GAO

United States General Accounting Office

Report to the Chairman, Committee on

Commerce, House of Representatives

March 2000 PRIVATE HEALTH

INSURANCE

Cooperatives Offer

Small Employers Plan

Choice and Market

Prices

GAO/HEHS-00-49

Page 1 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Contents

Letter 3

Tables Table 1: Characteristics of Five Small Employer Health Purchasing

Cooperatives 11

Table 2: Comparison of Healthmart Proposal and Typical Existing

Small Employer Purchasing Cooperatives 12

Table 3: Plan Types and Premiums Available Through Four

Cooperatives, 1999 17

Table 4: Selected Insurers’ Premiums for a Plan Offered Through a

Cooperative and a Similar Plan Outside the Cooperative 20

Figure Figure 1: Percentage of Covered Employees and Choice of Health

Plans, by Firm Size, 1999 16
Page 2 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives
Page 3 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

United States General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-282868 Leter

March 31, 2000

The Honorable Thomas J. Bliley, Jr.

Chairman, Committee on Commerce

House of Representatives

Dear Mr. Chairman:

Nearly two-thirds of nonelderly Americans rely on employer-sponsored

coverage for their health insurance. Yet, despite low rates of

unemployment, the number of uninsured individuals has increased during

the 1990s. More than 70 percent of the working-age uninsured in 1998 were

employed, and many uninsured employees worked for a small firm. Of the

44 million uninsured individuals in that year, nearly 16 million (more than

one-third) were in families where the family head was employed by a firm

with fewer than 100 employees.1 Small firms are much less likely than other

employers to offer health insurance to their employees, and when offering

coverage, they usually offer only a single plan.

Concerned about the increasing number of uninsured, policymakers have

sought ways to improve the accessibility and affordability of health

insurance for individuals working for small employers. One approach that

attempts to create better access and choice as well as lower costs for

employees of small firms is to facilitate cooperatives and other pooled

purchasing arrangements that employers can join to purchase health

insurance.2 Recent congressional proposals would create a new type of

pooled purchasing arrangement for small employers known as a

“Healthmart.” According to proposed legislation, Healthmarts would be

nonprofit entities offering a choice of health insurance plans to employers

with 2 to 50 employees. To assist the Congress as it considers proposals to

facilitate the development of such purchasing arrangements, you asked us

to examine the experiences of small employer health insurance purchasing

1

See Paul Fronstin, “Both Job-Based Health Coverage and Uninsured Continue to Rise, CPS

Shows,” EBRI Notes (Nov. 1999), based on an analysis of the March 1999 Current Population

Survey by the Employee Benefit Research Institute.

2

These small employer purchasing cooperatives are also sometimes referred to as

“alliances.”
B-282868

Page 4 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

cooperatives, in particular, those sharing some key design features with the

proposed “Healthmarts.” Specifically, we answered the following questions:

1. What advantages do health insurance purchasing cooperatives offer to

small employers, and to what extent have these advantages been

effective in attracting employers?

2. How successful have cooperatives’ strategies been to obtain premium

reductions?

3. How do health purchasing cooperatives maintain their viability in the

small group market?
B-282868

Page 5 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

To address these questions, we (1) reviewed a bill that would establish

Healthmarts,3 (2) reviewed studies of small employer purchasing

cooperatives and the small group market, (3) interviewed health policy

association officials and experts, and (4) examined the experiences of five

small employer health purchasing cooperatives. These five cooperatives

were drawn from a list of small employer purchasing cooperatives

identified by the Institute for Health Policy Solutions.4 Similar to the

proposed Healthmarts, all five of the cooperatives we examined provide

coverage to firms with 50 or fewer employees and offer at least two fully

insured coverage options. Three that we examined—the Pacific Health

Advantage in California,5 the CBIA Health Connections in Connecticut, and

Florida’s Community Health Purchasing Alliance6—are among the largest

small employer cooperatives in the nation. We also examined two smaller

cooperatives—North Carolina’s Caroliance and the Texas Insurance

Purchasing Alliance. In our review of the cooperatives, we interviewed

their officials and selected participating employers and insurers. In

addition, we reviewed documents from the cooperatives and the insurers,

as well as state laws regulating premiums in these small group markets.

While these five cooperatives share many features with the proposed

Healthmarts, their experiences may not be fully generalizable to other

types of purchasing arrangements or those operating under other state

insurance regulations or in different health insurance markets. We

conducted our review between May 1999 and January 2000 in accordance

with generally accepted government auditing standards.

3

Our analysis was based on the Healthmarts proposal in H.R. 2990, The Quality Care for the

Uninsured Act of 1999 (Oct. 1999).

4

As of March 2000, the Institute for Health Policy Solutions identified 15 health purchasing

cooperatives. See Institute for Health Policy Solutions’ Internet listing of “Consumer-Choice

Health Purchasing Groups” at http://www.ihps.org/ (Nov. 11, 1999). The Blue Cross and Blue

Shield Association identifies 21 purchasing cooperatives, some of which also serve larger

employers or government employees. See State Legislative Health Care and Insurance

Issues, 1998 Survey of Plans (Blue Cross Blue Shield Association, Dec. 1998).

5

As of July 1, 1999, Pacific Business Group on Health assumed administrative

responsibilities for the cooperative, formerly known as the Health Insurance Plan of

California. Our review primarily represents the experiences of the Health Insurance Plan of

California, which was administered by the state of California’s Managed Risk Medical

Insurance Board.

6

Florida’s Community Health Purchasing Alliance is based on a regional governance

structure. Each region is governed by its own board, which enjoys wide autonomy in

operation and decision-making. For the purposes of this study we interviewed

representatives of region 6, located in central Florida, including the Greater Tampa Area.
B-282868

Page 6 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Results in Brief Small employer purchasing cooperatives have been an important

component of several states’ efforts during the 1990s to improve small

groups’ health insurance options. Established either by state legislation or

private employer associations, purchasing cooperatives aim to provide

small employers with some of the same advantages larger employers have

in offering health insurance, such as administrative simplicity, choice of

multiple insurers and benefit packages, and leverage in negotiating lower

premiums. The five small employer purchasing cooperatives we examined

have demonstrated that these cooperatives can offer two of these

advantages—administrative services and a range of benefit options to

participating small employers. By participating in a cooperative, small

employers have a single point of entry to multiple insurers’ plans with

standardized benefit packages that can be compared easily instead of

having to individually identify insurers and their agents, review widely

varying benefit options, and determine price and terms of coverage.

