Starting in 1986, the Arizona Health Care Cost Containment System (AHCCCS) has operated a healthcare coverage program, Healthcare Group of Arizona (HCG). In 2000, the legislature subsidized the program with $8 million of general funds. In 2004, the subsidy was cut in half to $4 million, and HCG was directed to become financially self-sufficient (funded by premium only) as of July 1, 2005.
Since July of 2005, the state does not subsidize premiums. Employers and employees pay the entire cost of the product. HCG protects carriers using aggregate stop-loss reinsurance financed from member premiums. As of December 2006, HCG reported enrollment of over 24,000 lives (over 8,500 small business groups). More than 90 percent of businesses enrolled have three employees or less.
HCG contracts with three managed care organizations to provide a health maintenance organization (HMO) health care coverage product for small businesses and a third party administrator to provide a Point of Service product. HCG reinsures its managed care contractors to reduce their risk of adverse selection by small business employees, the self-employed and political subdivisions. No income limits apply, but HCG does have employee participation requirements and firms must not have offered group insurance for six months. In addition to these guaranteed-issue products, HCG offers dental, vision, and a separate behavioral health benefit to employers. Employees can select between several benefit plan options. Since July 2007, the Arizona legislature has capped new employer enrollment into HCG and plans to study whether HCG should be restructured into just a high risk pool.
