HMOs and the small business market

In many urban areas with an abundance of health maintenance organizations (HMOs), small businesses are probably one of the few untapped markets. A 1986 survey by Arizona's prepaid Medicaid program, the Arizona Health Care Cost Containment System (AHCCCS), found that 43% of the state's small businesses of 25 or fewer employees do not offer health insurance to their employees. Insurers and HMOs have traditionally found small businesses undersirable for a multitude of reasons. They are considered to be higher utilizers of services, expensive to administer and subject to higher employee turnover. Little data have been available to substantiate the above premises. The Health Care Group, a program administered by AHCCCS and funded by the Robert Wood Johnson Foundation and Arizona's Flinn Foundation, was developed to address the problem of small businesses that do not have health insurance. This paper will consider the lessons learned by Health Care Group in marketing coverage to small groups.