"Designed Specifically for the Small Business"

Mitch Zaretsky, of New York City's HealthPass, explains why his organization has thrived while other rate-bargaining outfits folded

Back in 1998, the Big Apple's then-mayor, Rudy Giuliani, recognized that too many New Yorkers working for the city's small businesses lacked health insurance. To that end, City Hall partnered with the New York Business Group on Health, kicked in $4 million to start things rolling, and founded the HealthPass collective health program, which makes it easier and cheaper for entrepreneurs and small-business owners to obtain coverage for themselves and their workers.

While similar plans in other states and cities have foundered, New York's experiment looks very much like a survivor -- so much so that HealthPass's executive director, Mitch Zaretsky, doesn't think the day is too far off when public subsidies will no longer be required (see BW Online, 10/15/03, "The Hidden Snags in Health-Care Pools"). Zaretsky spoke recently with BusinessWeek Online's Edward Popper about HealthPass' growth, the options it offers, and why New York State's community-rating law, which limits the difference between what an insurer can charge a healthy individual and a sick one, has been a vital part of its success. Edited excerpts from their conversation follow:

Q: Health Pass is the result of a partnership between the New York City government and a private corporation. What does that make you?


We are in the process of applying for status as a social-welfare entity...[and] that would make us a not-for-profit. Currently our status is in limbo…. The challenge and the excitement of HealthPass is to take a really important social mission, providing access to health insurance to the working uninsured, and making it self-sustaining. We have no intentions of being a permanent government program. This year, we expect that 80% of what it takes to run this company will be earned the old-fashioned way, in the marketplace.

Q: How does HealthPass work?


It's built on the choice model… In New York, a small employer is defined as having between 2 and 50 employees. So, let's say you're a company with 9 employees, you can come to HealthPass and get a choice of 4 major medical carriers and 28 benefit designs… If each one of your nine employees wants a different benefit plan, then they can enroll in HealthPass and get them. We also offer, under one roof, a dental plan and a bundled security [term life, death and dismemberment, and long-term disability], and all designed specifically for the small business.

The employer then can say, "You know what, I'm going to contribute some dollars -- let's say, $150 each month for an individual policy and $400 for a family policy." Now, our model allows for the employee to decide, "That will pay for the lowest-cost plan with the leanest benefits, but I need something more." The employee can add the additional amount of money to get a richer benefit if he or she decides that is what is needed.

Q: How does your service help small businesses save money?


First of all, the employer can contribute a fixed dollar amount through the HealthPass model…If you're contributing 30% of a premium and the premium goes up every year, your 30% costs more every year. Under our model, you can contribute hard dollars, and that enables you to control, and to know, what your benefit costs are going to be. Because it's up to you whether you want to change that hard-dollar contribution, your fate is not left in the hands of the carriers.

The second way we enable [people] to control costs is that…the employee, at renewal, can say, "I can no longer afford this particular benefit design, but I've got another 26 benefit designs I can select from." That will enable him say, "OK, Insurer A increased by 48% -- but wait a second, there is a very similar plan offered through Insurer B that has only increased by 6%. That I can handle."

Q: Are there any other advantages for small businesses that sign on to HealthPass?


Administratively, from the employer's perspective, it is extremely simple. There's only one enrollment form, one bill, and one check. If the employer decides he wants to offer health care, then he lets the employees decide which carrier, and whether they want dental or not. Then the employee chooses the particular benefit design that he or she needs…. If someone is unhappy, the employer doesn't get sucked in. The employer's job is to run the business. If one of the employees is unhappy with a [health-insurance] product, that employee, on his own or her own, can select from a whole range of products that we have at HealthPass.

Q: Does the economy of scale allow HealthPass to negotiate lower premiums?


HealthPass was supposed to be an example of a health-purchasing cooperative, where you could have hundreds of employers band together and sit down with a health-insurance carrier and say, "Unless you give me this price, I'm going elsewhere." Well, that doesn't work…. You can't have market-leveraging by having a large amount of employees in a state where we have got "community rating," because the rate is set by the state. It's not negotiable, which is a positive thing, because in 1993, a small businesses in New York State, couldn't possibly afford health insurance. Community rating acts as a price ceiling.

Q: How does an interested small business owner go about signing on to HealthPass?


They get in contact with us through HealthPass.com and request a quote.

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