Furthermore, since cooperatives typically offer plans sponsored by a

variety of insurance carriers with different benefit levels and managed care

features, participating small employers can offer their employees a choice

of multiple health insurance products—a sharp contrast to the single-plan

option offered by most small and many large employers. These advantages

have led some small employers that previously had not been offering health

insurance to join a cooperative. However, even the largest cooperatives

cover only a small fraction (typically about 5 percent or less) of the small

group health insurance market in their states.

The experiences to date of small employer purchasing cooperatives

typically have not resulted in a third advantage, which is available to large

employers: leverage in negotiating lower premiums. Officials of the

purchasing cooperatives and participating insurers as well as several

recent studies reported that cooperatives typically offer plans at market

prices for plans with similar benefits offered to small employers outside the

cooperative. This similarity in premiums is also reflected by rate quotations

we obtained from several insurers. The cooperatives’ potential to reduce

overall premiums is limited because (1) they lack sufficient leverage as a

result of their limited market share; (2) the cooperatives have not been able

to produce administrative cost savings for insurers; or (3) their state laws

and regulations already restrict to differing degrees the amount insurers

can vary the premiums charged different groups purchasing the same

health plan. Cooperatives can potentially offer lower premiums for firms

with high-risk, high-cost individuals if they restrict the premiums insurers

may charge individual firms more than restrictions already imposed by
B-282868

Page 7 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

state statutes and regulations for all small groups. The Texas cooperative

initially imposed significantly more restrictive rating criteria than were

required by the state and as a result attracted a disproportionate share of

high-risk groups. Concerned about this trend, and the defection of insurers,

the cooperative attempted to make premiums more comparable to those

available in the small group market by eliminating restrictions and allowing

participating insurers to set premiums under the same terms allowed by the

state for the small group market.

Finally, to ensure their viability in the small group market, the purchasing

cooperatives we examined have had to take several steps to maintain a

sufficient number of participating insurers and employers. Recognizing and

countering insurers’ perceptions that high-risk individuals and groups are

likely to enroll through the cooperative is key to gaining insurer

participation. Therefore, the cooperatives have attempted to manage

potential risk selection through their design of standard benefit packages

and other approaches. Furthermore, to increase employer participation,

the cooperatives have maintained insurance agents’ principal role in

guiding employers to the cooperative. The cooperatives have had mixed

success in maintaining their viability. While the Connecticut and California

cooperatives continue to enjoy relatively stable employer participation,

other cooperatives have faced declining participation, and a few, including

the one in Texas, have disbanded.
B-282868

Page 8 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Background While nearly two-thirds of nonelderly Americans rely on employersponsored coverage for their health insurance, only about one-half of very

small firms (those with three to nine employees) offered health insurance

in 1998, compared with more than 95 percent of those with 50 to 199

employees. In addition, a recent employer survey found that, compared

with plans offered by large employers, very small firms paid premiums that

averaged about 10 percent higher for plans that covered fewer benefits, and

required deductibles twice as high.7 Furthermore, employees of small firms

frequently have lower incomes than those in larger firms. Lower-wage

employees are less likely to accept coverage if they must pay part of the

premium.8

Studies in the early 1990s consistently pointed to the high and rising cost of

insurance as the key factor preventing small employers from offering

coverage to their workers. In addition, some insurance practices

exacerbated the problem by substantially increasing the costs or denying

coverage for some higher-risk firms or workers. Consequently, in the early

and mid-1990s, most states adopted some type of insurance market reform

designed to improve access and affordability for small employers. Reforms

passed in many states included measures to ensure that

• employers who want health insurance coverage for their employees will

be accepted and renewed by insurers for at least one plan (“guaranteed

issue”);

• premiums charged different employers purchasing coverage cannot

vary by more than a specified percentage (rate restrictions); and

• small employer purchasing cooperatives can be established to improve

firms’ access to multiple insurers and to seek lower premiums

potentially available to larger firms.

7

See Kaiser Family Foundation and Health Research and Educational Trust, Employer

Health Benefits 1999 Annual Survey.

8

Philip F. Cooper and Barbara Steinberg Schone, “More Offers, Fewer Takers for

Employment-Based Health Insurance: 1987 And 1996,” Health Affairs, Vol. 16, No. 6 (Nov.-

Dec. 1997), pp. 142−9.
B-282868

Page 9 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

The Health Insurance Portability and Accountability Act of 1996 (HIPAA)

set federal standards for certain aspects of private health insurance that

apply to all small employers.9 One such standard is a requirement that

insurers that provide coverage in a group market must accept all small

employers that apply for any of the plans they offer (guaranteed issue). The

extent to which HIPAA’s guaranteed issue provision improved market

access for small employers in a given state, however, is largely dependent

on the extent of state reforms preceding HIPAA. Further, while HIPAA may

have improved the choices of products available to small employers, the

cost of coverage, especially for high-risk groups, may still be unaffordable.

Various pooled purchasing arrangements, including large employer

purchasing cooperatives,10 multiple employer trust or welfare

arrangements,11 trade or other associations,12 and small employer health

insurance purchasing cooperatives, have been used as strategies for

improving the provision of employer-sponsored health insurance. The

pooling arrangements may vary significantly in terms of their coverage

options, who can participate, and the geographic area in which they

operate.

More than 20 states have adopted legislation allowing for the establishment

of small employer purchasing cooperatives. Many of the small employer

purchasing cooperatives started in the 1990s were based upon the National

Association of Insurance Commissioners’ (NAIC) purchasing alliance

model acts and differ from previous pooled purchasing arrangements in

several ways. Some tenets of the NAIC model acts that are also reflected, in

varying degrees, in the five cooperatives we reviewed include the

following:13

9

For additional information on HIPAA, see Private Health Insurance: Progress and

Challenges in Implementing 1996 Federal Standards (GAO/HEHS-99-100, May 12, 1999).

