Health Insurance ‘David’ Aspires to Stand Up to ‘Goliaths’

Andrew Kitchenman | May 17, 2013 | Health Care
Freelancers Union affiliate lays groundwork to offer affordable-care option in the fall

James Martin, executive director of the Freelancers CO-OP of New Jersey.
In a state that’s dominated by insurance Goliaths, the Freelancers CO-OP is setting out to prove that it can be a giant-slaying David – or at least a viable alternative.

It’s not setting out on this mission alone. It’s one of 24 Consumer Operated and Oriented Plans (CO-OPs) established in different states under the 2010 Affordable Care Act, a model that federal officials hope will result in affordable, consumer-friendly healthcare.

The CO-OPs are intended to be nonprofits, governed by consumer-led boards, and providing affordable coverage. Through the ACA, the New Jersey organization has received $107 million in federal loans to cover start-up costs and to ensure that the company can pay medical claims before it’s built up revenue from premiums.

Freelancers CO-OP of New Jersey (FCNJ) is one of three affiliated with the Freelancers Union, a New York City-based organization that provides insurance to self-employed workers.

FCNJ Executive Director James Martin said the federal government likely chose the Freelancers Union to sponsor affiliates in New Jersey, New York and Oregon because of its track record of providing insurance to freelancers, a group that has traditionally had difficulty finding affordable insurance.

Martin cited estimates that 30 percent to 40 percent of the state’s working-age residents are self-employed.

“That seems like a startling number, but when you think of all the real-estate agents and others who perhaps don’t work for a company but are just affiliated with a name brand,” it makes sense, Martin said.

The organization’s potential is drawing the attention of observers – including former Gov. James Florio — who said its introduction could have a big impact on the insurance market.

Florio said he sees the organization playing an important role in providing competition to the established insurers.

“I think that is just a very, very important initiative and will be almost a measuring rod against which the private insurance industry will be compared,” said Florio, adding that having a new alternative is “highly desirable.”

With six employees working in space rented in Newark’s Gateway Center, the Freelancers CO-OP has the feel of a start-up, with yet-to-be filled desks situated near growing stacks of newly drawn-up plans. By the time it starts insuring residents at the start of next year, the organization aims to have 20 employees.

FCNJ is targeting a population that “falls in the middle,” Martin said, adding that “middle” refers to those who fall in between – not qualifying for public insurance programs like Medicaid and Medicare, not receiving employer-provided benefits, and not being able to afford expensive individual insurance plans.

The organization will serve residents across the state but will be focusing its early marketing effort on the northern and coastal counties that have the densest population of both uninsured residents and freelance workers, said Cynthia Jay, FCNJ’s marketing director.

It already has tackled perhaps the largest challenge in launching a new insurance option: assembling a network of providers that will be attractive to residents. It did this by reaching an agreement with QualCare Inc., a provider-owned managed care company that sells health plans to self-insured groups.

FCNJ plans to sell insurance both through the existing individual and small-group market and through the new health insurance exchange. The exchange is an online marketplace in which residents will be able to compare and purchase health plans and learn whether they are eligible for federal subsidies to help buy insurance.

Since every plan offered through the exchange must offer a federally defined set of essential health benefits, it’s expected that insurers will compete on the prices of their plans.

“We believe we will be coming in at probably the lowest-priced item,” in the exchange, said Martin, an Essex Fells resident and former hospital executive who worked as a freelance consultant before starting with FCNJ in late March. His most recent position was as vice president of behavioral health for Liberty Health, the parent company of Jersey City Medical Center.

He said this will be possible for several reasons, including the savings from sharing planning, marketing and operational resources with Freelancers organizations in New York and Oregon, and savings from contracting with QualCare’s existing provider network.

Jay added that with at least 51 percent of its board members being consumers, “We’re people who allow you to have a voice and speak to what your needs are – and that’s where healthcare is really moving.”

QualCare President Sharon Seitzman said the Freelancers CO-OP of New Jersey would play an important role in the state.

“We see this as a significant partnership with the Freelancers,” Seitzman said. She added that the ACA’s promotion of the CO-OPs as an alternative to traditional insurers presents a chance to increase the number of insured residents covered by QualCare’s network.

“We see this as an opportunity to provide access and availability of services to that population, which previously either couldn’t afford or didn’t have access to coverage,” she said.

During the organization’s first years, its viability will depend on its federal loans.

In the near term, the federal loans will be crucial for the company to maintain its viability, Martin said. If the organization makes a profit, those funds will be used to improve services or reduce costs.

Sen. Joseph F. Vitale, an expert on state health policy, said the organization’s low overhead costs might put it in a strong position to at least break even.

“They’ll change the landscape” if they succeed, Vitale said.

Jay said that while there will be challenges in reaching the target population for the exchange, she is hopeful that the combination of outreach by community organizations that serve as “navigators” in steering residents through the enrollment process and a national advertising campaign will work.

“If you get information too early, you’re going to forget it,” Jay said, adding that she expects public awareness of the exchange to grow throughout the summer.

She noted that FCNJ and other insurers can’t actually sell the plans until the exchange is launched, but the coming months will provide an opportunity to inform the public about the exchange.

“It’s incumbent upon us, as a plan, to actually help with the education, in the general education,” Jay said.

The CO-OP is in the process of applying for state licenses and federal certification to begin selling insurance. Jay said the organization expects to have completed this process well ahead of the exchange’s October 1 launch.