Small-Biz Health Insurance
A startup offers online application for group policies
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
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
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
To: STAFF & BENEFITS