This health insurance exchange works

By Anne Fisher

Lawmakers wrangling over health care reform could do a lot worse than to take a close look at Manhattan-based HealthPass, a nonprofit clearinghouse for small businesses (with two to 50 employees) looking to buy health coverage.

Started in 1999 with funding from health insurers, the city and the New York Business Group on Health, HealthPass is now self-supporting. About 3,600 employers, whose workers and their dependents number 31,100, get their health insurance through the exchange–a 50% jump in just the past year. “There has been a learning curve,” notes Executive Director Vince Ashton. “It took people a while to understand what we do.”

What HealthPass does is simplify comparing and choosing medical insurance. Member businesses can select from more than 30 plans, with help from Mr. Ashton and his team, then fill out one form, write one check and leave the rest to HealthPass. “Businesses can pick a plan that fits their budget,” says Mr. Ashton.

Could something like this work nationwide? Maybe, but only if other states change their rules. New York is the only state that allows “community rating,” where everyone in a geographic area pays the same rate–as opposed to “experience rating,” which lets insurers base their fees on medical histories and other risk factors.

“Community rating makes insurance more affordable,” Mr. Ashton observes. “The drawback is that healthy employees can opt out of having insurance, leaving only higher-risk people in the plan, which puts upward pressure on costs.” He adds: “The ‘individual mandate’ being talked about in Congress, requiring everyone to have insurance, would solve that. I think it’s key to making reform work.”