Forbes.com
11/21/02
“Click Here for Coverage”
By Ratha Tep
Sunnyvale, Calif- based EHealthInsurance is the brainchild of an engineer named Vip Patel, 39, who started the company in 1997 after defecting from another Web healthcare start up, WebMd.
EHealthInsurance had a convincing business model. The company has formed partnerships with 135 insurance carriers, including Aetna, Cigna, Empire and HIP. It makes money as a broker, by taking an average 20% cut of the annual premium an insurer charges for those people that applied through its site and were approved for coverage. EHealthInsurance also gets 10% or so when policyholders renew their coverage, even if they don’t renew through EHealthInsurance’s Web site.
Vip Patel:
“I saw that the system that was in place for individuals seeking health insurance was broken and inefficient.”
http://www.forbes.com/best/2002/1202/005.html
Comment: Since EHealthInsurance sells health insurance in the individual market, which is subject to underwriting, individuals with significant chronic disorders are rejected by the insurers. Coverage is limited to only a healthy subset of applicants. And paying a 20% broker’s fee significantly increases the administrative waste that characterizes our system since this fee is in addition to the high administrative costs of the insurers and the administrative burden that they place on the providers.
Vip Patel recognized that the individual health insurance market was “broken and inefficient.” But instead of offering measures to fix the system, he has maneuvered himself into a position to take a major cut of the action, only compounding the defects of our current system. Adding to insurance costs for the healthy and denying the sick any coverage at all is not the type of innovative reform that we need.
The administrative cost of enrolling an individual in a single, universal public insurance program for life is less than negligible. Let’s eliminate the brokers along with the rest of the superfluous administrative waste in our system.
