Coalitions help Texas firms find insurance
Covering Small Business
Small businesses face a multitude of challenges, including the unhappy prospect of paying more for health insurance than large firms.
Legislation passed by the 2003 Texas Legislature, however, can help small businesses find more affordable coverage.
House Bill (H.B.) 897, enacted in response to a January 2003 recommendation by Texas Comptroller Carole Keeton Strayhorn, allows small employers to form coalitions that can purchase employee health insurance as if they were single business entities, obtaining better rates by spreading risk across a larger pool of insured persons.
Business alliances to obtain employee insurance have been legal in Texas since 1993. But H.B. 897, which became effective on September 1, 2003, is the nation's first law specifically designed to help small businesses band together.
It allows such firms to form coalitions of up to 50 employees. By law, insurance carriers must treat these coalitions as single entities, offering them the same terms and rates as a single firm with the same number of employees.
Such companies often find it difficult to find affordable employee insurance on their own. Michael Lee, president of Texas Coalitions Inc., a nonprofit corporation formed to educate businesses and help them form H.B. 897 coalitions, noted that insurance carriers can charge firms with fewer than 10 employees rates up to 20 percent higher than larger companies receive.
"But when you get to 20, 25 lives covered, they start discounting the rates," Lee said. "That's where the savings are at."
In May, two H.B. 897 coalitions had received coverage. The First Texas Health Coalition, formed by Texas Coalitions, provides coverage for seven companies with 22 insured employees, saving them an average of about 30 percent over the rates they could obtain separately.
The TRA Coalition, formed by Benefit Designers of Texas Inc., of Wimberley, covers 15 employees of four retail firms.
"They all saved money by going into the coalition and in most cases were able to get better coverage," said Mary Starr, president of Benefit Designers.
Texas Coalitions has formed eight additional coalitions, but none have found suitable rates.
"The carriers are extremely adverse to coalition business," said Lee.
"Some of the carriers don't feel that they have to comply with this," she said. "And then there's others that say, 'Yeah, we'll do it, but we'll make it hard on you."'
Such stories prompted the Texas Department of Insurance to issue an October 12, 2004 memo--"the strongest I've seen come out of the department in 35 years," said Marvin Williams of Texas Coalitions--reminding carriers of their responsibilities under H.B. 897.
They will come, anyway
Texas Coalitions believes it's only a matter of time until H.B. 897 coalitions become more common.
"The public still doesn't know very much about this," said Williams. "But there's about to be mass publicity."
Greater acceptance of coalitions can't come soon enough for some businesses, according to April Arzate, president of Ascend Health Services, a company for which Texas Coalitions is seeking coverage.
"It's been frustrating," Arzate said. "There is a truly desperate need for some type of health care access for small businesses. I think the coalitions are definitely the way to go."