SAMA moves closer to health care consortium

The July 12 approval allows Mercy Health Plans to market health insurance plans to members of Springfield-based Southwest Area Manufacturers Association.

Under the decision, the Department will suspend for two years the Small Employer Health Insurance Availability Act, a requirement in the state statute that deals with premium restrictions.

Springfield-based Jenkins & Associates Insurance Consultants has proposed an association health plan for SAMA member companies, with coverage offered through Mercy. The plan requires that a minimum of 1,000 employees sign up for coverage as members of a consortium.

For Rita Needham, executive director of SAMA, the proposed consortium and the suspended statute come after a long search for health care coverage suitable for the 43 manufacturer members in her organization that have 25 or fewer employees.

“It has been the No. 1 concern of our members for the last three years,” said Needham, who oversees the group of more than 100 member companies representing about 10,000 employees. “Our members, for the last few years, were hit with double-digit increases in health care costs. That directly impacts their bottom line and their ability to continue to be profitable and stay in business, and also their ability to continue to hire workers.”

Manufacturers, she said, are under intense global competition.

“If they get a double-digit increase in health care, they can’t pass that on in the form of higher prices for their product,” Needham said. “They’ve been having to either assume that cost or pass it on to employees … or they’ve had to dilute their plan designs to lower their premium costs.”

Doug Jenkins, president of Jenkins & Associates, contacted Needham after reading an October 2004 story in Springfield Business Journal on the high insurance premiums SAMA’s members were dealing with. In the article, Needham said health care premiums for large manufacturers, averaged about $6,375 per employee while, smaller businesses were paying up to $7,190 per worker.

Jenkins represents six health care consortium groups in Missouri, the first formed in 1997. He said annual rate increases for other consortiums’ members have averaged less than 10 percent. “There were years where they received as low as a 3.5 percent increase, and some other years they received a 12 percent (increase),” he said, adding that there are no guarantees of specific rate increases for any consortiums, including the one SAMA might form.

The focus, Needham said, is long-term rate stability.

Cost savings

Premiums for the proposed SAMA consortium health care plan have not yet been determined.

“The pricing will be based upon the risk at hand,” said Sam Drysdale, manager of group sales and service for Mercy health plans, a health insurance company that provides coverage to more than 80 school district consortiums in Missouri. “Once people decide that they want to participate in this type of a buying group, our underwriters will assess what the pricing for that risk should be. It’s going to be based on the demographics of that group.”

Needham anticipates a Jan. 1 effective date for the plan, which would be offered to all SAMA members.

Health insurance consortiums, Drysdale said, can offer small employers lower premiums by allowing the groups to be owned by the participants. “It helps them in lower administrative costs,” he said.

More covered members means lower costs as well.

“I think we’ll reduce the vulnerability to risks because there will be so many more lives to spread the risk across,” Needham said. “If an employer with 10 employees has a large claim, they only have 10 lives to cover that, to spread that over. But if we have a pool of 1,000, we can spread that over 1,000, and that will make a big difference.”

In order for it to work, however, members must be committed to the consortium for the long term. That commitment has worked for employees of the Nixa school system through the Southwest Missouri Educators Group, a consortium set up by Jenkins & Associates in 1997.

“It helps us through low times when we all stick together,” said Stephen Kleinsmith, superintendent of Nixa schools. “When you have a good year, your good year helps the other schools who might be having a bad year. One year, you might be the one that has a bad year, and the power of numbers keeps the peaks and the valleys stabilized fairly well.”

Kleinsmith said that the district’s 500 employees could probably stand on their own, with their own plan, rather than being part of the 13-district consortium, which also includes Republic and Marshfield. “But it’s my opinion that we would stand alone on weaker ground if we did that. We get better rates and better coverage through a consortium model,” he said. “There’s more and more consortiums popping up, and I think it’s for that very reason – the power of numbers and the protection that you surround yourself with.”

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