Plans tout affordable options for businesses.

To hear insurance executives and business experts tell it, small business owners are a lot like typical teenagers. They don't listen to anyone except their friends--in this case other small business owners.

These days, insurance companies are exerting parent-like pressure in order to get small business owners to listen to their advice and offer health insurance to their employees.

Michael Chee, spokesman for Blue Cross of California, echoes Valley hospital administrators when he says that the main problem in getting all Californians insured is education. According to Blue Cross' research, one third of those 6.5 million uninsured Californians qualify for some sort of state sponsored program, and another third can afford some kind of private insurance; they just aren't aware of their options. Included in this two thirds are some of the people across the state working for small businesses that don't offer insurance.

Chee is certainly ready to present a case to those businesses.

"There are studies out there that show health benefits help retain and attract loyal employees and more productive employees. Businesses that offer health insurance compared to those that don't show higher profitability and a higher long-term success rate. Employees feel more devoted, loyal and grateful to the company," Chee said.

Many business owners have individual insurance, he said, and they aren't aware of flexible new programs that insurers have developed over the last few years or of state laws that guarantee coverage for employees.

In an attempt to break through to this potentially rich market, Blue Cross launched its new BeneFits program in January aimed at small business owners, who can participate with as few as 60 percent of their workforce and pay as little as 25 percent of premium costs. Employees in this program choose between different plans with varying degrees of cost and coverage. The company has launched a direct mail campaign and a moderately successful radio campaign aimed at convincing small businesses to sign up for the plan. Appearing last week before the Latino Coalition Small Business Economic Conference in Washington, D.C., Larry Glasscock, CEO of Blue Cross parent WellPoint, said that 84 percent of the groups enrolled in BeneFits were previously uninsured.

Blue Cross has also partnered with the U.S. Small Business Administration to present a series of free seminars for small businesses throughout the state. There are presentations on maintaining cash flow, obtaining business loans, taking advantage of financial and technical assistance programs, boosting productivity and several other topics. Naturally, Blue Cross also includes an informational session in which it explains its health plans like BeneFits to the gathered business owners.

Negative views

Chee is also aware that plenty of people working in health care consider private insurers to be as much the problem as they are the solution to the state's problems.

"Have a look at the health plans, look how profitable they are," said David Levinsohn, chief executive officer of Sherman Oaks Hospital. "Blue Cross makes $350 or $400 million a quarter ... that money goes fight out of health care, that does nothing for health care. They'll tell you 'Oh we've got a wellness foundation,' and stuff like that. But look at the stock price of Blue Cross, Health Net, PacifiCare. The people that are making money in health care today are the health plans."

Anthem Inc. (now WellPoint Inc.) received some criticism from Insurance Commissioner John Garamendi last year when it was acquiring WellPoint Health Networks because it agreed to pay WellPoint chairman Leonard Schaeffer $47 million in cash in addition to the $187 million in stocks he held.

In response to hospitals' claims, Chee said that Blue Cross and other companies can only be responsible for taking care of their investors and clients. Private plans are only responsible for the people that pay into the plans, Chee said, not for hospital costs that don't involve patient treatment.

"Historically, government players like Medicare used to be the deep pockets, they provided a large amount of revenue for hospitals, but all that changed dramatically when federal Medicare laws changed," said Chee.

For a while, hospitals were able to squeeze better rates from insurance companies by consolidating. Insurance companies have become more vigilant in combing over hospital invoices and deciding what they should be covering.

Bobby Pena, spokesman for the California Association of Health Plans, said that hospitals, because they are required to constantly purchase new equipment and pay for seismic improvements, are also a big factor in the increase in medical costs.

He said that health plans, through disease management programs and managed care, have actually tried to slow the rising costs as much as they can. Before managed care, Pena said, doctors that treated the same patients were often duplicating their work and causing cost overruns.

"The average patient would say 'I have a heart problem, I'm going to my cardiologist,' or 'I have a stomach problem, I'm going to my gastroenterologist.'" A lot of times, physicians weren't talking to each other. Managed care has improved quality through coordinating better management."

Pena said small businesses have the most to gain from insurers' cost saving efforts, since they feel the pain of rising premiums most acutely.

Kaiser Permanente, a private nonprofit health plan, avoids many of the conflicts between hospitals and insurance companies because of its unique model. Kaiser's doctors work directly for the insurance company at Kaiser hospitals. As a nonprofit, the company doesn't have to worry about paying dividends and keeping shareholders happy.

"For more than 60 years now, Kaiser Permanente has been in the business of keeping people healthy--we are and always have been about disease prevention and the promotion of wellness. It is far more cost effective to keep people healthy than to treat them once they become ill," said Jane Finley, Senior Vice President for Kaiser. "Beyond this, the best way to control costs is to make sure that delivery systems are operating in the most efficient and effective manner possible. The way Kaiser Permanente ensures this is through integration of patient care services. Our services have always been integrated--meaning carefully coordinated via primary care physicians, specialists, health educators and pharmacists working as a team."

Expanding choices

Finley said that, through its cost saving efforts, Kaiser has also been able to expand its health care choices for small businesses, offering relatively inexpensive plans.

Neither Chee nor Finley was prepared to offer a solution to the state's rising health care costs, but each company is driven, whether by profit or otherwise, to insure as many people in Southern California as possible, they said. Covering the uninsured is the necessary first step, Glasscock said.

"There is no single, simple solution to the challenge of the uninsured--but we can solve the problem," Glasscock said.

Attempts to regulate health plans or set up a single-payer system are greeted with skepticism. Health care experts and laypeople think that such a switch that would only lead to a rationing of care.

Legislative requirements that have been approved such as a requirement that new mothers spend at least 48 hours in a hospital after delivery are dealing with matters best left to doctors, Pena said. When legislators approve these mandates, Pena said, the people that end up paying for the increased costs are individuals and employers.