LIA health plan converted to for-profit arm

COMMACK - The Long Island Association, the Island's biggest business group, has converted its Health Alliance medical distribution plan to a for-profit venture with expectations of about $4 million in annual profit.

The Health Alliance, through which about 20,000 Islanders in 2,200 small businesses

"Whether the LIA will take money in the form of dividends or not is simply a tax question," Crosson said.

The conversion comes as rising premiums and failing health care companies are emboldening employers to offer "defined contribution" programs as a way to control costs. Under such programs - which the Health Alliance offers - workers are given a fixed amount of money to use toward the health insurance coverage they see fit. "We're in a perfect situation to take advantage of that,"

Crosson said. He expects the alliance to rise 5 percent to 10 percent annually, and many companies to boost premiums between 10 percent and 20 percent annually.

Under Health Alliance, employees can choose between medical plans under HIP, Horizon Healthcare, MDNY, Prudential HealthCare or Vytra Health Plans.

The LIA's membership voted for the change to for-profit status on June 1. The LIA is the sole shareholder of the Health Alliance.

The change, which Crosson said won't affect member health plans or the LIA's financial status, started in 1994, when the alliance was set up as a 501C-4 non-profit entity. The IRS began a review process that lasted 2 1/2 years, ending in a precedent-setting decision that the Health Alliance should be taxed as a for-profit entity, Crosson said. The Health Alliance then found itself with a non-profit corporate status and a for-profit tax reporting status, something it opted to normalize.