A new Omaha company plans to fill what its founders say is an impending void by opening a private, national health insurance exchange for people who work at businesses with fewer than 50 employees.
The online exchange, called Benefitbay, will allow workers from small businesses to buy individual policies from a choice of health insurance companies, paying monthly premiums with pre-tax dollars, with employers picking up part of the tab.
The exchange will open Nov. 1 for coverage to start Jan. 1. Workers who buy coverage would leave their employers' group health plans but still have job-related benefits.
It's an alternative to the health insurance exchanges being created in each state under the Affordable Care Act and to other private exchanges targeting large or medium corporations regionally.
Small-business owners are wrestling with the federal changes in health insurance. While there's no penalty for dropping their group policies, they consider health insurance important to attracting and keeping good employees. At the same time, small-group costs can skyrocket with only a few large claims in a year.
Zach Harris, president of Benefitbay, said the exchange will give employers more control over their benefit costs since they can decide how much to pay employees toward health coverage. Typically, small employers have little leverage in bargaining with insurance carriers.
With Benefitbay, he said, people who buy policies will be part of a large pool of employees who buy the same policies, sharing the risk of medical claims to average out the cost of premiums.
“We looked at the problem,” Harris said. “There was nobody competing.”
Nationally, about 47.5 million people work for businesses with fewer than 50 employees, according to human resources company ADP Inc.
The 50-employee level is important because smaller companies are exempt from the Affordable Care Act's requirement that employers must offer insurance or pay penalties, an “employer mandate” that has been postponed until 2015. But new provisions of Obamacare take effect soon — on Oct. 1, public insurance exchanges are to open, offering health insurance for people without group policies, Medicare or Medicaid.
The federal law, also known as Obamacare, makes Benefitbay's plan viable for insurers and brokers, attractive to employers and beneficial for workers, its organizers say, overcoming barriers that made such a system unworkable in the past.
“This is a 50-state solution,” said Harris, also a vice president with Swartzbaugh, Farber & Associates, a longtime Omaha employee benefits brokerage.
Early market research indicates 20 percent of small businesses would take a look at such a plan, he said, to be offered through a national network of insurance brokerages with 30,000 small-business clients.
That network, United Benefit Advisors, is the key to rolling out the new exchange nationwide, Harris said, giving it more potential than some similar regional exchanges that are popping up as Obamacare's provisions take effect.
“That's a competitive advantage,” he said. “It's the packaging of everything together that really sets us apart.”
Nebraska Insurance Director Bruce Ramge said he isn't familiar with Benefitbay, but “the concept sounds like it offers a lot of flexibility and a lot of good comparisons not only for the business but also for their employees.
“We always encourage everybody to shop. This is another tool. It'll really compete with the federally facilitated exchanges.”
Robert Swartzbaugh, a veteran of the benefits industry, said Benefitbay has advantages thanks to executives with experience at some of Omaha's top online companies, including Omaha Steaks and travel information provider Sojern.
“We are so lucky finding all these people,” said Swartzbaugh, one of four Omahans who put up $3 million to start Benefitbay.
Dozens of private health insurance exchanges have been created in recent months, but all or nearly all are limited to large or medium-sized employers or operate regionally.
InsureXSolutions, a private exchange affiliated with insurance agent Flexible Benefit Service Corp. of Rosemont, Ill., offers individual and small-group coverage with a choice of top insurers, but so far mostly in Illinois.
“We will be in other states,” said John Divito, president.
Mercer Health & Benefits of Kansas City, Mo., has a group policy exchange — not individual policies — for businesses as small as 100 employees.
Aon Hewitt Corporate Exchange of Chicago went live on Jan. 1 but only for employee groups of 5,000 or more. So far it has three clients: Aon, Sears and Darden Restaurants, which operates Olive Garden, Red Lobster and other chains.
Abigail Neary of Chicago, Midwest leader for Aon's exchange, said she hadn't heard of Benefitbay or any other national nongovernment exchange offering individual coverage and insurer choices for small-business workers.
“That is unusual,” she said. “There are a lot of complexities around those sorts of things. I want to understand how they've structured that.”
Silverstone Group, another Omaha benefits firm, is starting an online exchange for under-50 employers, offering group insurance choices within single insurers. Silverstone principal Bret Sesker said the exchange might adapt to needs as they arise.
Some insurers are creating online exchanges offering their own plan options.
Benefitbay is a different animal, its backers say, with its national marketing organization, wide choice of insurers and billing and administrative system.
Harris believes Benefitbay's costs will be competitive with the government exchanges, which will offer tax subsidies for many people. He said workers with decent wages may not qualify for subsidies, or only for small subsidies, which could make Benefitbay cheaper.
“They can do the math and decide,” Schwartzbaugh said.
United Benefit Advisors member firms include Swartzbaugh Farber in Nebraska, TrueNorth Companies in Cedar Rapids, Iowa, and Frank Berlin & Associates in West Des Moines. Another member, Hanna Global Solutions of Concord, Calif., will provide billing and other administrative support. Each of the association's 140 brokerages is licensed and regulated by its state insurance authorities.
Benefitbay's insurance choices come from GetInsured of Redwood City, Calif., an online insurance broker formed in 2005 that offers plans from more than 100 insurance companies. On Benefitbay, an employee could choose among companies licensed to sell policies in the worker's home state.
Harris said Benefitbay also will give options for life insurance, disability coverage, vision and dental insurance and other benefits, either paid by the employer or the employee.
The exchange will work because the Affordable Care Act prohibits insurance companies from rejecting individuals for coverage because of pre-existing medical conditions, Harris said. Now every small-business employee can get coverage.
Swartzbaugh said Benefitbay is partly intended to help benefits brokers serve small-businesses clients. If small businesses drop insurance and send their workers to the federal or state insurance exchanges, they may drop their brokers, too.
“They're trying to save their businesses,” Harris said.
Organizing Benefitbay has taken a year and a half. Its CEO is Gordon Whitten, a Hastings, Neb., native who founded Sojern, an Omaha company that provides information to travelers and travel companies.
Besides Harris, Schwartzbaugh and Whitten, the fourth founder is William Fisher, a former First Data executive who now heads Treetop Ventures, an Omaha startup investment company. Executives include Bill Dudley, formerly of Omaha Steaks, and Patrick Fisher, also formerly with Sojern.
Harris said Benefitbay will be ready to sell insurance to tens of thousands of small-business employees, and some medium-size employers have shown interest, too.
“We think this is a better way to take care of our clients,” he said. “The market will do what the market's going to do. We have a nice, viable business.”
Contact the writer: