Most small business owners in southeastern Wisconsin know the drill all too well. Every three years or so, they contract with a broker who then negotiates on their behalf with for-profit health care insurance companies to provide coverage for their employees.
And the sticker shock that happens when the price quotes come back to the small business owners is all too familiar. The costs of health care in southeastern Wisconsin have risen 113 percent over the past nine years.
Three years ago, Milwaukee small business owner Bob Connolly set out to find an alternative model.
The result of Connolly's hard work and vision is the Common Ground Healthcare Cooperative, which recently was approved to receive a $56.4 million loan from the U.S. Department of Health and Human Services to establish an organization to help southeastern Wisconsin small businesses and nonprofit organizations provide affordable health insurance for their employees.
The loan was provided through President Barack Obama's Affordable Care Act.
The Common Ground Healthcare Cooperative is one of seven cooperatives recently announced across the nation by the HHS. Combined, the seven co-ops will receive more than $638 million to establish regional alternatives for more affordable health care insurance to small businesses and individuals.
"We're honored to bring a new approach to affordable, quality health insurance to individuals, small businesses and nonprofits throughout southeastern Wisconsin," said Connolly, board president of the newly formed Milwaukee initiative. "As a small business owner, I grew tired of the exorbitant increases in health insurance costs with no real additional value. Common Ground Healthcare is a solution to the region's cry for help."
The Common Ground Healthcare Cooperative will be based in Milwaukee and serve the seven-county area (Milwaukee, Waukesha, Racine, Kenosha, Ozaukee, Washington and Walworth counties).
Organizations and individuals interested in joining the co-op can enroll in the fall of 2013. The organization plans to add some 30 employees over the next five years and has begun the process of negotiating with health care providers throughout the region.
The organization's long-term strategy is to keep costs affordable to members, while at the same time helping them to receive high-quality care with a multifaceted approach. First, Common Ground Healthcare Cooperative will focus on working as partners with doctors, hospitals, agents and members so that the best health care can be provided at a reasonable price, Connolly said.
Since the Common Ground Healthcare Cooperative is nonprofit and member-governed, its financial reporting will be transparent, Connolly said. The organization will invest any surplus it achieves back into the company for the benefit of its members by keeping premium costs lower, he said.
Connolly and the other leaders of the Common Ground Healthcare Cooperative outline how the co-op will work in the interview that accompanies this story.
The question at the outset is fundamental: Will the co-op succeed in providing lower health care insurance coverage for small businesses in southeastern Wisconsin?
The short answer is that many experts in the health care industry and business leaders are hopeful, but others are skeptical. Meanwhile, many small business owners will surely be reluctant to participate in anything remotely connected with what some call "Obamacare."
Wendell Potter, a former executive at Cigna Corp. and Humana Inc. who has been an outspoken critic of the health care insurance industry, says the co-ops will face daunting challenges.
"When co-ops were proposed during the health care reform debate, I'll admit I was skeptical. It's very difficult to go in as a newcomer. However, if they can keep their administrative costs low, if they don't have to pay shareholders and if they can be transparent, they very well may be able to attract a significant marketshare," Potter told BizTimes.
Potter, who is an author and a national health care analyst at the Center for Public Integrity, said public relations will be crucial to Common Ground's mission of convincing small businesses to switch from their for-profit insurance companies.
"I do wish them well. I hope they can get up and running and establish enough customers to be a going concern. The barriers to entry are very, very high. They will need to persuade both prospective customers and providers that they are real. Scale is so important. They're going to have to be able to attract a significant portion of the population to spread the risk," Potter said. "They're going to have to do everything very smartly. Part of it will be generating good will, particularly to small businesses."
The first seven co-ops across the nation are members of the National Alliance of State Health Cooperatives (NASHCO).
NASHCO chairman John Morrison is particularly bullish about the Common Ground Healthcare Cooperative.
"Co-ops, and specifically Common Ground, will work. Common Ground was awarded funds after a thorough application process, and their business plan is very sound. Though the majority of co-op applicants have not been awarded funding, almost all of them had serious, strong, and professional applications that included hundreds of pages of actuarial analysis and in-depth business plans," Morrison said. "Common Ground stood out for excellence and for the quality of leadership they brought to the process, and most importantly, for their ability to bring additional health insurance options for small business owners and individuals in need of affordable healthcare in Wisconsin. This new co-op will be governed by and accountable to the members it serves, which is important to people who are fed up with the status quo in health insurance. There will be a positive response to the products they offer because they are a member-governed, non-profit health carrier. In the end, the Wisconsin co-op will prove to be a success, and the real winners will be the people of Wisconsin."