10See Access to Health Insurance: Public and Private Employers’ Experiences with

Purchasing Cooperatives (GAO/HEHS-94-142, May 31, 1994).

11See Employee Benefits: States Need Labor’s Help Regulating Multiple Employer Welfare

Arrangements (GAO/HRD-92-40, Mar. 10, 1992).

12See Employer Association Health Plans (GAO/HEHS-96-59R, Dec. 6, 1995).

13See the “Single Health Care Voluntary Purchasing Alliance Model Act,” and “Regional

Health Care Voluntary Purchasing Alliance Model Act,” NAIC, Model Regulation Service,

Oct. 1996.
B-282868

Page 10 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

• accepting any small employer choosing to join the cooperative;14

• establishing a governing board that is dominated by participating

employer and employee representatives;

• prohibiting any financial risk for the cost or provision of health services

to be borne by the cooperative, but instead contracting with at least

three unaffiliated insurers to make a variety of fully insured plans

available to its members;15

• obtaining insurers’ participation by contracting with qualified group

carriers meeting objective criteria established by the cooperative16

through a fair, competitive process;

• negotiating the administrative portion of premiums with participating

insurers to reflect any cost savings the insurer experiences in the

coverage it offers through the cooperative; and

• allowing employees to enroll with any insurer or plan offered through

the cooperative.17

See table 1 for more specific characteristics of the five cooperatives

examined in our study.

14Employers must agree to pay membership fees and the coverage premium as well as

follow the bylaws and rules of the cooperative. Additionally, cooperatives may require

employers to pay a minimum share of the total premium and that all or a certain percentage

of employees eligible to purchase the employer sponsored coverage do so through the

cooperative.

15The state’s commissioner of insurance may, upon a showing of good cause, waive the

requirement for three unaffiliated insurers.

16Objective criteria may include requiring the insurer to obtain certification from the state

insurance commissioner that the insurer is licensed in the small group market, satisfies

state financial requirements, and is in good standing.

17Employees can be limited to those plans that provide coverage where he or she lives. In

addition, an alternative allows the employer to limit employee choice to at least three

insurers, of which one must provide out-of-network coverage and one a managed care plan,

if available.
B-282868

Page 11 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Table 1: Characteristics of Five Small Employer Health Purchasing Cooperatives

a

Florida’s cooperative reached a peak enrollment of 24,000 groups and 92,000 lives in 1998.

b

North Carolina’s cooperative had a peak enrollment of 1,200 groups and 5,000 lives in 1995.

c

Texas’ cooperative had a peak enrollment of 13,000 lives in 1997.

To create an additional option for small employers seeking health

insurance coverage, recent congressional proposals would create a new

pooled purchasing arrangement for small employers known as a

Healthmart. As proposed, Healthmarts share many design characteristics

with existing purchasing cooperatives. Unlike most existing small

employer purchasing cooperatives, however, Healthmarts would be

operated jointly by employers, providers, insurers, and employees; would

be exempt from state-mandated benefits18; and could operate in more than

one state. Table 2 displays some key features of purchasing cooperatives

and how they compare with the proposed Healthmarts.

State

Name of small

employer

purchasing

cooperative

Date

coverage

available

Size of

employer

eligible to

participate

Average

employer size

Number of

employer

groups and

enrollees,

1999

How sponsored or

established

California Pacific Health

Advantage 1993 2 to 50 10

8,216 groups,

144,424 lives

State-established

Connecticut CBIA Health

Connections 1995 3 to 50 8

3,500 groups,

55,000 lives

Privately

established

Florida Florida Community

Health Purchasing

Alliance 1994 1 to 50 2

18,000 groups,

75,000 livesa

State-established

North Carolina Caroliance

1994 1 to 50 4

920 groups,

2,900 livesb

State-established

Texas Texas Insurance

Purchasing Alliance

1994-July 1999 2 to 50 6

Ceased

operations in

July 1999c

State-established

18Our 1996 report summarized studies in six states showing that mandated benefits

represented between 5 and 22 percent of total claims costs. This report also found that most

employers voluntarily offered commonly mandated benefits, such as obstetrical care,

mental health benefits, and mammography screening, even if they were not required to do

so. Therefore, to the extent that employers typically offer these or similar benefits, the

potential premium savings from preempting mandated benefits may be less than their share

of claims costs. See Health Insurance Regulation: Varying State Requirements Affect Cost of

Insurance (GAO/HEHS-96-161, Aug. 19, 1996).
B-282868

Page 12 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Table 2: Comparison of Healthmart Proposal and Typical Existing Small Employer

Purchasing Cooperatives

Source: Information for Healthmarts is based on the Healthmarts proposal as approved by the House

of Representatives in H.R. 2990, The Quality Care for the Uninsured Act of 1999, Oct. 1999.

Information for the small employer purchasing cooperatives is based on a summary of 13 small

employer purchasing cooperatives by the Institute for Health Policy Solutions. See

http://www.ihps.org/chpglist.html (Nov. 2, 1999) and Jack Meyer and others, Small Employer Health

Insurance Purchasing Arrangements: Can They Expand Coverage? (Economic and Social Research

Institute, May 1999).

Cooperatives Help

Small Firms Offer

Insurance and Choice

of Plans but Represent

a Small Portion of the

Small Group Market

Small employer cooperatives offer administrative services to employers

seeking coverage by preselecting a group of insurers, standardizing benefit

packages, and obtaining rates on behalf of the small employer purchasers.

Employers participating in the cooperatives typically offer their employees

a wider range of plan choices than do nonparticipating small employers.

