California's new healthcare agenda.

Throughout the nation, small companies are speculating that President Clinton's healthcare reform plan may benefit larger companies only, leaving small employers limited in the healthcare coverage, if any, they can afford to offer their employees. An important feature of healthcare reform plan is the development of large purchasing pools known as Health Insurance Purchasing Cooperatives.

The nation's small employers will assuredly be keeping a close eye on California. Starting this month, the number of working uninsured in California could get a lot lower because of a state health care reform bill that guarantees coverage to companies with five or more employees. The concept set forth by State Assembly Bill 1672, effective on July 1, 1993, is a key component of a reform model known as managed competition, which the Clinton Administration is considering adopting for the entire nation.

California employers may take advantage of AB 1672 in two ways. They may be assured of the availability of health coverage through all insurers marketing to small businesses regardless of their employees' health status. Or by joining a Health Insurance Purchasing Cooperative in California known as the Health Insurance Plan of California (HIPC), the employees may each select from any number of health plans without regard to health status. Next year, the HIPC will be open to companies with four employees and in 1995, the pool will apply to companies with only three employees. The future of health care, still only in the planning stages in other states and at the White House, is now reality in California.

Virtually all large employers offer health coverage to their employees -- and already deliver the advantages of HIPCs. Now with passage of AB 1672, comprehensive health coverage will no longer be an unaffordable luxury for many small companies. California lawmakers and the insurance industry believe that the new bill will offer small businesses easier access to health care, more affordable health insurance rates, increased stability in premium rates, and a wider selection of benefits. Clinton officials have been in constant contact with the state and California insurers during the establishment of the health care reform plan and will monitor the program during the next year to measure the success and identify any problem areas of the program.

Although the bill is expected to benefit thousands of companies in California, many small employers are still unsure about what this ground breaking new law will offer them. Studies have shown that the more small business owners learn about the details of AB 1672, and the development of HIPC, the more they like it.

Among the favorable benefits offered under AB 1672 are:

1) guaranteed coverage and renewability for any small business;

2) development of standard rates based upon the location and family composition of the employee;

3) implementation of new rules shortening the amount of time of a pre-existing exclusion and allowing credit for an exclusion period already satisfied; and

4) limitations to the amount of premium increase for the second and subsequent years.

To the individual working for a small company, guaranteed coverage could not have arrived sooner. Until now, many private health insurers used the "cherry picking" method of offering care to a select group of companies they considered at "low risk" for health problems. Often, entire industries were deemed "high" based on common stereotypes. Some companies found their efforts to provide health care coverage to employees frustrated when their insurance carrier raised premiums dramatically after a worker filed a claim essentially pricing them out of the health care market.

One of the most important facets of the HIPC that small businesses need to be aware of is the new leverage it offers them in the purchase of health care benefits. Previously, the ability to haggle over health care costs was only available to companies with a large number of employees who could guarantee a substantial level of enrollment. Earlier this year the HIPC contracted with insurers, health maintenance organizations and other medical plans on behalf of some 300,000 small companies and the 5 million people they employ, creating a powerful pool of purchasers when it comes to negotiating health care prices. Each carrier provided set rates for each of the next two years, beginning July 1 1993.

The HIPC will be managed by private industry. They have contracted with an outside company to provide administrative services, such as marketing, eligibility and premium billing. In order to for the HIPC to be considered a success, the state has mandated that the HIPC break even its first year.

Under the HIPC employers can purchase their health care benefits directly through the HIPC or through the use of an agent. Once an employer chooses to utilize the HIPC, each employee has the choice of any of the contracted participants and each of the four plan designs. The design of these plans consist of a basic health maintenance organization and PPO; or a preferred health maintenance organization and PPO. The key difference between the plans is the deductibles or co-payments. On July 1 of each year, an open enrollment period will allow each employee to switch carriers and/or plan designs if they choose.

Before an employee chooses a plan, they will want to carefully examine the quality of each health care plan offered through the HIPC. While benefits in the HIPC remain relatively constant, there are subtle differences in plan designs and network access. A prospective employer/member would do well to compare the details of each plan and choose wisely. The National Committee for Quality Assurance (NCQA) is an independent non-profit institution that reviews and accredits health maintenance and managed care organizations as to their quality assurance programs, credentialling, utilization management, members' rights and responsibilities, preventative health services and medical records. NCQA accreditation demonstrates that the health care plan not only takes quality care seriously but is also committed to continued improvement.

Beginning this month, the state of California will serve as the broad based testing ground for a cutting-edge health care reform plan that has only been subject to experimentation by very small groups of businesses and professional organizations in limited geographic areas. Small business owners, employees and health care providers in California must realize that this is uncharted territory. The plan's success is not guaranteed. However, if the HIPC in California matches the expectations set forth in AB 1672, it could lay the groundwork for an equally successful, and accessible, national health care plan for employers of all sizes.

Susan D. Odomis Director of Public Relations for Prudential's Western Group Operations.