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Avenue H

Affordable Small Business Solution for Healthcare Coverage

By Jennifer Dobner

When Donna Milakovic became vice president of the Utah Valley Chamber of Commerce in 2012, the organization had an operational problem to solve: how to slow a high rate of employee turnover.

Alex Nabaum

The primary challenge was an annual budget that didn’t allow for health insurance in the chamber’s benefits package. That made it tough to attract—and retain—the kind of top-notch talent the organization needed to help it grow, Milakovic says. The chamber was paying its half-dozen workers a stipend to help with healthcare costs, but it wasn’t enough for a robust insurance plan.
“We could really only hire people who had health insurance through a spouse, or were students and young and were in that group that didn’t care that much about health insurance,” she says. “That was our limited pool of resources for hiring talent. We really wanted to change that.”
So Milakovic went shopping, looking for a health insurance option that would provide adequate—and affordable—care. She found her solution in Avenue H, Utah’s innovative, online health insurance marketplace designed specifically to help small businesses—companies of less than 50 employees—provide access to insurance at affordable costs.
The program uses a “defined contribution” approach, which lets employers contribute an amount their budget will allow and sends employees to its online marketplace with that money to shop for a plan that meets their specific healthcare needs.
“Avenue H seemed a very stable, reliable, budgetable solution for us,” Milakovic says. “We could rely on the budget, and we could look at it year after year and know that even if premiums did fluctuate, our defined contribution didn’t have to fluctuate.”

Ahead of the Curve

Utah has roughly 58,000 small businesses, not including sole-proprietors, and those companies have always been a cornerstone of the state’s strong economy. But finding a balance between budgets and benefits has also been a challenge for these business owners—one that only grew more complicated and confusing with the 2010 federal Affordable Care Act’s mandate that nearly every American citizen have health insurance either through work-based or individual plans.
Fortunately, Utah has long been ahead of the curve, says Patty Conner, director of the Office of Consumer Health Services, which runs Avenue H. The state’s efforts to address health system reforms and secure access to care for the uninsured began in 2008 with then-Governor Jon Huntsman. The effort focused on aiding small business because data showed those companies employed a significant number of the uninsured, Conner says.
That’s how Avenue H was born.
“We felt like given the approach and the money we had available, that we could help these people get coverage,” says Conner, whose department is part of the Governor’s Office of Economic Development (GOED).
By the time the Affordable Care Act (ACA) became law, Utah’s Avenue H was already running a small prototype program. Eleven small businesses signed up during that rollout year, covering 150 lives, Conner says. The voluntary program allowed these companies to use an online marketplace to shop for and enroll in group health insurance.
Over time, participation in the program has steadily grown. As of March 2014, some 443 employer groups were enrolled in Avenue H, providing insurance for roughly 3,953 employees; including dependents, Avenue H has just over 10,830 total covered individuals. In December, the program saw an expected enrollment surge, with more than 80 new employer groups and 1,800 employees and dependents joining just ahead of the Jan. 1, 2014 launch of the ACA. Through Avenue H, those employees and their families can choose from more than 70 health plans offered by three insurance carriers. Dental coverage is also being offered for the first time in 2014.
Some 66 percent of companies that enrolled in Avenue H last year are now offering insurance for the first time, Conner says with pride. She says that more than 85 percent of companies that have joined Avenue H since 2010 remain with the program.
“They stay because the employees were able to find value in the plans,” Conner says. “For the employer, what it really does is give them peace of mind. Their employees could pick their own insurance and options and [the employer] was the one that helped them get that opportunity.”

Empowering Employees

Not everyone was excited about Avenue H when it launched, says Scott Miller, an insurance broker of more than 25 years and a founding partner of the MillerWade Group. Miller was an early adopter of Avenue H, but he says other employers and brokers were wary about the new, out-of-the-box approach to health insurance and weren’t sold on some the plan’s elements and design because it was so new and innovative.
For his part, Miller says, he loved the Avenue H concept from the start and wanted to be among the first to learn about the program so he could offer it to small business clients.
“I thought it was phenomenal and probably the wave of the future for insurance,” he says. “We wanted to be very familiar with how it all worked.”
Avenue H was an almost instant success with Miller’s clients. Employers love the idea that they can control their budgets by setting the amount they want to spend. Employees like being able to choose from an array of insurance plans, rather than defaulting to the choice made on their behalf by the human resources department.
“In the first year or so that we started to actively market it, I think we picked up a half dozen or so clients that had not been clients before,” he says. “Getting enrolled is also very simple,” says Miller. “You need about 10 or 12 pieces of information and once you get that in, usually within about 24 hours, you can shop.”
Controlled costs and flexibility aren’t the only benefits to Avenue H, Miller says. Unlike most insurance carriers, the program doesn’t set a minimum monthly financial contribution level for employers, and it only requires that 75 percent of company employees enroll in a plan.
“By virtue of the fact that it’s the employer’s choice and not the carrier dictating that, that’s been huge,” says Miller, who now has about 30 client groups enrolled in Avenue H.
Another benefit? The ACA’s small business tax credit, which beginning in 2015 is available to companies with 25 employees or fewer and that are offering insurance but pay an average wage of less than $50,000. Those employers can get a tax credit that equals up to 50 percent of the employer’s contribution toward employee insurance.
“That’s significant,” says Miller. “The law says that after 2014 the only way to get it is to go through the SHOP [Small Business Health Options Program] exchange in your state.”
Miller likes Avenue H so much that his own company switched to the program in 2010 as it struggled to deal with rising premium costs. The move has saved the company money and gave its 16 employees flexibility they didn’t previously have, he says. Miller and his business partner, for example, wanted a plan built around a health savings account, while others in the company wanted to stick to more traditional health plans.
“Now everybody is happy,” he says.
Miller has also engaged with Avenue H staff and state lawmakers to share broker concerns and field experiences as the young program grew. He now sits on a broker panel that meets monthly with Conner, and he credits part of the program’s success to her leadership and willingness to listen and make changes to streamline the enrollment processes to improve the Avenue H experience for consumers.
“Right now, there are only a few other [online marketplaces] that are operational,” Miller notes. “We definitely have a leg up.”