The five small employer purchasing cooperatives we reviewed also

enrolled some very small employers as well as employers that had not

previously offered health insurance coverage. Nevertheless, the

Design feature Healthmarts

Small employer purchasing

cooperatives

Choice of insurers/plan

options

Would offer at least 1 insurer

and 2 coverage options

Offer more than 2 insurers and

coverage options

Risk of pooled

arrangement

Would offer fully insured

health plans; Healthmarts

would bear no financial risk

Offer fully insured health plans;

cooperatives bear no financial

risk

Subject to state

insurance regulations

Exempt from state-mandated

benefits, otherwise subject to

state regulation

Subject to state regulation

Size of eligible group Open to all firms with 2 to 50

employees

Open to all firms with 50 or

fewer employees. While some

exclude firms with fewer than 2

or 3 employees, others include

self-employed individuals or

employers with more than 50

employees.

Governing board Equal representation from

employers, employees,

providers, and insurers

Typically represent employer

and employee purchasers

How sponsored or

established

Nonprofit entity operated

jointly by employer, employee,

provider, and insurer

representatives

Varies. Some established by

state, some by private

associations of employers
B-282868

Page 13 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

cooperatives remain a very small fraction of the small group market in their

states.

Cooperatives Assist Small

Employers Seeking to

Purchase Health Insurance

Coverage

Small employers seeking health insurance for their employees outside of a

purchasing cooperative can be faced with significant administrative

burdens. Cooperatives seek to facilitate the purchase and choice of

insurance available to small employers and their employees by providing

them with a single point of entry to a choice of plans offered by multiple

insurers. In addition, cooperatives simplify the selection of coverage by

collecting and publishing premiums for sets of standardized benefits.

Specifically, each of the five cooperatives we reviewed offered at least two

standard sets of benefits and copayment levels. According to the literature

and cooperative officials we interviewed, having standardized benefits not

only helps consumers evaluate the costs and benefits of each plan option

but forces insurers to distinguish themselves through other features such

as premiums and provider networks rather than differences in covered

services. Further, another benefit to a firm’s participating in a cooperative

is assistance in providing information to the firm’s employees about the

insurer’s benefits and, in some cases, helping to resolve conflicts that may

arise between an insurer and the firm’s employees.
B-282868

Page 14 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Cooperatives also facilitate access to coverage for newly formed or very

small businesses because they impose fewer barriers to enrollment. Both

officials of the cooperatives and an insurer reported that some insurers

require more extensive documentation, for example, to show that an

employer has been in business a sufficient period of time prior to offering

the employer coverage. For example, a Florida cooperative official

reported that new employers can demonstrate their eligibility for coverage

by simply submitting their estimate of taxes, while outside the cooperative,

insurers may request additional documentation, such as a copy of an

employer’s tax returns. Although this makes it easier for new businesses to

purchase insurance through cooperatives, one Florida insurer cautioned

that this practice resulted in some fictitious groups gaining coverage, such

as a self-employed individual who adds a family member or friend to the

rolls of the firm solely for the purpose of purchasing group health

insurance.19

Cooperatives Result in More

Small Employers Offering

Multiple Plan Options

By participating in a cooperative, small employers have more opportunity

to offer their employees multiple plan choices. Choice within a cooperative

also provides collateral benefits to employers and employees. For example,

a greater choice of insurers inside the cooperative may assist participating

employers in their recruitment and retention efforts, and creates a better

likelihood that their employees are able to select a plan that includes the

provider of their choice. Employees do not always have access to all plans

offered through the cooperative, however, depending on their location or

employer.

19Insurers are concerned about fictitious groups because these individuals may be obtaining

coverage only when they expect to incur medical expenses. By seeking group, rather than

individual, coverage, they are guaranteed coverage and may be able to obtain lower rates

than in the individual market.
B-282868

Page 15 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Employers in each of the five cooperatives we reviewed offered their

employees a greater choice of health plans than did small employers

outside of the cooperative. When small firms sponsor health insurance

outside of a cooperative, they usually make only one plan available to their

employees. Results of a 1999 survey of nearly 2,000 employers showed that

only a single plan choice was available to more than 90 percent of covered

workers in firms with 3 to 49 employees. In contrast, at least three plan

choices were available to nearly 84 percent of covered employees in firms

with more than 5,000 employees. See figure 1 for the number of plan

choices by firm size.20

20See Kaiser Family Foundation and Health Research and Educational Trust, Employer

Health Benefits 1999 Annual Survey.
B-282868

Page 16 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Figure 1: Percentage of Covered Employees and Choice of Health Plans, by Firm Size, 1999

Source: Kaiser Family Foundation and Health Research and Educational Trust, Employer Health

Benefits 1999 Annual Survey.

Furthermore, each of the cooperatives we examined offered multiple

managed care plans, insurers, benefit packages, and premium options.

Most cooperatives offered at least two types of managed care plans, usually

several health maintenance organizations (HMO) and either a point-ofservice (POS) plan or a preferred provider organization (PPO) option.

Among the cooperatives, the California cooperative currently has the

largest number of plan options and the North Carolina cooperative has the

0

10

20

30

40

50

60

70

80

90

100

3-9 10-24 25-49 50-199 200-999 1,000-4,999 5,000 or More

3 or More Plans

2 Plans

1 Plan Only

Percentage

Number of Employees
B-282868

Page 17 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

fewest (see table 3). In choosing among different plans, an individual could

see variation in total premiums of as little as 28 percent in the Florida

cooperative to more than 100 percent in the California cooperative.

Table 3: Plan Types and Premiums Available Through Four Cooperatives, 1999

Note: The Texas cooperative is not included in this table because it ceased operations in 1999 and

thus information comparable to that for the other cooperatives was not available.

a

All plan types may not be available in all locations.

b

Rates are for July 1, 1998, through June 30, 1999.

c

Includes information only for region 6 (Central Florida) of Florida’s Community Health Purchasing

Alliance.

d

An open-access HMO permits enrollees to visit a specialist without a referral from a primary care

doctor or other gatekeeper.

e

Rates for a 30-year-old male in Hillsborough County (Central Florida) available between October 1999

and December 1999.

Even though cooperatives attempt to offer choice to their participants, not

all plans are available in all areas served by each cooperative, and

individual employers using some cooperatives may limit the choice of plans

their employees can select. For example, the Connecticut cooperative

made 16 plan options available to employers, but only one-half of surveyed

employers offered all of the plans to their employees. Similarly, the Texas

cooperative offered as many as eight plans in urban areas but only two

plans in rural areas.

