Got a headache? The tight job market ratchets up pressure on small businesses to offer health benefits, premiums are rising, and entrepreneurs face a dizzying array of choices. A recent arrival to online insurance sales promises some relief for entrepreneurs trawling the market for policies.

Launched last October, EHealthinsurance.com joined a coterie of online insurance brokers that primarily offer individual and family policies. But starting this fall, Ehealthinsurance.com will offer policies for businesses with no more than 50 employees, making it one of the few to do so online. (Sole proprietors must apply for individual policies.) Companies will be able to fill in the applications, which will then be forwarded to the carrier, at the site. Payments go directly to the carrier, which pays Ehealthinsurance.com a commission of up to 20% per sale. Premiums on the site are no different from those available directly from the insurers. The advantage to using the site is the ability to compare different plans' prices and services -- and apply online.

Ehealthinsurance.com plans to roll out its small-group insurance listings state by state, starting with California. Carriers will be Blue Cross-Blue Shield, Prudential Pacificare, United Healthcare, Cigna, and Aetna. By the end of 2000, Ehealthinsurance.com plans to list small-group policies from top providers in all states.

Companies with 14 or fewer employees will have to submit individual applications for each worker, though they're still eligible for a group rate. Enterprises with 15 or more workers will fill out a master group form, which gives health insurance companies "the view [of employee health] from 30,000 feet," says Vip Patel, founder of Ehealthinsurance.com's parent, Sash Communications Inc. The forms may ask if anyone in the company is pregnant, has been hospitalized in the past 24 months, or has a heart or kidney condition or AIDS.

There's also detailed information on the site about policies, such as a "Physicians Directory" that lists all the doctors associated with the plans in states where EHealthinsurance.com lists offerings.

Sash Communications is based in Sunnyvale, Calif., and develops systems for online health-insurance sales. Patel is a former executive of Healtheon Corp., an Internet health-care information and transaction network. EHealthinsurance.com competes with the likes of Insweb.com, a Healtheon partner; Insuremarket.com; and HealthAxis.com. The four are considered the top online insurance sites because of their comprehensive information and their ability to take applications online. Of these, only EHealthinsurance.com and HealthAxis.com specialize in health plans. All have limited offerings for small-business health insurance, but Ehealthinsurance.com's planned offering appears to offer the widest choice.

No question there's a market for such services. According to consulting company Booz, Allen & Hamilton in New York, almost a third of the $1 trillion a year spent in the U.S. on health care goes to insurance premiums. An early 1999 Booz Allen study of 150 insurance companies, their Web sites, and the sites of 50 insurance brokers found that up to 60% of insurance-buying customers plan to purchase coverage online in the next three to four years.

Relative newcomer EHealthinsurance.com only lists individual and family policies for five states, so far: California, Illinois, Indiana, Virginia, and Washington, but it plans to be in all 50 states by yearend. By comparison, Redwood City (Calif.)'s Inshealth.com, which filed for an initial public offering four weeks ago, says consumers can find information on five major carriers' health-insurance offerings in 40 states. The site also lists automobile, term life, renters', and homeowners' policies.

But Patel says the company will gain an edge over its competitors late this year with a system for instant online approval of applications for individual policies. That service won't be immediately available for small companies, however. At present, insurance companies can take several weeks to process applications. Patel says proprietary underwriting software will compare the insurance companies' standards with information consumers provide to determine eligibility. Companies don't typically verify application information -- submitted online or off -- unless an applicant notes a preexisting medical condition, Patel points out. The proof of the pudding comes later when a policyholder submits claims that don't jibe with the application. Then the company can cancel the policy. About half the states have "guaranteed-issue" policies, which means carriers cannot deny coverage based on preexisting conditions, Patel notes.

EHealthinsurance.com isn't the only place to find health insurance online, but it's one more tool to help entrepreneurs navigate the tricky straits of health insurance coverage.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

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