EHealth Joins with Advocacy Group to Offer Insurance Option

A partnership announced this morning by eHealth and a small business advocacy group seeks to fix a common problem facing many small businesses: the lack of health insurance.

EHealth, an online firm offering health insurance for small businesses, individuals and families, has partnered with the National Federation of Independent Business to offer a customized technology designed to facilitate and encourage the use of Health Savings Accounts.

An HSA is a tax-free savings account for medical expenses paired with a high-deductible health insurance plan that allows individuals or families to save for future medical expenses.

EHealth represents about 185 different individual health insurance carriers and has between 9,000 and 10,000 different insurance plans listed on its Web site. Users punch in their ZIP code and the service lists plans available in their state.

EHealth Senior Vice President Sam Gibbs said the Mountain View, Calif.-based company began noticing that over the last 15 months many small businesses were no longer purchasing group health insurance plans and instead were signing up for individual coverage.

"Many of these businesses over the last two years were really starting to feel the inflation of small group products," said Gibbs, who explained that small business owners were switching to coverage for themselves or their families but could no longer afford to insure their employees.

"These owners felt really bad about not being able to provide for their employees and really wanted to do something about it," said Gibbs. "Although the insurance industry is extremely regulated, we thought let's see what's help business owners contribute to the health care costs of employees and we came up with the idea of marrying health savings accounts to business needs."

EHealth, which has been located in the tech mecca of Mountain View, Calif., since 1997, has created a technology tool that encourages a business owner to contribute to an employee's HSA. For example, if a firm has 10 employees, the owner may decide that he could contribute $250 per employee per year toward HSAs.

"From an employee's perspective, now I own my policy and it has flexibility," said Gibbs. "In a small group plan, all employees have to get whatever the owner or spouse decides is the best plan. Additionally, if an employee leaves a firm, he or she can take the HSA with them."

Individuals are not penalized if they use HSA funds to pay for qualified medical expenses and the unused funds can be rolled over if they are not used by the end of the year.

EHealth's service is based on existing programs that are in place today, Gibbs acknowledged. There were more than 6 million HSA bank accounts in place nationwide at the end of last year.

"The pieces have been on the table before, but we've put them together in a certain way and invented some proprietary technology and process of how to facilitate it," he said. EHealth charges an employer $2 per employee per month. There are no charges for employees.

A company signing up for eHealth's HSA service sets up an account on the Web. The program is set up like a "bill-pay" system allowing the employer to add or subtract employees and monitor expenses. Employees also have access to a separate Web portal to monitor their own personal information.

EHealth also sees a new market segment to tap into - the uninsured. A large part of that market is made up of service industry employees, who tend to be young, said Gibbs.

"These industries, including franchises, have tried to offer insurance programs but the challenge for them is that their turnover rate is more than 100 percent a year," Gibbs said.

"If you can get someone who is younger participating in the program, their insurance premium is generally inexpensive and it's a great ability for them to put pre-tax dollars into an HSA and they could have 30 more years to put funds in there."

EHealth calls 20-somethings the "young invincibles" because they are healthy but never think something is going to happen to them, said Gibbs. "But they all skateboard or snowboard and it's not too hard to go and break your arm doing that and then suddenly you have a $15,000 medical bill. When these folks understand that they can get a policy for $30 to $50 a month, it makes sense."

By Sharon McLoone |  June 9, 2008; 8:00 AM ET
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