Cooperatives Represent a

Small Portion of the Small

Group Market

The five small employer purchasing cooperatives we reviewed have

attracted some very small employers as well as varying proportions of

employers that had not previously offered health insurance coverage.

State/cooperative

Available

insurers Available plan typesa

Available

standardized benefit

packages

Monthly premiums

(employee-only coverage for

a 30- to 39-year-old enrollee)

California−Pacific Health

Advantage 18

HMO, POS

3

$89.22 to $204.02b

Connecticut−CBIA: Health

Connections 4

HMO, POS

2 $130.81 to $233.08

Floridac

8

HMO, HMO open-accessd

2

$89.51 to $147.89e

North Carolina−

Caroliance 3

HMO, PPO,

indemnity 2 $81.29 to $160.64
B-282868

Page 18 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

However, small employers participating in the cooperatives represent only

a very small share of their states’ small group health insurance market.

Furthermore, the HIPAA requirement that insurers must issue health

insurance to any small employer willing to purchase it, regardless of the

health condition or anticipated costs of the employees, may have reduced

the incentive for some small employers to join a cooperative. At the same

time, it may have enhanced cooperatives’ viability by reducing the

differences between purchasing through a cooperative and in the general

small group market.

The purchasing cooperatives that we examined appeared to have enrolled

primarily very small employers, but they attracted very different

proportions of employers who previously did not offer coverage. For

example, the average employee group size in the cooperatives ranged from

2 in Florida to 10 in California. In addition, cooperative officials reported

that about half of the newly participating employers in the Florida, North

Carolina, and Texas cooperatives had not sponsored coverage in the prior

year. In contrast, just over one-quarter of the newly participating employers

in the California cooperative and fewer than an estimated 10 percent of

employers newly participating in the Connecticut cooperative had not

sponsored coverage in the prior year. However, these newly participating

employers might have offered health insurance even in the absence of the

cooperative.21

None of the purchasing cooperatives we reviewed had a large enough

market share to create bargaining leverage and therefore had a limited

ability to significantly increase the percentage of small employers offering

coverage in their states. For example, the Pacific Health Advantage, with

144,000 covered lives, is one of the largest small employer purchasing

cooperatives in the nation, but it accounts for only about 2 percent of the

small group health insurance market in California. Except for the

Connecticut cooperative, which accounted for 5 to 8 percent of the small

group market in the state, the other purchasing cooperatives we reviewed

accounted for less than 5 percent of their state’s market.

21Many of the employers that were newly offering health insurance through the cooperative

may represent businesses that are just starting up as well as other employers that might

have begun offering coverage even in the absence of the cooperative. Also, an employee of a

firm that does not sponsor insurance might still have coverage through another source, such

as individually purchased insurance or employer-sponsored coverage through a spouse.
B-282868

Page 19 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Cooperatives’ Ability to

Obtain Premium

Reductions Is Limited

Despite efforts to negotiate lower premiums, cooperatives have only been

able to offer premiums that are comparable to those in the general small

group market. The cooperatives we reviewed typically did not obtain

overall premium reductions because (1) their market share provided

insufficient leverage, (2) they could not produce administrative savings for

insurers, or (3) premium variation is already restricted by state laws and

regulations. While one cooperative attempted to impose more stringent

restrictions on the premiums that could be charged for high-risk individuals

than the restrictions already imposed by the state, insurers withdrew from

the cooperative because they were concerned they would receive a large

proportion of high-risk, high-cost individuals. As a result, the cooperative

abandoned this practice.

Cooperatives Adopted

Multiple Strategies to

Attempt to Obtain Lower

Premiums

The cooperatives we reviewed used a number of strategies to obtain lower

premiums from insurers that could benefit either the cooperative as a

whole or, in some cases, employers who were likely to face higher

premiums outside. In one strategy, the cooperatives attempted to use their

pooled market strength to generate competition among insurers and

negotiate favorable rates for all participants comparable with the rates of a

large purchaser. To participate in the California cooperative, insurers are

precluded from offering a plan outside of the cooperative at a lower price if

it is equal to or greater in actuarial value than the one offered inside the

cooperative. The California and Connecticut cooperatives also encourage

participating insurers to resubmit bids that are at the high end of rates

allowed by state insurance rules. Also, since its second year of operation,

the California cooperative has restricted the entry of new insurers to those

that offer lower-priced plans than those currently available or those whose

plans otherwise improve the cooperative’s selection of available providers

or product lines.

Another strategy cooperatives used was attempting to obtain lower

premiums from insurers by assuming administrative responsibility for

activities such as billing and enrollment that are currently performed by the

insurers. One Connecticut insurer reported that since the cooperative was

responsible for billing and collecting premiums, this insurer was able to set

up one account to receive payments from the cooperative instead of

managing individual accounts for each employer. In addition, in an effort to

achieve administrative efficiencies for participating insurers, the Florida

cooperative’s new third-party administrator intends to apply new
B-282868

Page 20 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

technologies to electronically scan enrollment applications and transmit

billing data to insurers and agents.

To make insurance more affordable for employers with high-risk

individuals, one cooperative employed a third strategy—restricting how

much insurers could vary premiums for different firms. This meant that

some employers could potentially find more affordable insurance through

the cooperative than in the general small group market.

Cooperatives Typically

Obtain Premiums

Comparable to Those

Available to Other Small

Employers

Officials of the cooperatives and selected participating insurers reported

that premiums available through the cooperatives were typically similar to

those available in the market, and might be slightly higher or lower in

certain instances. As shown in table 4, premium quotations we obtained

from selected insurers participating in several cooperatives indicated that

prices of plans offered through the cooperative were approximately the

same as those for similar plans available to nonparticipating small

employers.

