One of the big questions hanging out there in the wake of the Patient Protection and Affordable Care Act is, will it lead to employers giving up on providing health plans for their workers?
I’ve had some experts point out to me a number of reasons why this might happen. Starting in 2014, the health reform fines many employers if they don’t cover their workers, but the fines are generally less than what it costs to pay premiums on a health plan. Employers would also have less guilt sending their workers out to shop for individual plans because the health reform requires states to set up exchanges that make it easier for people to find their own plans.
So is an employer-sponsored health plan someday going to be a benefit as quaint and luxurious as, say, a pension plan is today? At least one entrepreneur, Abir Sen of Minneapolis-based Bloom Health, says he knew the answer in 2009, and he’s using his one-year-old startup to offer a middle ground that he thinks will replace employer-sponsored plans in much the same way that the 401(k) plan has mostly replaced the pension.
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Bloom Health consults with an employer’s executives to help them decide what proportion of revenue they are comfortable dedicating to employee healthcare. The employer then ditches the old health plan, takes the amount decided on and distributes the money into tax-free health reimbursement accounts (HRAs) that the workers use to go out and purchase health insurance on their own.
Bloom Health provides clients’ workers a proprietary Web-based health insurance search engine, as well as phone access to Bloom health insurance experts, to help them through the process of buying their own insurance.
More than 31 employers have taken Bloom Health up on the idea, and Sen told me Bloom will soon have more clients to announce. Employers picking up the Bloom Health model include the construction companies group Anderson Cos., the home-care outfit Orion Corp. of Minnesota, software platform maker Echobit, software developer Refactr, health wellness manager Wellclicks, the disable and senior support services outfit Pinnacle Services and consulting firm Digineer.
The amount of money in each HRA account is usually similar to what employers were paying on insurance premiums, Sen said. He said the national average on such premiums is about $7,500 per year per worker.
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There will be savings in the future, though, because the employers will no longer have to respond every year to large premium increases on a health plan; they’ll add to the HRA contributions as they are able.
Sen was previously a co-founder and president of the wellness programs management company RedBrick Health, which has raised tens of millions in venture capital.
A past MedCity News writer, Thomas Lee, asked more than a year ago whether Bloom Health was really any different from RedBrick. It seems now that the answer is that there’s a lot of difference. RedBrick seeks to help employers control the costs of their health plans by making workers healthier; Bloom Health wants to replace the traditional employer-sponsored health plan altogether.
Sen’s operation has grown to 35 workers based out of the Lumber Exchange Building in downtown Minneapolis, and he plans to hire five more in the next month. He acknowledged the company is still very much in startup mode, with no operational profits yet. He declined to disclose revenue. But his business plan obviously has fans: Bloom Health raised $12.5 million in two venture capital rounds last year.
