Health startup cashes in on Obamacare loophole

Another New York startup is looking to make money filling a hole in the Affordable Care Act, and once again investors are intrigued.

Manhattan-based BeneStream announced Tuesday that it has raised $1.58 million from angel investors looking to capitalize on the expected surge in business when Obamacare's employer mandate takes effect on Jan. 1. The mandate, which requires businesses with more than 50 full-time equivalent employees to provide health insurance or pay a monthly penalty, is the driving force behind BeneStream's business plan: it wants to help companies enroll eligible low-wage workers in Medicaid.

"It's an intentional crack," BeneStream's CEO Benjamin Geyerhahn told Crain's of the language in the mandate that allows a family of four making less than $32,900 to eschew private coverage in favor of joining the rolls of an expanded Medicaid program. "There's an understanding in the ACA that a certain class of worker would not be able to afford coverage through their employer."

BeneStream will capitalize on that understanding, offering a subscription service to employers that will analyze the pay of every employee, and then offer to enroll low-income candidates into Medicaid. Geyerhahn predicts that between 20% and 40% of employees at companies in industries like hospitality and home healthcare will qualify for Medicaid enrollment. BeneStream will charge subscribers a one-time $40 registration fee and a $200 annual maintenance fee for each employee.

Investors have shown an interest in companies that are looking to capitalize on the surge in newly insured Americans. Last week, Hudson Square-based Truveris, a digital health platform providing management tools to sponsors of prescription benefit plans, announced it had raised $12.8 million in Series C funding.

By identifying lower-income staff eligible for Medicaid and then guiding them through the obtuse enrollment process at a reasonable cost, BeneStream is charging relative pennies on the dollar to help companies comply with new ACA guidelines and avoid thousands of dollars in possible penalties. Companies can't coerce employees to opt into Medicaid, but they can nudge employees in that direction by offering a plan that complies with the law's minimum coverage requirements but is less generous than the government's offering.

"It's both good policy and good business," said Andy Stern, a BeneStream board member and a former president of the Service Employees International Union, which represents primarily healthcare workers but also government and building services workers. With a six-month window to comply with the mandate, BeneStream's client roster should swell quickly, he said.

Both Stern and Geyerhahn were major proponents of the ACA before its adoption. Geyerhahn played a role in New York state as an adviser to Gov. Andrew Cuomo and as a member of his Health Benefit Exchange Regional Advisory Committee. Stern advised President Barack Obama on healthcare reform.

"Health startup cashes in on Obamacare loophole" originally appeared on the website of Crain's New York Business.