Table 4: Selected Insurers’ Premiums for a Plan Offered Through a Cooperative and

a Similar Plan Outside the Cooperative

Note: The premium quotations are based on two age groups of 10 individuals each—employees aged

20 to 25, and employees aged 55 to 59. The premium quotations we received from the Connecticut

insurer for these two groups are for individuals less than 30 years of age and individuals 50 to 59 years

of age, respectively. All premium quotations are preliminary and could change on the basis of

additional information received by the insurer.

a

Premium quotations are for Hartford, Connecticut.

b

Premium quotations are for the cooperative’s region 6, which includes Central Florida.

25-year-old 55-year-old

State Plan type

Cooperative’s

monthly

premium

Similar

plan’s

monthly

premium

Cooperative’s

monthly

premium

Similar

plan’s

monthly

premium

California HMO $108 $101 $231 $216

Connecticuta HMO 138 147 277 296

POS 187 169 375 338

Floridab HMO 127 127 357 357
B-282868

Page 21 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Similarly, a national survey of over 21,000 employers also found premiums

within pooled purchasing arrangements to be comparable to those outside.

Specifically, this survey found that 1997 monthly single (self-only)

premiums for small employers participating in any pooled purchasing

group, including cooperatives, multiple employer welfare arrangements,

and association plans, were $180, compared with $172 for

nonparticipants.22

By initially imposing greater restrictions on insurers’ ability to vary

premiums than the restrictions imposed by state law for insurers in the

small group market, the Texas cooperative was able to temporarily offer

significantly lower rates to employers with high-risk employees.

Specifically, participating insurers were not allowed to vary premiums on

the basis of group health status, group size, or industry, as they could

outside of the cooperative. As a result, a cooperative official reported that

less healthy individuals could obtain premiums about 30 percent lower

through the cooperative; however, healthy individuals could pay up to 30

percent more for coverage within the cooperative. Because this practice

caused the cooperative to attract a disproportionate share of high-risk

groups, beginning in January 1997 it revised its rating practices to become

more comparable to rates available in the small group market.

Cooperatives’ Potential for

Obtaining Lower Premiums

Is Limited

Three factors appear to explain why cooperatives have not typically

achieved greater overall premium reductions. These factors are a small

market share, minimal administrative savings, and state rating

requirements.

First, despite their efforts to leverage market share, the cooperatives we

reviewed were limited in their ability to do so. In part, this was a function

of their relatively small size. Three of the cooperatives—California, North

Carolina, and Texas—each represented 2 percent or less of the small group

market in their states, while Florida and Connecticut represented about 5

and 10 percent, respectively, of market share. In some cases, a

cooperative’s bargaining leverage was impeded by legal and practical

constraints that largely prevented it from selectively contracting with only

22See Long and Marquis, “Pooled Purchasing: Who Are the Players?” Health Affairs

(July/Aug. 1999). This study did not report premiums for specific small employer purchasing

cooperatives. Nonetheless, it found that individuals participating in the California,

Connecticut, and Florida cooperatives were no different for selected risk factors—age, sex,

and earnings—than those who purchased insurance outside of the cooperative.
B-282868

Page 22 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

a few insurers, thereby fragmenting an already limited pooled market

strength. For example, some of the cooperatives we examined experienced

difficulty in leveraging their market share because they were required to

contract with all qualified health plans, as in Florida, or they had difficulty

attracting and retaining insurers, as in Texas. To avoid a threatened boycott

by agents and brokers, the California cooperative initially accepted all

plans that met its terms; however, the cooperative has subsequently been

able to be more selective in admitting new plans. In contrast, the

Connecticut cooperative—a privately sponsored entity—faced neither

legal nor business impediments and therefore had more flexibility in

limiting participation to four insurers. It cannot, however, pass any savings

it may achieve to its members in the form of lower premiums because the

state Department of Insurance interprets the state’s community rating

statute to prohibit insurers from adjusting their rates as a result of

administrative savings.

Insurers’ perceptions of risk also limit a cooperative’s abilities to use its

pool of small employers to obtain lower premiums. Specifically, actuaries

and insurers reported that the risk of insuring a large employer is perceived

to be more favorable than that of a small employer, even when the small

employer participates in a purchasing cooperative. Insurers reportedly

anticipate a greater chance for adverse selection within a purchasing pool

composed of several small employers than for a comparably sized pool

created by one large employer. In addition, some insurers believe that some

small business owners are inclined to purchase health insurance only when

they or an employee imminently needs coverage.

Second, while the cooperatives tried to obtain premium reductions by

assuming some of the administrative responsibilities of insurers, the

anticipated administrative savings either never materialized or were not

valued by insurers. According to some cooperative officials, administrative

savings are inherently limited because cooperatives can relieve insurers of

only a fraction of their costs. Moreover, when assuming responsibility for

an administrative task, such as marketing, a cooperative generates its own

costs that must be covered, typically by a fee to members. Administrative

costs can be higher for insurers selling insurance to a cooperative of small

employers than for a single large employer. This is due, in part, to insurers

facing an increased need to create name recognition and product

differentiation when employees in cooperatives can choose among

competing plans. One insurer also reported that its administrative costs

actually increased because it had to modify its computer programs in order
B-282868

Page 23 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

to accommodate the information requirements for business obtained

through the cooperative.

Third, cooperatives were limited in their ability to offer significantly lower

premiums to firms with high-risk employees because state laws, to varying

degrees, already restrict premium variation allowed in the small group

market. For example, the premiums within the Florida cooperative are

essentially based on the same rating factors that can be used outside—age,

gender, family composition, geography, and tobacco use. As a result, most

groups could obtain similar premium prices from an insurer whether they

purchased a plan through this cooperative or on their own. The California

cooperative based its premiums on three rating factors—age, geography,

and family size. Outside of the cooperative, state insurance laws and

regulation allowed insurers to vary premium rates by plus or minus 10

percent from their base rate for additional factors such as health status.

Therefore, if insurers applied these additional underwriting standards,23

premiums outside the cooperative could be as much as 10 percent higher or

lower for some groups.

