Novel Approach to Health Plans Gains Traction

Hospitals and Nonprofits Offer Packages of Basic Care Directly to Small Businesses


As the Obama administration wrestles with how to expand health-care coverage to the millions of uninsured Americans, some local organizations are finding creative ways to help cover one of the most affected groups -- employees of small businesses.

The programs typically involve collaboration between business owners, nonprofit groups and local hospitals, which offer enrollees a range of medical services at a reduced rate. The plans keep costs down partly by bypassing the extra costs that come with traditional insurance. That can be a big help for small-business employees who can't afford traditional insurance. But for patients with costly chronic diseases or catastrophic illnesses, the coverage would likely be inadequate.

In Galveston, Texas, the University of Texas Medical Branch hospital recently began providing coverage to more than 430 employees of small businesses at a cost to individuals of $60 a month, plus copayments -- far less than many traditional insurance plans. Nonprofit groups, including ones in Duluth, Minn., and Pueblo, Colo., have started similar programs. In Muskegon, Mich., one such program called Access Health currently covers about 1,100 small-business employees.

Gail Peterson gets health care for her and her employees under a so-called 3-Share plan at UTMB.

Gail Peterson, who owns a small printing company in Galveston, says she has offered to help her employees get insurance by paying half the monthly cost of about $300 per person. But the workers weren't willing to participate for that price. Instead, Ms. Peterson enrolled her company in the UTMB plan, and all five of her employees have signed up. Ms. Peterson also dropped her own traditional individual-insurance plan, which had cost her $400 a month, in favor of the UTMB coverage.

Small-business employees make up a disproportionate share of the country's uninsured. Some 15% of U.S. residents, or about 46 million people, were uninsured as of 2007, the latest data available, according to the Census Bureau. Meanwhile, 32% of workers at U.S. companies with fewer than 25 employees were uninsured in that year, and 21% of employees at firms with 25 to 99 workers had no coverage, according to the Kaiser Family Foundation.

"If you get a person into primary care where an issue can be identified at its earliest stages, then you can ...have an impact on it before it becomes a huge issue, a catastrophic-type case," says Jim Rodriguez, executive director of the UTMB plan.

Delia Melendez, a 42-year-old employee at a small dental laboratory in the Galveston area, says she wasn't going for medical check-ups when she was uninsured. But diabetes runs in her family and she wanted to get checked every so often to make sure she's not developing it herself. Signing on to her husband's workplace health plan would have cost the couple about $350 a month. So, after her employer joined the UTMB plan, she enrolled at a cost of $60 a month.

"For the price and for what it does cover, I felt it was a reasonable amount for me to have," Ms. Melendez says.

The UTMB plan in Galveston pays for 20 doctor visits a year and covers maternity care, visits to the emergency room, medical imaging such as CT scans and MRIs, and surgery. Enrollees can go only to UTMB and its staff doctors, and the coverage limits are lower than those of most employer-sponsored insurance plans: $1,200 per year for drugs, for instance, and a lifetime cap of $250,000. Family members aren't covered.

These types of plans are called 3-Share, because employers and workers who participate each pay a third of the cost and the nonprofit groups find other sources of funds for the balance. The nonprofits generally look to government, foundations and hospitals as possible sources of money.

Traditional insurance last year cost on average $382 a month per employee at businesses with fewer than 200 workers, according to Kaiser. The total cost for the UTMB plan is $180 a month. Employers and workers each pay $60 of that, and the rest is paid for by UTMB and the Houston Endowment, a philanthropic foundation.

Such plans are a middle ground between traditional insurance coverage and so-called limited-benefit plans, says Randy Giles, chief executive for South Texas of UnitedHealthcare, an insurance unit of UnitedHealth Group Inc. Limited-benefit plans tend to have sharply reduced coverage limits and are often marketed to part-time or temporary workers.

The UTMB plan avoids directly competing for patients with traditional insurers -- for instance, it markets only to small businesses that haven't offered health coverage to workers in the prior 12 months.

Under state law, the UTMB plan isn't categorized as "insurance." That means it isn't subject to state requirements for how much money it must have available in case claims shoot up. It also isn't required to cover certain types of care, such as inpatient mental-health care or inpatient alcohol- and drug-dependency treatments.

Patients also have fewer protections than with traditional insurance. If the UTMB plan were to go under, patients won't be protected by a coverage fund to which insurers are required to contribute. Patients also aren't able to appeal to state insurance regulators if they have disputes with the plan over whether specific services should be covered.

Groups involved in organizing 3-Share plans say they are trying to maintain standards of care similar to those mandated for insurers, and to reserve sufficient funds if claims should shoot up.

UTMB says it doesn't expect to make a profit from the program. Still, the hospital hopes the coverage plan will save it money by helping it collect co-pays and premiums from patients who often used to pay little to nothing when they came to the emergency room and UTMB clinics as uninsured patients.

For some patients, the coverage isn't sufficient. Anthony Rios, 47, started on the UTMB plan last August. But he blew past the $1,200 annual limit on drug coverage in January when he began a regimen of three HIV drugs that cost a total of $2,000 a month. He also worries about how quickly he would exhaust the $250,000 lifetime cap if his health were to worsen significantly.

"A young person who doesn't have any health issues, they'd be OK with that kind of coverage," Mr. Rios says. "But it's not for a person who is a high-risk patient."

Mr. Rios is looking for new options, including a state assistance program that helps pay for HIV drugs and an insurance plan through the state's "high-risk pool" for patients who are unable to buy insurance on their own because of health problems. The risk-pool plan would cost him 10 times as much, $600 a month, but it has a $2 million lifetime coverage limit.

"Some of it does have to come down to what's doable versus what's ideal," says Connie Crawford, an assistant county attorney in El Paso, Texas, and a member of the TexHealth Coalition, a collaboration of nonprofit groups and others aiming to set up additional 3-Share plans around the state. "Hopefully you can avert catastrophic things by providing a medical home and primary preventive care."

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