put an ad in the newspaper asking if other companies are having trouble with their health-care costs and guess how fast you'll get responses. It's the hottest topic in the small-business market. It doesn't take too many 100-employee companies before some of the benefits managers in big businesses in the community will see the value of your participation."
Personnel Journal, September 1993, Vol. 72, No.9, p. 110.