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For years, small-business owners found it hard to compete for good employees because they couldn't offer them health insurance. Now, an increasing number of states are establishing community health-insurance purchasing alliances that make health insurance more affordable for entrepreneurs.

The basic concept of the purchasing alliance is as follows: By combining the purchasing power of several small employers, an alliance can offer small-business owners increased bargaining clout and better rates. Several states have included the alliance idea in their health-care reform bills.

The National Association of Insurance Commissioners (202-624-7790) has developed three legislative models to be used in the alliance discussion. One of the most successful models, the Florida system, is based on a regional system governed by regional boards. In Florida, this entity is called a Community Health Purchasing Alliance (CHPA).

So far, the state's 11 CHPAs have enrolled more than 40,000 employees and cover nearly 80,000 people, according to Connie Ruggles, senior management analyst for the Florida Agency for Health Care Administration (904-922-8447), which helps run the CHPAs.

Another approach involves a single purchasing alliance for the entire state. This approach has worked in California through Health Insurance Plan of California (800-447-2937). The program is intended for companies with between three and 50 eligible employees, and now has more than 6,000 businesses participating in the plan.

The third model encourages private, competing alliances. This idea has taken off in Colorado, Iowa and Ohio. For example, 11 alliances are registered with the Ohio Department of Insurance (614-644-2658), according to David Randall, deputy superintendent for the agency. These alliances provide coverage for companies that employ up to 150 people and, to be certified, must cover at least 2,500 people. In many cases, the alliances are being run by local chambers of commerce.

Contact your state's department of insurance or state health department to see if they've organized any health-insurance purchasing alliances for small businesses. --David Volz

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This article was originally published in the January 1997 print edition of Entrepreneur with the headline: Keep 'Em Coming Back For More.

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