BizTimes: Many of our readers are asking if this is for real. This project is the result of more than three years of research on possible solutions to providing affordable health insurance in the region. How was that research done, and what did you discover?
Connolly: "We put a team together of 40 volunteers, and we started talking to everybody involved in the health care system. We talked to doctors, health care providers, hospital employees, small business owners; everybody we could think of to figure out our health care system. We tried to figure out what's good about it, what's not so good about it and what we came up with over and over again was that nobody was paying attention to people like me: small business owners.
"I've got four employees in my plan, $104,000 a year in premiums and then my rates go up 35 to 40 percent. People kept saying to us, 'What can we do? Why do my rates keep going up, and how can we control this?'"
BizTimes: Has anything like this ever been done before? Are there any similar projects to emulate, or is this breaking completely new ground?
Connolly: "There are other models out there. What we did was study how big businesses are already doing it. Some have already managed to drop their costs 20, 30, sometimes 40 percent. As a small business, I can't self-insure, but if we bring together 50,000 people, we can self-insure. We can be our own insurance company. We're going to do for small businesses what big businesses already can do to keep their costs down."
BizTimes: The first $7.4 million of the $56.4 million will be used to finance operational expenses in the first two years. The remaining $48.9 million will be allotted to the co-op after it has demonstrated that previously identified milestones have been hit, correct?
Mahaffey: "Actually the first $7.4 million for startup expenses is subject to milestones as well. We went through quite an application process and once we found out that we could enter into loan negotiations with CMS (Centers for Medicare & Medicaid Services), we had to put together a milestone schedule. What that schedule does is identify all the elements of our business plan and when we're going to accomplish them. As we accomplish those milestones, each quarter, then we'll get a disbursement. We'll get a portion of that $7.4 million. So the money isn't allocated to us all up front but as we go along each quarter."
BizTimes: What are those milestones?
Mahaffey: "Well, there are 96 of them. But as an example: provider network. We have to finalize our provider network contracting strategy and then we have to implement the strategy in order to have a provider network as part of our plan."
BizTimes: Who, exactly, will be your targeted customers?
Connolly: "Small businesses, nonprofits and individuals working for businesses or nonprofits with 200 or less employees. Now, in the proposal, what the feds want us to focus on is the group of two to 50 employees."
BizTimes: How will you market this? Why should businesses leave their current insurance providers and become members of the Common Ground Health Care Cooperative?
Mahaffey: "Certainly we understand that this market is very price sensitive. But we also believe that there is so much more than just the cost to consider. Obviously, we are going to do everything in our power to have it be an affordable premium, and long term be a stable premium, but what we want people to know is that this is very different than what is available to them in the market now. It will be a member-governed cooperative. We'll have a board of directors that will be elected from the membership. That board will represent all members. I think that is really, really important.
"When you look at a group health cooperative or other co-ops that have member-governed entities, you can tell that it's a completely different environment. We exist to meet our members' needs. We listen to our members, and we've designed our products, processes and operations to focus on our members instead of on our profit. It's important that we help folks understand that even the underlying structure of this organization is different. That if we do have any profits, they have to be invested right back into the organization by keeping premiums affordable, by improving the benefits we offer or introducing more value-added programming. Our members will have a say in how that happens. That's important, and it's important to get folks to understand why that's important."
Connolly: "What I've learned about health care over the past three years is that it's all about money. If you understand where the money goes and who's getting what pieces of the money, then you understand how it works. We will tell our members everything. I'm going to insist on complete transparency. They will know where their money is going, how much we pay out in claims, how much we pay our CEO. I don't deny that we're going to pay our CEO pretty good money. We aren't, however, going to pay them $50 million a year, and we aren't going to pay a bunch of shareholders $30,000 a year either. All of this goes back to us. When everybody knows where the money goes, when everybody can see it, they'll trust it and they'll know that our organization is going to be on your side. We're still going to have to be competitive, and we know this is a business, and it needs to be financially sound."
BizTimes: Ultimately this comes down to the providers. They provide the health care, and you'll have to contract with them to provide care to members. How will you have the leverage to negotiate with them that the existing insurance companies can't seem to get?
Connolly: "That's a million dollar question you've just asked. There are two things that will make this work. One is the provider contracts, and the second is organizing 10,000, 20,000 or 30,000 people to sign up, buy the insurance, believe in us and then us deliver what we promised to deliver. The provider contract piece we've been working on for about a year. We met with all the CEOs in town before we even did the application. We told them that we needed to do something for the small businesses in this market. All six of the provider systems wrote a letter endorsing our proposal, saying they would work with us on negotiating good prices.
"They all wrote letters of support, and here's why: this impacts them in significant ways. The No. 1 person without insurance in this region works for a small business. Do you know where they go if they don't have insurance? They go to the emergency rooms. It's in the provider's interest that small businesses have insurance because otherwise it goes into their uncollected debt or their charitable care, and these are people that work. We can't say absolutely, but we're convinced the provider systems want to see us be successful."
BizTimes: Many of our readers are skeptical about President Obama's health care reforms, and they will be inherently skeptical about this. What can you say to them to convince them that this is different and it's going to work?
Connolly: "Here's what we say to them. We've got to try something different. We want you to give this a try. Give us a chance to prove this will work. We know it's worked in other places, (such as the) Group Health Cooperative (of South Central Wisconsin) in Madison. Will it work here? We have to prove ourselves. So they can be skeptical all they want. We'll get out there, and we'll talk to them. We'll design this for you, and we'll make this work."
BizTimes: The U.S. Supreme Court will consider the challenges to Obama's Affordable Care Act soon. Ultimately, the court could affirm it as constitutional, it could strike down parts of the bill or it could strike down the entire bill. Does this project live or die, based upon the court's ruling?
Connolly: "No. We're designing this so that it will work with or without the Affordable Care Act. We are thinking we can make this work whether there is an exchange or not. We think we can make this work. We're designing this outside of politics."
De Vita: "No, and I'll tell you why. Forget about Affordable Care Act for a while. Market reform is changing health care, and that train has already left the station. You have to get set on how you are going to do the future because businesses, small businesses and large businesses alike, can't sustain the prices they are paying."
BizTimes: Will a court ruling like that take the purse strings away for this project?
Mahaffey: "We're told it does not. I understand your question. If the ACA goes away, doesn't everything associated with the ACA go away? We have been told no, that the funding will be there. This program has been cut twice. That could get cut further, but we are secure in the funds that we've received."
BizTimes: Can you speak to the wellness components of the project?
Mahaffey: "Our intent is to help our members to get the best health outcomes possible. It's a little more difficult for small employers and individuals to incorporate a wellness component into their benefits. We have to be able to provide our members with resources to make good health care decisions. We want to make sure our benefit plans and our wellness strategy help our members be better health care consumers and make better decisions. Our goal will be to have a primary care and preventative treatment model. We know we have to keep people out of the emergency room. This is really an important piece."
BizTimes: I understand it's early, but will you provide incentives to employers to provide wellness programs, or will you actually provide the wellness programs?
Mahaffey: "I think we have to provide the wellness programs or at least assist with that. These are small employers. They don't have human resource departments. So we have to come up with something that they can actually incorporate and that will actually work."
BizTimes: How is the search for the executive team going? It seems like you are looking for a pretty diverse skillset. Can you elaborate on who you are looking for?
De Vita: "We start(ed) interviews on March 14. The right person needs to understand health care and what's going on in Milwaukee. We're bringing in people that understand Milwaukee or have experience here in the past or have relationships here."