In addition, cooperatives were concerned that offering lower premiums to

firms with high-risk employees could attract too many high-risk

individuals, a phenomenon called “adverse selection.”As mentioned earlier,

the Texas cooperative was able to temporarily offer significantly lower

rates to high-risk employers by imposing greater restrictions on insurers’

ability to set premiums than the restrictions allowed by state laws and

regulations for all insurers in the small group market. By doing so,

however, the cooperative produced the classic “death spiral” by charging

relatively higher rates to those who were healthier, leading to an increase in

average premiums as more high-cost individuals enrolled in the

cooperative and the low-cost individuals left. While the cooperative

eventually adopted rating practices similar to those used by insurers

outside, insurers withdrew their participation anyway and the cooperative

ceased operation in July 1999.

23The American Academy of Actuaries defines underwriting as “the process of identifying

and classifying the potential degree of risk represented by a proposed insured or group of

insured. Medical underwriting is sometimes used to identify risks which are expected to

incur high medical costs.”
B-282868

Page 24 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Cooperatives Take a

Variety of Actions to

Maintain Their Viability

To remain viable, cooperatives have to attract a sufficient number of

insurers and employers interested in participating. Key to this effort is

maintaining both the perception and the reality that the participating

employer groups do not include disproportionate numbers of high-risk

individuals. To accomplish this, cooperatives used a variety of strategies to

protect individual insurers from receiving a disproportionate share of highrisk enrollees, including establishing standardized benefit packages and

formal risk-adjustment mechanisms. Furthermore, the cooperatives have

learned that they need to maintain close working relationships with

insurance agents in the small group market to increase participation of

employers.

Small employer cooperatives have had varied success in maintaining their

viability. The cooperatives in Connecticut and California have generally

enjoyed stable—even growing—employer participation. However,

participating PPO plans withdrew from the California cooperative because

of adverse selection by high-risk groups. In contrast, cooperatives in Texas,

Iowa, and Kentucky have discontinued operation. Other cooperatives,

including those in Florida and North Carolina, have struggled with

declining participation by insurers and employers. Several insurers have

withdrawn from both the Florida and the North Carolina cooperatives,

some citing high administrative costs and the risk perceived to be

associated with the cooperatives.

Cooperatives Use Varying

Approaches to Manage Risk

Selection Among Insurers

The cooperatives we examined used various approaches to manage

potential risk selection—adverse or favorable—among insurers, including

establishing standard benefit packages, requiring all participating insurers

to offer both an HMO and a POS option, establishing employer participaton

requirements, and establishing formal mechanisms to adjust payments for

instances where adverse selection had occurred. Because cooperatives

allow employees to choose directly among competing plans, the potential

for selection bias may be compounded, since employees have more

information about their own likelihood of using services than do their

insurers or employers. To preserve and enhance a broad choice of plans for

their members, cooperatives instituted approaches to mitigate the potential

for adverse selection affecting insurers that offered out-of-network options

such as PPOs and POSs that might be attractive to high-risk individuals.

Each of the cooperatives we reviewed made standardized benefit packages

available to limit the potential for risk selection. By requiring all
B-282868

Page 25 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

participating insurers to offer similar benefit packages, the cooperatives try

to minimize attempts by insurers to attract only lower-risk groups by

excluding benefits particularly valued by high-risk individuals. This was

echoed by a cooperative official and an insurer we interviewed who

indicated that the cooperatives designed their benefit packages to closely

match those offered in the small group market so that they would not

attract an undue proportion of low- or high-risk groups seeking coverage.

Beyond standardizing benefits, all participating insurers in the Connecticut

cooperative offered the same two types of managed care plans—HMO and

POS. The cooperative deliberately designed its plan offering to reduce risk

selection that might develop for insurers if they offered only a POS option.

The goal was to minimize the likelihood that any one participating insurer

would find itself with an undue proportion of higher- or lower-risk

individuals because of the type of plan that it offered.

The California cooperative implemented a risk-adjustment system that

retrospectively redistributes funds to insurers who attract a

disproportionately sick population. California’s risk-adjustment model is

designed to redistribute funds from plans that enroll a population with

expected costs at least 5 percent less than the cooperative’s average to

plans with costs expected to be at least 5 percent greater. Plans with lowerrisk enrollees pay a portion of their revenues to plans with higher-risk

enrollees.24 Even with this risk-adjustment mechanism, however, insurers

no longer offer a PPO option, considered too high-cost, through the

California cooperative.

24As discussed in John Bertko, Health Based Payments—What Do We Know About Risk

Adjusted Payments? (Jan. 1998) and Jill Yegian and others, Health Insurance Purchasing

Alliances for Small Firms: Lessons From the California Experience (May 1998). The

California cooperative’s risk adjustment process involves identifying individual enrollees

who have been hospitalized in a previous period with a “marker diagnosis"—that is, one of

approximately 120 diagnoses with high costs, all requiring inpatient admission. Each

individual with one of these diagnoses is assigned a weight based on average costs derived

from California health care experience in managed care plans during the period 1992 to

1994. All other enrollees receive an “average weight.” An individual insurer’s average weight

for all enrollees then determines a risk assessment score that is used to calculate proposed

risk-adjustment amounts. In 1996, the plan that received the most favorable selection paid

$11.80 per contract per month into the pool, and the plan that received the most adverse

selection received $46.04 per contract per month. In 1997, four plans paid out a maximum of

$8 per contract per month, and one PPO received $16 per contract per month. In 1997, 1998,

and 1999, the percentage of premiums transferred was 1.14 percent, 0.04 percent, and 0.11

percent, respectively. Pacific Health Advantage is in the process of converting to a new riskadjustment method.
B-282868

Page 26 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

The North Carolina cooperative explored two alternative risk-sharing

mechanisms but did not implement either. Officials of the cooperative

reported that they considered a risk-adjustment system and a reinsurance

mechanism providing stop-loss protection to insurers for individual claims

exceeding $150,000. The cooperative explored financing these mechanisms

with funds contributed to a pool by insurers or with funds from the state

for the purpose of creating a high-risk pool. The cooperative did not

implement either mechanism because the expected costs would have

obviated potential premium reductions sought by the cooperative from

participating insurers.

