In the late 1990s, New York City small businesses saw surging healthcare costs and many small business employees were going without insurance. As part of broader efforts to warm the city's business climate, in 1999 mayor Rudolph Giuliani awarded a $1 million grant to the New York Business Group on Health to create the not-for-profit insurance exchange HealthPass New York.
Now the HealthPass exchange sells small group insurance to about 30,000 members from 3,500 organizations, mostly through defined contibution plans.
In New York City, where about 200,000 companies are considered small businesses, HealthPass is positioning itself for a growth in the small group market, and is contracting with the Chicago-based benefits tech firm bswift to provide the online retail platform.
Vince Ashton, HealthPass CEO, who started as sales director with HealthPass in 1999, says the exchange is using a mix of the old and new, relying on brokers for old school clients, while adapting to the digital preferences of young business owners who work from a Brooklyn home office.
HPN: What was the market need for HealthPass back in 1999?
Ashton: As employer and employee health care costs continued to increase at double digit rates of inflation, HealthPass was created to help offset the resource drain healthcare had on small employers, both in the form of premiums paid and time and money spent on administration. This endeavor helped promote New York City as a small-business-friendly environment and helped retain and attract employers and thus jobs and tax revenue to the area.
HPN: How have New York City businesses greeted defined-contribution plans?
Ashton: The defined contribution strategy has been the basis for making the HealthPass program successful for small employers, though it has been something they have at times been slow to embrace based on old habits. Many longer standing employers had been used to the idea of percentages when instituting their premium cost sharing arrangements with employees and often with HR manuals that dictate such a scheme.
HealthPass has always been appealing to first time insurance purchasers. Nearly half of HealthPass employer groups that have signed up did not previously offer health insurance to their employees.
HPN: You've said brokers are key to a lot of your business. What's their role?
Ashton: The broker is, and will continue to be, the trusted advisor of the small business owner, considered an extension of their staff, and often the decision maker when it comes to the benefits package. Brokers currently play a leading role and we envision them playing a central role in distributing the product well into the future. Although many small employers are becoming more comfortable with making complex decisions and purchases online, most want to validate an important decision like their insurance with a person who is well versed in the market dynamics and realities.
HPN: How are you expecting the NYC small group market to change as a result of health reform?
Ashton: 2014 is when the market will see significant changes. While we don't anticipate vast decreases in the pricing, the way benefits are delivered to small employers and the opportunity to do so statewide through an exchange should foster even more acceptance of the exchange platform and help to expand health care access.
Many small business owners are entrepreneurs that have left or been downsized from large employers that likely had a cafeteria plan, and have gravitated toward the exchange concept because of that. Another segment of these new employers will be those straight out of school who do not have preconceived notions on how benefits were traditionally offered and thus are more receptive to the idea of a flexible benefit package. And the defined contribution strategy is one that resonates moreso with small employers these days as we are well past the days of offering non-contributory plan options in the majority of cases.