July 18, 2005

Arizona's state-run health insurance carrier for small businesses is being accused of violating regulations designed to avoid unfair competition with for-profit carriers.

Some brokers say Healthcare Group, run by the Arizona Health Care Cost Containment System, is telling small businesses how to circumvent a clause implemented by the Arizona Legislature two years ago.

That clause requires businesses to prove they have gone without insurance for at least six months prior to applying for the state-run program.

Brokers are saying Healthcare Group recently advised businesses to get a new employer identification number, or EIN, to skirt the 180-day period.

AHCCCS Director Tony Rogers said he is aware of the complaint but believes it to be an isolated incident and is investigating internally.

Healthcare Group has been known as the safety net for small businesses that could not qualify for coverage because of high health risks. But in the past few years, it has more aggressively marketed affordable options to all small businesses.

It's increased marketing efforts prompted the push by commercial carriers in 2003 to lobby for the 180-day "go-bare" period.

Sen. Dean Martin, R-Phoenix, chairman of the Senate Finance Committee, said he has heard from several sources about inappropriate solicitations by Healthcare Group and wants to investigate whether this is an isolated incident or a pattern.

"We would have very serious concerns whether they would continue to go around a provision like this," Martin said.

Henry GrosJean, a Phoenix small business broker, had been a long-time proponent of Healthcare Group but has turned sour against the state-run plan as it has more aggressively marketed to small businesses.

"They're making the product look like a commercial product, and they're also encouraging employers to circumvent the go-bare period," GrosJean said.

Bill Weaver, owner of Focus Benefits Group in Phoenix, said he was in a Healthcare Group meeting with a client at Paradise Valley Community College when sales staff at Healthcare Group broached the idea to circumvent the go-bare period by using a different EIN number.

"I know they have contacted this client several times, encouraging him to take that action," Weaver said. "They're out there running around trying to get market share. ... They're going out there to sell something."

AHCCCS' Rogers said he questioned the sales staff after hearing the allegations and ordered employees to call brokers working with Healthcare Group to determine who is promoting the idea.

"We wanted to check with our brokers to see if there has been any inappropriate communication between sales staff and brokers," Rogers said.

He said so far he has not heard from anyone in the brokerage community who was approached with this sales pitch.

"We have one person who said at one meeting there was a discussion about EIN," Rogers said. "We're still trying to figure out whether this is an isolated event. We're not finding any pattern that this has been going on."

Rogers said Healthcare Group made a commitment two years ago to honor the go-bare period. There are enough small businesses out there without health insurance that Healthcare Group needs to be targeting, he said.

"That's where our focus has been. To take business away from the commercial health plans is counterproductive. It doesn't really reduce the number of uninsured."

Commercial carriers hope Healthcare Group takes the high road.

"We have heard those rumors as well, but we assume they are going to comply with the law in good faith," said Regena Frieden, public relations manager for Blue Cross Blue Shield of Arizona.

As if an investigation into Healthcare Group isn't enough for the agency to deal with, Martin dropped another bomb suggesting Healthcare Group be spun off so that it's no longer run by a state agency, much the way the State Compensation Fund is considered a separate entity.

"My biggest concern with having Healthcare Group as an insurer run by a state agency is: What keeps the Legislature, or anybody else for that matter, from raiding their reserves the next time we go into a recession?" Martin asked.