A Free-Market Model

Under the ACA, the online insurance marketplace is becoming the norm. The law established both an individual marketplace and Small Business Health Options Program (SHOP) exchanges for companies with less than 50 workers.
States can decide whether to operate exchanges, or let the federal Health and Human Services Department (HHS) take the lead.
“From a political perspective, Utah did not have the appetite to do the individual market,” Conner explains. “But we asked for an exception from HHS to approve a bifurcated approach, so we could keep Avenue H.”
Governor Gary R. Herbert won the fight, including getting the feds to exempt Utah from having to dramatically redesign its program to meet all of the ACA’s requirements. That includes retaining the defined contribution and employee-choice model and limiting data sharing with the feds.
“We didn’t have to take away from what we were already doing and create a more restrictive model,” she says.
As one of two online marketplaces that pre-date the ACA (Massachusetts also had one), Avenue H has become a model for other states wrestling with the politics of healthcare reform and the mechanics of making an online exchange actually work, according to Conner.
“Utah fit at least on the SHOP side of things,” says Matthew Kennicott, communications director for New Mexico’s department of human services. State leaders began talking with Utah officials well before the ACA and then hired the Salt Lake City-based Leavitt Partners—run by former Utah governor and U.S. Secretary of Health and Human Services, Michael O. Leavitt—once it was ready to set up its online exchange.
Although New Mexico doesn’t share Utah’s conservative political leanings, its leadership appreciates the free-market model offered by Avenue H.
“It lets the market set the right standards and the right prices and the right models for insurance,” Kennicott says.
Conner also has had inquiries from Mississippi, Idaho and HHS officials, each seeking a tutorial in the lessons Utah learned in building its marketplace, including functionality, system architecture and other technologies. HHS has the daunting task of building a system that will work in 32 states, something Conner says isn’t easy.
The federal agency, which fumbled the launch of the individual online marketplace last fall, delayed implementation of the SHOP exchange by one year, to October 2014. Among states planning to run their own SHOP marketplaces, some have failed to open on Oct. 1, 2013, while others have been plagued by delays or opened only on a limited basis.
Interest in Avenue H has not been limited to governments, Conner says. Many Utah businesses with 50 or more employees would like to be able to use the program.
“We hear every day from employer groups and brokers who want to know when we are going to expand to 100 [employees],” she says.
Under ACA rules, businesses with 51-100 employees will be able to use the SHOP exchange beginning in 2016.
“We would love to expand,” says Conner. “In the next few years, the majority of insurance plans will be purchased through a marketplace, whether it’s private or public. It makes a lot of sense to broaden our scope now to reach many of those larger companies that are exploring their options.”
Based on the conversation she’s had with chamber members in Utah County, Milakovic believes the issue of providing health insurance will only become more important for small businesses. Forward-thinking companies that want to maintain a competitive edge are already looking at insurance options because of ACA rules for individuals.
“I expect that in the next year as those individual mandates start coming on people’s taxes, businesses that have been concerned about it will get on the bandwagon and decide they need to find a way to offer benefits,” she says. “Their employees will come to them and say, ‘You know, I’m getting penalized for not having health insurance. You don’t offer health insurance and I need to go find someplace that will.’’’
Milakovic is quick to provide an enthusiastic endorsement of Avenue H. She’s certain the program has made a difference in employee retention and recruitment, and helped the organization land an event manager with a “huge resume” who had his pick of opportunities and considered health insurance a bottom-line need.
“I know for a fact he wouldn’t be here without these benefits,” she says. “We’re advocates of Avenue H. It’s been a great solution for our small business.”