The state’s health insurance program for small business has received a clean bill of health from an audit mandated by the Legislature.
Healthcare Group (HCG), established in 1986 by AHCCCS to provide health coverage for employees of small business and political subdivisions, is performing well in three areas examined in a special audit ordered by the Legislature last year, the Auditor General’s Office reports.
As of December 2005, 17,850 people were enrolled in HCG’s benefit plans, and over the next 18 months, the self-funded program expects to have more than 50,000 members, says AHCCCS Director Tony Rodgers.
The program serves employers and political subdivisions with 50 or fewer employees.
“The key to financial sufficiency and keeping HCG premiums affordable is continued membership growth and attracting not only ‘forty-somethings’ but also ‘twenty-somethings’ to our health plan benefits,” Mr. Rodgers wrote in a response to the audit.
The audit covered the program’s administrative costs, reserves and whether it is abiding by laws regarding who’s eligible for coverage.
There were allegations last year by a former HCG employee that Mr. Rodgers was encouraging business applicants to sidestep a requirement that they be without group health insurance for six months to be eligible for the state program. An external investigation found no substance to the allegation.
Called the “bare period,” the six-month eligibility requirement was established in 2004, and HCG this year instituted policies requiring prospective applicants to certify they have met eligibility requirements, and the program is authorized to contact insurance companies to certify dates and types of benefits previously provided.
Mr. Rodgers cited a Kaiser Foundation finding that the No. 1 one reason for small business failures and bankruptcies was a major illness suffered by the business owner.
“Large employers often have the competitive advantage for Arizona’s labor market because they can offer health benefits,” Mr. Rodgers wrote.
No General Fund appropriation
HCG’s approximately $6.9 million in administrative costs between July 1, 2003, and Sept. 30, 2005, were 8.5 percent of the program’s total costs, mostly for salaries and benefits and professional services. In addition to revenue from premiums, HGC received $7 million from the Legislature, approximately $700,000 of which went toward administrative expenses, the audit states.
The program did not receive a General Fund appropriation this year.
In his response, Mr. Rodgers stated administrative costs will drop to 6.8 percent from 8.5 percent next year.
The audit also stated HCG appears to be in line with its efforts to remain financially stable, including having nearly $3 million in reserves and $1.1 million in net assets.
State agencies are not subject to Arizona’s insurance regulations.
HCG offers more than 15 health benefit options statewide, including four health plan networks and dental and vision coverage.