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From...

Surfing for cover: Health insurance on the Web

October 20, 1998
Web posted at: 3:25 PM EDT

by Todd Woody

(IDG) -- Californians surfing the Internet without health insurance will soon be able to buy medical coverage online.

EHealthInsurance.com is a joint venture between Sunnyvale, Calif.-based start-up Sash Communications and broker Interwest Insurance Services. The site will offer medical plans from six of California's biggest insurance providers and aims to provide national coverage by the end of 1999, according to CEO Vip Patel, a veteran of Silicon Graphics and health technology company Healtheon.

"We would like eHealthInsurance.com to be the Coke or Kleenex of online health insurance," Patel says.

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The launch of eHealthInsurance.com marks the first one-stop shopping site for health insurance on the Web. Consumers will be able to compare and price health plans, choose their doctor, apply for coverage and pay their first premium at the Web site.

But will they be willing to transmit sensitive medical information over the Internet? To apply for Blue Shield's HMO plan, for instance, applicants must divulge mental health problems, HIV status and drug and alcohol addictions, among a laundry list of other medical conditions.

The health care and Internet industries should be watching closely. Worries about hackers obtaining medical records or the inadvertent disclosure of such information have been the great bugaboos of health care providers and insurers contemplating a move online.

"I'm sure it will cause some people to pause and not use [eHealthInsurance.com] for that reason," says Meta Group analyst Doug O'Boyle. "But I think the concerns about security are diminishing."

Patel acknowledged, "Security is the premier issue when people consider health care and the Internet." He says eHealthInsurance protects medical information with several layers of security and has begun to encrypt stored data. "If [people] are already on the Web and used to buying on the Web, there will be less resistance" to purchasing health insurance online, Patel says.

The company aims to tap into a pool of Web-savvy, self-employed and contract workers who must pay for their own medical insurance. "We want the young, individual insurance purchaser who has $40K of income," Patel says. In other words, the demographic of a typical Internet user.

Shopping for health insurance online or offline traditionally has been a hit or miss proposition. While a number of insurance companies provide information about their plans on the Internet, and a site at InsWeb.com allows consumers to get price quotes, there has been no way to shop, apply and purchase a policy online.

"It's a smart idea," O'Boyle says. "A number of studies have shown that one of the primary uses of the Internet by consumers is to access health care information."

Patel says eHealthInsurance.com will receive a cut of commissions paid to its associated broker, Interwest. Other revenues will come from advertising. The health insurance companies, according to Patel, "have the opportunity to announce their presence at the point of [consumer] decision-making."

For health insurers like Blue Shield, the availability of insurance online promises to cut administrative costs while increasing sales. In fact, Sash has developed a Web site for Blue Shield where brokers can go to sign up customers online. Patel says Sash's future plans include developing sites for brokers.

"It should lead to savings for health care plans as they reduce administrative costs and at the same time improve service to consumers." notes O'Boyle. "It seems like a win-win situation."

But perhaps not for some brokers, who may feel the insurance companies are competing for their business.

An executive for eHealthInsurance.com partner Interwest, however, dismissed concerns that the company will be cannibalizing itself.

"We feel there's going to be a segment of the population that is going to be drawn to this type of business," says Interwest VP Dave Dias. "So we didn't see it as a competitor but more as a complimentary methodology of serving the public."

Sash will need to keep some brokers happy. In many states, including California, health insurance can only be sold through licensed brokers and eHealthInsurance.com must affiliate with a broker to be able to sell policies online.

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