As the healthcare industry looks toward a crucial vote on the reform package Tuesday, the potential of insurance exchanges -- an idea tried in Florida in the 1990s with disastrous results -- is sparking intense discussions.

Some experts think new ideas about exchanges can be made to work, but others see inherent problems that mean any version is likely to fail.

The concept behind health exchanges is that individuals and small businesses joining together could get better rates from insurers than they could get separately. Depending on how they are structured, they are sometimes referred to as co-ops, sometimes ``insurance marketplaces,'' but by whatever name, they involve forming groups to get better deals.

However, in Florida and some other states where they have been tried, heavy lobbying from the insurance industry has led to serious limits to the exchanges.

The Florida groups, called Community Health Purchasing Alliances, started in 1993 to allow small businesses and the uninsured to band together to purchase insurance.

They died in 1999 because insurers were suffering such large losses they didn't want to offer coverage to the CHPAs (pronounced CHIP-ahs).

Randy Kammer, an executive with Blue Cross Blue Shield of Florida, says improved exchanges can be ``absolutely'' made to work as part of a healthcare reform package now being discussed in Washington. ``There's a lot of good lessons to be learned from the CHPAs,'' she says.

John Sinibaldi, the president of an insurance company in Seminole who sold a lot of CHPA policies in the 1990s, disagrees. ``Even when properly administrated and constructed, they're going to find it tough to maintain viability.''

`SMOKE AND MIRRORS'

Sinibaldi says the present proposal for the exchanges is ``huge smoke and mirrors. People are offering this up because they're opposed to a government insurance program. But I don't think it can be effective or meaningful.''

In Florida, the Legislature created 11 district CHPAs in 1993, diluting the pool and adding to administrative costs. What's more, they weren't allowed to negotiate rates with insurers. ``So they had no group purchasing power,'' says Linda Quick, president of the South Florida Hospital and Healthcare Association.

By April 1996, 74,000 people were covered by CHPA-sponsored health insurance, according to a report by the Legislature's Office of Program Policy Analysis and Government Accountability. About 38,000 of those had been uninsured -- but that was a mere 1.5 percent of the state's uninsured at the time.

The report also found an oddity: Almost 80 percent of the small businesses signing up for CHPAs had only one or two employees.

Sinibaldi has an explanation: The state's high-risk pool -- a group intended for the seriously ill who couldn't get insurance at work or through the individual market -- had closed to new patients in 1989.

``CHPA became the de facto high-risk pool,'' Sinibaldi says. People formed one- or two-person businesses just to get into a CHPA. One difference: In Florida and most states, high-risk pools are subsidized by the government because the patients are so expensive to treat. CHPAs received no subsidies.

The end result: CHPAs attracted the older and sicker. Small businesses with younger, healthier employees found they could get much better rates by dealing directly with the insurers and avoiding the CHPA alliances.

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