Bucking National Trend, Thousands of California Small Employers Purchase Health Coverage for the First Time.

Business Editors & Health/Medical Writers

ORANGE, Calif.--(BUSINESS WIRE)--Oct. 28, 2002

Concern is mounting that significant rises in health premiums will force an increasing number of companies to drop healthcare coverage altogether, especially at the small business level. One California-based program, however, has found a way to buck this trend through a model that has opened the door for thousands of businesses to actually offer coverage to their employees for the very first time.

CaliforniaChoice, the nation's leading small group health purchasing alliance, disclosed today that a full 40 percent of its 10,000 employer groups were previously uninsured prior to signing up with CaliforniaChoice. That means that 4,000 California employers - and tens of thousands of California residents - have joined the ranks of the insured thanks to CaliforniaChoice.

"This demonstrates that we have developed a different model that is making healthcare attractive for employers and employees alike," said John Word, managing partner of CaliforniaChoice. "This is critically important at a time when over 40 million of our nation's citizens are uninsured and double-digit rate increases are causing many small employers to consider whether they can continue to afford to provide coverage for their workforce at all."

Employers find offering health coverage an easy business decision to make with 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 "voucher," employees are then empowered to choose from multiple carriers within the CaliforniaChoice purchasing pool. All of these health plans are competing for business based on provider network, drug formulary, geographic convenience, reputation and, of course, price. Employees who want "richer" benefits than the employer is funding may contribute the difference out of their own pocket. More than 64 percent of CaliforniaChoice members choose to "buy-up" in this manner.

"Even budget-conscious employees recognize the need to contribute their fair share to the cost of health care," says Word. "When it comes to their family's health, employees are willing to pay for what they want provided they are given the opportunity to make their own choices. We have found that while people are very concerned with the cost of health insurance, they are equally as troubled by the inflexibility of most plans. That combination makes it easy for them to just say no."

CaliforniaChoice has been particularly successful due to the diversity of its product offerings, including a range of HMO network choices, four PPO benefit designs and a consumer-directed product that qualifies for a tax-deferred Archer Medical Savings Account (MSA). For added flexibility, employers opting for CaliforniaChoice may make the consumer-directed product available to those employees who want it without forcing their entire group to embrace it on a replacement basis.

"Employers are looking for viable solutions and their desire to control costs and achieve budget predictability has caused them to take a fresh look at some innovative new approaches," says Word. "The fact that four out of ten of the companies we cover never previously had health insurance at all tells us that the time is right for a program such as CaliforniaChoice."

Based in Orange, California, CaliforniaChoice currently serves over 10,000 employer clients and approximately 150,000 members. Earlier this month the Health Insurance Association of America recognized the company's efforts in the areas of cost controls and employee choice with HIAA's prestigious annual "Innovators Award," which recognizes one company in America whose contributions that have led to "true industry advancement." Further information on CaliforniaChoice may be obtained at www.calchoice.com.