Hospitals are supportive
The Wisconsin Hospital Association said it would be up to the individual provider hospitals to decide their involvement in the co-op.
Adam Beeson, public affairs manager at Aurora Health Care, Wisconsin's largest health care provider, said, "Aurora Health Care supports the work of the Common Ground Health Care Cooperative. We believe their plans are valuable to the community and the health care industry. Our organization looks forward to the success of the Common Ground Health Care Cooperative and working with them in the future."
Peter Pruessing, executive vice president of Froedtert Health, said, "Common Ground deserves a lot of credit for tackling a very real problem facing our community and society as a whole. We congratulate them on getting this substantial federal funding, which is an important step forward, and wish them well in this effort. Clearly, it's very early in the process but we've met with them and are willing to talk further about how we might work together."
Coreen Dicus-Johnson, senior vice president for physician and revenue operations for Wheaton Franciscan Healthcare, said, "As a faith-based organization, Wheaton Franciscan Healthcare has supported other Common Ground initiatives to date. We support the Common Ground Healthcare Cooperative's efforts to expand access to affordable health insurance for individuals and small businesses in our community."
The leadership team at the Metropolitan Milwaukee Association will be watching closely as the co-op progresses.
"We applaud their mission of trying to provide lower health care costs in the region. Lower costs would benefit our members. A focus on wellness and the prevention of chronic disease is a good starting point. Unfortunately, controlling health care costs has been a vexing problem that has proven beyond difficult to solve. We will watch them closely as this co-op takes shape," said Julie Granger, vice president of the MMAC.
Dianne Kiehl, executive director of the Business Health Care Group (BHCG), a membership group of large and small employers in Milwaukee, said, "BHCG's ultimate goal is to 'move the market' resulting in better value for each health care dollar spent in southeastern Wisconsin. If Common Ground can contribute to this effort, they will be a welcome addition to the marketplace. With over 1,000 small employers as members, we understand the challenges small employers face to offer affordable health care plans to their employees."
Jon Rauser, president of The Rauser Agency in Milwaukee, is not convinced the co-op will succeed.
"The marketplace needs innovation and needs more competition. There's nothing wrong with anyone attempting to build a better mouse trap, and I applaud Common Ground and anyone else who has interest in doing that. There have been examples, though, in the past of people who tried and they didn't last very long," Rauser said.
"In the end, they are hoping to achieve lower costs by having a member-owned nonprofit cooperative. The for-profit factors they are pointing to as major contributors to the high costs – the salaries and the stock options and the shareholders –in fact only account for 2 percent of the total costs in existing organizations. The costs are high because the cost of health care is high. Nothing in a traditional co-op is going to change that dynamic," Rauser said. "I want to see them succeed though, and if they insist on tying wellness to premiums, that may be different. But other insurance carriers tie wellness and health risk assessments to premiums and discounts, and members are skeptical of them because they are for-profit entities. Maybe that will be different for the member-owned co-op, but I'm not sure of that. They have to have a different story line than just the nonprofit member-owned status. They must have an absolute laser focus on lowering the cost of health care and how they are going to do that if they want to succeed."
Arvid "Dick" Tillmar, founder and president of Tillmar Connect and co-chair of Well City Milwaukee, has long believed that an emphasis on wellness and disease prevention could lead to lower health care costs.
"The key to (Common Ground Healthcare Cooperative's) success is going to be their differentiation. I want to know what's going to make them different from any other small group pool that Humana or Anthem or any other carrier has. Why are they going to be able to do anything differently? I plan on meeting with them and talking with them more, but the first thing to consider is that you've got a group of small employers and nonprofits which doesn't necessarily make them desirable from an underwriting standpoint. They plan to take on risk; to form an insurance company. On the other hand, the good news is they've got the funding," Tillmar said.
"I'll tell you what they could do differently. Right now, the U.S. health care system is designed to take care of you when you get sick. It's not designed to keep you from getting sick. If they weighted heavily on prevention and focused on behavioral changes and really become the epitome of a preventative plan design, then maybe they've got a chance. It's got to be more than a wellness program though. They are taking a very aggressive approach, but the key to their success will be differentiation. They'll have a few missteps along the way and challenges to overcome, but that doesn't mean that they won't overcome them. We'll just have to see," Tillmar said.
A Humana spokeswoman said the company was not familiar enough with the Common Ground Health Care Cooperative to make a statement for this report.