Insurers to launch first-of-its-kind health insurance pool in July.

As part of the state legislation aimed at increasing access to health insurance for small businesses, 18 insurance companies have formed the country's first cooperative insurance pool offering small employers health care and rates as much as 20 percent lower than what major insurance companies offer.

The pool is set up under AB 1672, which is scheduled to become effective July 1. The new law is expected to increase the health insurance options for nearly all of California's estimated 300,000 small businesses and the 5 million people they employ.

The law doesn't require companies to provide health insurance, nor is it expected to hold medical prices down. But it does remove many of the roadblocks small-business employers have had in getting health insurance, such as insurance companies discriminating against workers whose jobs they thought were too risky.

This has included loggers and even florists, who were stereotyped as gay and, therefore, a risk because of AIDS.

The law, introduced by Assemblyman Burt Margolin, D-Los Angeles, will initially apply to businesses with five to 50 workers, dropping to four workers in 1994 and three workers in 1995.

The insurance being peddled by the 18 companies in the pool) is called the Health Insurance Plan of California and is currently waiting final approval by regulators before it hits the market.

Each of the plans being offered by the 18 companies in the pool provide uniform benefits so that employees can easily judge which plan offers them the best value based on price and quality of service.

Each of the plans will carry a different price because each plan was negotiated separately with the California Major Risk Medical Insurance Board, the state agency charged with overseeing the pool.

Each of the pool's insurance plans will offer the following:

* Comprehensive medical care, such as hospitalization, physician visits, prescription drugs and medical equipment.

* The choice of joining any one of 17 health maintenance organizations, with a choice of either a $5 or $15 copayment. Under an HMO, enrollees pay a set monthly fee for health care.

* The choice of joining any one of three preferred provider organizations, with a choice of either a $250 or $500 annual deductible for specific medical procedures. Under a PPO, enrollees are offered a discounted rate for health care.

* Employers must pay at least 50 percent of the lowest-cost plan available to an enrollee, but they have the option of paying 100 percent.

The health insurance will be available starting July 1. Employers interested in getting more information on the plan can either ask their insurance agents or dial 1-800-HPIC-YES (494-2937).

Conspicuously absent from participation in the pool are a number of prominent insurers, such as Blue Cross of California, Blue Shield, Travelers Corp. and Foundation Health Corp.

Rita Gordon, a commissioner to the California Major Risk Medical Insurance Board, said the insurance companies not participating in the pool is reflective of the insurance industry's mentality of excluding certain groups because of the perceived risk.

"For many insurance companies, insurance is about who you can't cover," said Gordon.

Blue Cross spokesman Michael Chee said Blue Cross is not against the idea of a voluntary purchasing pool, it just doesn't see the business benefit of joining the pool because it would limit Blue Cross' ability to earn a fair return.

Chee said all companies in the pool would have to absorb losses, which would force them to raise rates in the private sector to offset the losses from the pool.

Another big factor in Blue Cross' decision not to join the pool, according to Chee, was that the company felt there was a lack of "consumer support" for customers in the pool because the role of agents and brokers is greatly reduced. Agents and brokers serve as the business' customer-service representative.

Not only can employers buy insurance from the pool direct by dialing the 800 number, but the commissions for agents and brokers is limited. Instead of tying agents' and brokers' commissions to the increases in health care costs, the pool limits commissions by the size of the enrollees.

"Since there is no relationship between health care inflation and costs for insurers, we didn't see the need to tie a commission structure to a percent of health care premium," said Richard Figueroa, deputy director of the California Major Risk Medical Insurance Board.

Instead of the standard 3-to-4-percent commission that agents and brokers receive from major insurance companies, agents and brokers who sell the pool insurance will receive between $50 and $100 a month for the first year, depending on the size of the group, and $4 per enrollee per month for the first year, said Figueroa.

Upon renewal, agents and brokers will receive a commission of $4 per enrollee per month for the entire term of the renewed policy.

Chee said that Blue Cross, in effect, has its own pool because 1.2 million of its members work for employers with less than 50 employees.

Response from small businesses to the insurance pool is expected to be moderate, said health care observers, because there is not a great reduction in rates.

"Rates are out of reach right now," said Harold Martinez, founder and president of Able Industrial Products Inc. in South El Monte, which has 14 employees. He said a potential reduction of insurance rates by 6 to 23 percent as a result of joining the pool is simply not impressive.

Under his current health plan with Foundation, Martinez said he pays around $115 per employee and believes that average rates per employee should be "well under $100," and only about $45 per month for employees under 30.