Audit: Wis. Never Implemented Health Care Program for Businesses

November 20, 2007

A program created by Wisconsin lawmakers in 1999 to reduce health care costs for small businesses was never implemented after running up nearly $500,000 in spending, according to an audit released last week.

The Private Employer Health Care Coverage Program was canceled because insurers weren’t interested in participating, the nonpartisan Legislative Audit Bureau reported. The state also didn’t give the program enough money or change insurance regulations so it would succeed, the report said.

“The tragedy of it is in the 1990s we could have implemented a statewide health insurance program for small employers, but the political will failed us,” said Bill Smith, state director of the National Federation of Independent Business, which lobbies on behalf of small businesses. “We’ll never know if it would have been successful.”

In all, the state spent more than $470,000 before abandoning the effort in 2003.

Lawmakers directed the Department of Employee Trust Funds in 1999 to create a health insurance pool open to all farmers and small businesses with at least two employees. The agency was to design and promote the program and hire a private administrator, which would then contract with insurers.

The pool was to give small employers a choice of competing health plans for their employees. By banding together, supporters hoped businesses could reduce administrative costs and negotiate lower premiums.

Insurers in the program would have been required to provide coverage to any employer who applied, without regard to their employees’ health.

The effort ran into trouble in 2000 when no companies responded to the state’s call for proposals to run the program. Potential administrators did not believe lawmakers had given the program enough money to cover costs and they doubted they would have much negotiating power with insurers, auditors said.

Insurers, meanwhile, shied away because they feared the program would attract a disproportionate amount of individuals with expensive health care needs, the report said.

Lawmakers tried to address the concerns in 2001 by increasing funding and changing regulations to limit the difference in premiums that companies could charge small businesses. But then-Gov. Scott McCallum vetoed the funding and the regulatory changes after a lobbying blitz by insurance companies, Smith said.

“That was really the kiss of death when he did that,” he said.

In his veto message, McCallum said he objected to the funding source for the program and said the insurance changes would have increased premiums for some businesses not in the program.

The board overseeing the program disbanded in 2003 after a study concluded it would be unlikely to succeed without money to subsidize premiums or the regulatory changes.

Lawmakers have never repealed the original law, but the state budget signed last month prohibits the program from hiring employees or receiving money.

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