Don’t Have Health Insurance? Start Your Own Insurance Company!

How Sara Horowitz created affordable health care benefits for freelancers.

Sara Horowitz
Sara Horowitz

Courtesy Sara Horowitz.

Sara Horowitz was born into a proud union family. Her father worked as a labor lawyer, her grandfather as a vice president of the International Ladies’ Garment Workers’ Union. So it felt like kismet when, on the first day of a new law firm job, Horowitz discovered that she and several other recent hires had been classified as independent contractors. “We weren’t given retirement or health insurance benefits. We called ourselves ‘the transient workers union,’ and I was made president. We joked about it, but for me it was a significant aha! moment. I started realizing there was this whole new way that workers were being treated.”

This was the inception of what has since turned into Horowitz’s all-encompassing calling. Freelance contractors made up 31 percent of the American workforce in 2005, according to a GAO report, and that ratio is almost surely even higher today. As the freelance trend began to accelerate, in Horowitz’s recounting, labor activists at first tried to cajole corporations into hiring all those independent contractors as full-time staff with benefits. But to Horowitz, it was clear this was a losing battle. “It would never make sense from the company’s perspective,” she says, “and we’d never have enough leverage.” Instead, she envisioned a new strategy: She’d find ways to organize and protect freelance workers—in all sorts of fields—in the same way that classic trade unions provide safety nets for corporate employees.

This ongoing quest led to Horowitz’s creation of the Freelancers Insurance Company, which now provides health coverage for close to 25,000 New Yorkers and is approaching $100 million in revenues. Along the way, Horowitz has received countless personal accolades. She was awarded a MacArthur Foundation “genius grant” in 1999, and in December was named to the New York Federal Reserve Bank board of directors. What’s her secret—how did she transform a goal into a successful battle plan?

Horowitz began by forming the nonprofit Freelancers Union in 2003. It shared information, nurtured freelancer networking, and began the process of building solidarity. But she quickly saw that, for independent contractors who don’t get coverage through their employers, obtaining affordable health insurance was the truly pressing issue.

Her first instinct was to deal with existing insurance companies to get her group a better rate. But at a certain point she decided the plans that were already out there didn’t fit freelancers’ needs and didn’t account for their unique circumstances. So why not invent an insurance company of her own? “It was an audacious idea,” chuckles Nancy Barrand of the Robert Wood Johnson Foundation*, which helped provide funding to get Horowitz’s project off the ground. “People don’t just start insurance companies in this day and age. She had to raise $10 million in reserves to qualify for an insurance license in New York. But she’d been negotiating with insurance companies, she knew the market, she’d seen the data on costs and benefits, and she realized, ‘I can make it work better. I can be more efficient. I can do it myself.’ ”

The Freelancers Insurance Company launched in New York in 2008. It is wholly owned by the Freelancers Union and has no individual shareholders. In its first year, FIC lost money and had to raise rates. But by its second year, it was profitable. It has been profitable ever since. At a time when other insurance providers are seeking and winning double-digit rate increases, FIC has managed to freeze its premiums for the coming year. (Disclosure: I signed on for FIC health coverage last year. So far, so good.)

Sitting at her desk in a low-profile office in Brooklyn’s DUMBO neighborhood, Horowitz described to me a three-step process for turning a notion into a reality. It boils down to: 1) Find the North Star that guides your mission. 2) Practice poking holes in your business model until you’re certain it will actually work. 3) Find people who understand the concept of loyalty.

“It’s an interesting characteristic of Sara that she can identify macro trends,” says Maria Gotsch of the New York City Investment Fund, a private organization that provides startup capital for civically useful projects. “She saw the shift in the workforce, where people were no longer being tied to an employer, and she understood what that meant for collective benefits. She’d done a lot of thinking about the macro forces in place.” Horowitz’s North Star is to improve the lives of this new and growing category of American worker. Every move she makes, big or small, is steered by this overarching idea.

When it came time to turn her nebulous goal into concrete action, Horowitz did so with extreme rigor. “We auditioned super-seasoned experts who know everything about this field,” she says, “and we sought out the few who were free thinkers but also analytical. We vetted it with hard numbers, again and again. We needed revenue to exceed expenses. We did due diligence in a meeting with a team from Goldman Sachs, where they pulled out their calculators and slaughtered us like sheep. But we learned from it and kept going.”

One key element of pragmatism is flexibility. When Horowitz first conceived of a union for freelancers in the late ’90s, it was the height of the dot-com boom. “You could raise $30 million on a napkin,” says Gotsch. Horowitz intended to launch as a for-profit website and take advantage of the free money sloshing around. But she was dissuaded when she was advised that going nonprofit would put less pressure on her to achieve the gaudy returns that the for-profit investor market would require. It also meant she could seek funding from alternate sources, such as foundations. Later, when Horowitz was ready to launch her insurance company, she slalomed once again, after discovering that a for-profit insurance entity would have a much more streamlined capital structure.

“She’s the most entrepreneurial liberal I’ve ever met in my life” says one fan, “and that’s the key to her success.” The compliment comes from Greg Serio, who was the superintendent of insurance for New York state under the Republican Pataki administration—and was an unlikely comrade for a progressive social activist like Horowitz.* “She built a great working relationship with an administration that was not of her political persuasion,” says Serio. “She tossed out the standard liberal playbook of blowing things up to make them better. Instead she co-opted the establishment to make things go her way.”

Perhaps most important, though, is Horowitz’s knack for inspiring loyalty. It’s a bit counterintuitive to talk about loyalty among freelancers—classic lone-wolf types who’ve learned not to expect any loyalty back from the big corporations that won’t hire them full-time. But Horowitz points to her North Star and persuades those around her that it’s a mission worth pursuing. Even at occasional personal expense. When, after a tough first year, FIC was forced to raise rates and cut benefits, members were understandably outraged. But Horowitz produced webinars to explain the bigger picture. “I reminded them that we got foundation money for this project,” she says, “and that it wasn’t just them who could expect to benefit from our work. We’re trying to make something that will still be helping people two generations from now. It didn’t necessarily make them less angry about their rates going up. But they understood the truth in what I was saying, and they respected it.”

It doesn’t hurt that FIC is able to honestly portray itself as a breed apart from your average greedy insurance outfit. “I’m the lowest-paid CEO of any insurance company in America,” Horowitz boasts. “We don’t have any crazy expenses here, no private shareholders. All the money goes back to R&D, to getting great actuaries who help us become more efficient.”

This fall saw the opening of the Freelancers Medical Center in Brooklyn, where members get zero copay care and free yoga classes, among other perks. She next envisions a new form of unemployment insurance for the contractor class—helping freelancers make it through dry spells the same way that fired full-time employees can rely on the government for support. And there’s that spot on the New York Fed board. (“We need to bring the freelancer’s viewpoint into national discussions over capital and finance,” she says.) Horowitz can toss around highfalutin’ discourse on Northern Italian cooperative regions, the history of trade unionism, and the concept of “new mutualism.” But her focus always remains on achieving tangible results.

Correction, Jan. 29, 2013: This article originally called the foundation the Robert Woods Johnson foundation. (Return to the corrected sentence.) Feb. 7, 2013:This article also misspelled Greg Serio’s last name. (Return to the corrected sentence.)