Agents Retain Important

Role in Employer

Participation in

Cooperatives

Officials of the cooperatives we examined indicated that working

collaboratively with insurance agents and obtaining their support is

essential to success. Typically, small employers rely on agents to assist

them in procuring health insurance. Specifically, agents assist small

employers in identifying plans, completing applications, and obtaining

premium quotations. Without the cooperation of agents, a cooperative is

likely to face difficulty identifying small employers interested in offering

health insurance and in enrolling those employers, and may experience

adverse selection.

Cooperatives fulfill many of the functions that insurance agents

traditionally have performed for small employers. In recognizing this, the

California cooperative reported taking actions that made optional the use

of agents and, for those using agents, limited the commissions paid to

agents, thereby alienating many of them. These actions included paying

agents a set fee per employer instead of a percentage of premiums; listing

the amount of the agent’s commission on the employer’s bill; and enrolling

employers directly, thus bypassing agents. As a result, agents were less

likely to market the cooperative to small employers who initially contacted

agents. The state board overseeing the cooperative discontinued these

practices because it realized agents are needed to enroll small employers;

currently, 77 percent of employers in the California cooperative use agents

or brokers. A North Carolina cooperative official stated that the

cooperative attempted to work more collaboratively with agents as a result

of hearing about the California experience.

The commissions paid to the agent by the cooperative and insurer, and the

agent’s relationship with insurers, can also influence which groups an agent

will enroll in the cooperative. When the cooperatives and insurers set

different agent commissions for the same groups, agents have a financial
B-282868

Page 27 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

incentive to enroll their groups where the commission is highest. While

cooperatives offering higher commissions than insurers outside the

cooperative may increase employer referrals by agents, it does not

guarantee that agents will not tend to direct higher-risk groups to the

cooperative. Cooperative officials reported that agents are sometimes

reluctant to enroll higher-risk groups directly with insurers in order to

protect existing financial relationships. Instead, such groups may be

steered toward the cooperative, since some cooperatives are sometimes

viewed as de facto high-risk pools. For example, after raising commissions

to 10 percent to enhance its competitive position and broaden its agent

base, the Texas cooperative reported that agents still tended to enroll

groups with high-risk individuals in the cooperative, rather than enroll

them directly with insurers. In this way, agents could receive a relatively

higher commission for high-risk groups while maintaining positive

relations with insurers that provide the bulk of their compensation by

continuing to enroll low-risk groups with them outside of the cooperative.

Concluding

Observations

The experience of existing cooperatives—based on our analysis of 5

cooperatives, as well as other recent research—demonstrates that they can

provide employees of small employers with an enhanced choice of health

plans offering standardized benefits. In addition, a cooperative can offer

employers fewer administrative hurdles to obtaining health insurance.

However, in general, existing cooperatives have not realized any potential

to significantly reduce premiums for employers or employees. Additionally,

not all of the cooperatives have been successful in attracting and retaining

insurers willing to participate within the constraints of the cooperative or

in avoiding enrolling a disproportionate share of firms with higher-risk

individuals.

Key to the cooperatives’ ongoing viability is how practices such as benefit

offerings, premiums, and requirements for insurers affect the distribution

of risk among enrollees—that is, the extent to which the cooperative and

the insurers within it disproportionately attract and retain healthy, low-cost

enrollees or less healthy, higher-cost enrollees. Several cooperatives

established in the early to mid-1990s have either ceased operation or faced

declining participation by insurers and employers, and even the largest

small employer cooperatives have attained only a small share of the health

insurance market for small employers. As new forms of pooled purchasing

arrangements designed for small employers are proposed that operate

under different regulatory and market conditions, the experiences of

existing small employer purchasing cooperatives can provide meaningful
B-282868

Page 28 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

insights. However, differences in the design and regulatory environment of

the proposed Healthmarts and the existing cooperatives mean that their

experiences may not be fully generalizable for new pooled purchasing

arrangements.

External Comments Officials from the cooperatives we examined as well as expert reviewers

from two organizations provided comments on a draft of this report. In

general, they concurred with our findings and made technical comments,

which we incorporated where appropriate. In their comments, several

reviewers highlighted specific design features that they believe could

enhance or impede cooperatives’ viability as more effective purchasers for

small employers. In particular, they emphasized the importance of the

ability to negotiate rates, selectively contract with insurers, and maintain

comparability in benefits and rating practices with the small group market.

As discussed in our report, the cooperatives we examined demonstrated

these characteristics to varying degrees but were constrained in their

ability to selectively contract and negotiate rates. All of them eventually

established benefits and rating practices that were generally comparable to

the small group market, and the existing ones remain a small part of that

market. One reviewer also noted that the design and operation of some

more recently established, privately sponsored cooperatives—such as

those in Colorado, New York, Oregon, and Washington—reflect these

design features. Because these cooperatives have only recently come into

existence, have very few participants, serve employers with more than 50

employees, or operate in limited geographic areas, we did not include them

in our review and cannot comment on their operations.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after its

issue date. We will then make copies available to appropriate congressional

committees and others upon request.
B-282868

Page 29 GAO/HEHS-00-49 Small Employer Purchasing Cooperatives

Please call me at (202) 512-7118 if you have any questions about this report.

The information presented here was developed by N. Rotimi Adebonojo,

JoAnne Bailey, and Mark Vinkenes, under the direction of John Dicken.

Sincerely yours,

Kathryn G. Allen

Associate Director, Health Financing and

Public Health Issues

(101831) Letr
Ordering Information The first copy of each GAO report is free. Additional copies of

reports are $2 each. A check or money order should be made out to

the Superintendent of Documents. VISA and MasterCard credit

cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

Orders by visiting:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders by phone:

(202) 512-6000

fax: (202) 512-6061

TDD (202) 512-2537

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any list

from the past 30 days, please call (202) 512-6000 using a touchtone

phone. A recorded menu will provide information on how to obtain

these lists.

Orders by Internet:

For information on how to access GAO reports on the Internet,

send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web home page at:

http://www.gao.gov

To Report Fraud,

Waste, or Abuse in

Federal Programs

Contact one:

• Web site: http://www.gao.gov/fraudnet/fraudnet.htm

• e-mail: fraudnet@gao.gov

• 1-800-424-5454 (automated answering system)

United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. GI00