Startups turn to partnerships to get health insurance

Earlier this year Christie Quackenbush had been paying $270 a month for health insurance under the Affordable Care Act. Not a bad deal, but hardly a bargain compared to her current situation: She is now paying exactly zero each month for a policy offered through Raleigh employer, HQ Community.

Several hundred employees of small startups in Raleigh’s warehouse district will soon have a similar opportunity. It’s the result of a corporate partnership that offers HQ and its startup tenants the kind of health insurance option typically limited to workers at larger companies.

For Quackenbush, the timing couldn’t have been better. As health insurers are dropping out of the Affordable Care Act, or asking regulators for steep price increases, North Carolina is down to just one statewide health insurer under the ACA in 2017, and two insurance carriers in the Triangle selling individual ACA policies directly to the customer.

“It’s really, really affordable,” Quackenbush said of the partnership’s plan. “These are not plans you can choose on the open market.”

Quackenbush, 32, works as the executive coordinator for HQ Community, a Raleigh work space that houses 130 startups in Raleigh and 220 more in Charlotte and Greensboro. HQ has outsourced its human resources functions to TriNet, a California company that handles payroll and other HR functions for 13,000 businesses.

TriNet is one of hundreds of professional employer organizations, or PEOs, that offer clients health insurance through national and regional health insurance carriers. Because TriNet represents thousands of employees, it pools those employees and qualifies for insurance rates similar to those offered by other large employers.

HQ is paying about $110 per employee per month for TriNet’s services; the monthly fees vary by such factors as employer size, geography and industry.

It was the health care option that drew HQ to outsource backoffice functions to TriNet. After the Affordable Care Act made health insurance mandatory for most Americans in 2013, insurance costs have climbed year after year, while coverage options have dwindled.

“Health care is particularly attractive,” said Christopher Gergen, a founding partner of HQ Community. “We’ve signed up our own company for it.”

Professional employer organizations have been around for about three decades, but it’s not clear how many people are insured through PEOs. The N.C. Department of Insurance said 149 PEOs are licensed in the state, up from 92 in 2009, but the department doesn’t track how many people obtain coverage through these third-party management companies. The National Association of Professional Employer Organizations, or NAPEO, doesn’t track health insurance enrollment, either.

TriNet does not disclose how many of the 325,000-plus workers employed by TriNet’s 13,000 clients use the health insurance option. Two major PEOs – Insperity and ADP TotalSource – also declined to provide information.

Lew Borman, spokesman for Blue Cross and Blue Shield, the state’s largest health insurer, said the Chapel Hill company doesn’t disclose how many people it covers through professional employer organizations like TriNet.

When startups at HQ contract for HR services through TriNet and other PEOs, their local workers become legal employees of the PEO. NAPEO, the trade group, stresses that this dual employment is not a legal fiction, but a shared responsibility and shared risk. According to TriNet brochures, wages of the employees are reported under TriNet’s federal and state employer identification numbers. The TriNet client company such as HQ remains a co-employer and TriNet becomes a co-employer for some purposes, such as payroll and benefits.

Charles Kelly, TriNet’s manager of vertical alliances who’s in charge of TriNet’s HQ Community contract, said that typically only about a third of small businesses see an overall financial savings from a TriNet management deal. The savings could include health care as well as other HR services that TriNet provides, such as payroll, compliance, tax administration and risk compliance.

HQ has 15 employees, 10 of which have signed up for TriNet’s health insurance option, offered by Blue Cross. The other five obtain health insurance through spouses or parents or don’t qualify because they are part-time. Quackenbush said TriNet reps made presentations to HQ’s warehouse Raleigh tenants in July and now about a half-dozen startups who lease space at HQ are considering the health insurance option. TriNet made a presentation for HQ’s Charlotte tenants Tuesday and will be presenting to HQ clients in Greensboro in the coming weeks.

Until July 1, Quackenbush had an ACA policy through Coventry Health Care of the Carolinas. She was paying $270 a month and the federal government was chipping in an $89 monthly subsidy. HQ had increased employee pay by $300 to help workers pay for individual health insurance through the ACA.

Now, through TriNet, HQ contributes $334 a month toward each employee’s health insurance. Quackenbush selected a Blue Cross policy that costs $334 a month, but it’s free to her because HQ covers the cost up to that amount. The six Blue Cross plans available to HQ employees cost between $232 a month with a $6,350 deductible, to $475 a month with a $500 deductible. Quackenbush said her deductible is $2,600 with Blue Cross, compared to $3,600 with Conventry.

Quackenbush’s annual savings: $4,240. The savings come from the lower annual deductible and the elimination of monthly premiums.

One HQ tenant, Imurj, recently offered its seven employees Blue Cross health insurance through TriNet. Imurj, a collaborative space for artists and musicians, is also offering TriNet’s 401(k) plan, as well as dental and visual coverage. The employees are reviewing policies and enrolling this month.

Imurj’s monthly fee per employee paid to TriNet is similar to the amount HQ pays. Imurj covers about $250 of each employee’s monthly health insurance premium on the Blue Cross health plans TriNet is offering to Imurj employees.

“Everybody needs health insurance,” said Imurj managing partner Heather Burns. “It feels like they’re getting corporate benefits but they still have the opportunity to work for a startup.”

This story was originally published September 17, 2016 at 10:47 AM with the headline "Startups turn to partnerships to get health insurance."