Healthcare Sublimation

I think that the healthcare industry is undergoing a sublimation from static plan avails to choice to personalization. In short, the healthcare industry seems to be entering a new era where competition and an actual market exists for various plans.

Following the phase of choice, the industry will likely pivot to personalization where a consumer can customize the features of a plan by dialing various attributes such as premium, deductible and usage pricing for resource consumption.

This transformation is likely to take 5-10 years as healthcare companies learn how to compete in a free market and determine how to price along a demand curve in a way that is not detrimental to profitability.

Gap Analysis for My UHC Portal

Here is my gap analysis for my current health care provider portal.

1. Cryptic coverage and benefits terms with no glossary.

2. No tuning application to run what-if scenarios with benefit coverage, deductibles, co-pays, co-insurance, out-of-pocket limits.

3. No linkage between personal health record and wellness programs with costs (premiums, deductibles, co-pays, co-insurance).

4. No linkage to discount programs, HSA and costs (e.g. deductible).

5. No tools to optimize HSA qualified expenses and link to discount programs.

6. No mobile access to discount programs - assumes online usage and print medium.

7. No granularity to location for discounts.

8. No campaign tool for marketers seeking to insert offers into the program for consumer consideration.

9. No personal health record portability.

10. No comparison proof tools - e.g. progressive car insurance.

Unhealthy Driving Up Premiums for Healthy

As a healthy individual, I am not pleased funding individuals that chose to live an unhealthy life either through poor diet, lack of exercise, alcohol abuse or tabacco use. 

Here is some example math:

1. Unhealthy person pays $10

2. Health person pays $10

3. Health insurance plan reimburses $15 to care for (1)

4. Health insurance plan pays $2 to care for (2)

5. Health insurance plan pockets $3 for profit

I am fine with (5) but why should I pay $10 to fund care for a person that choses to live life overweight and out-of-shape while consuming a poor diet.

HSA and product differentiation is the answer.  I want the HSA to pocket the balance between the lower premium and the cost to care for my lifestyle (it is low).  Health care differentiation would also allow me to chose a really low deductible plan that bundles only the goods and services that are right for me - don't need all the bells and whistles or a big basket of goods and services.

This is fair.  If a person choses to live an unhealthy life, they can then pay for the care required to mitigate their self-created issues.

HSA = Getting Paid for Healthy Living

Another way to look at HSA enabled health care plans is as a means to get paid for healthy living.

For example, if an employer pays $100 to a health care plan for a low deductible plan and a set of services and goods that the subscriber never uses, the health care insurance providers pockets the savings.

Here is an alternative model assuming that the cost of an HSA qualified plan was $50.

1. Employer pays $50 to the health insurance plan.

2. Employer pays $50 to the employee via an HSA direct deposit.

3. The employee maintains excellent health through diet, exercise, and healthy living.

4. The employee keeps or earns the savings.

With this approach, the employee keeps the cash not used to mitigate issues related to unhealthy living.

Term Life Insurance Use Case from Freakonomics

Here is a use case from the Freakonomics book that illustrates the opportunity of price correction for insurance when pricing is transparent and a software application makes comparison simple.

http://books.google.com/books?id=LkQPOSXMUscC&printsec=frontcover&dq=freakonomics&ei=KuvASb7qOYzckQSo3vD3Dw

In the late 1990s, the price of term life insurance fell dramatically. This posed something of a mystery for the decline had no obvious cause. Other types of insurance, including health and automobile and homeowners' coverage were certainly not falling in price. Nor had there been any radical changes among insurance companies, insurance brokers, or the people who buy term life insurance. So what happened?

The Internet happened. In the spring of 1996, Quotesmith.com became the first of several websites that enabled a customer to compare, within seconds, the price of term life insurance sold by dozens of different companies. For such websites, term life insurance was a perfect product. Unlike other forms of insurance--including whole life insurance, which is a far more complicated financial instrument--term life insurance policies are fairly homogeneous: one thirty-year, guaranteed policy for $1 million is essentially identical to the next. So what really matters is the price. Shopping around for the cheapest policy, a process that had been convoluted and time-consuming, was suddenly made simple. With customers able to instantaneously find the cheapest policy, the more expensive companies had no choice but to lower their prices. Suddenly customers were paying $1 billion less a year for term life insurance.

Healthcare Pricing Transparency and Keep the Cash

Imagine a grocery store selling products without a price. How would a person decide to purchase a good? How would a person decide a must or want item? Without prices, wouldn't a person consume resources without regard or discretion?

How would one store compete against another store when the pricing is opaque? I suppose the environment and service level might provide differentiation. However, differentiation without pricing would lower the pace of innovation and operational excellence. There is no need to perform as an entity if the revenue is fixed whether the execution of delivery is done well or not well for the consumer.

Now think about the Health Care system. Why is there no pricing transparency? Why does a consumer need to effectively allow employers to transfer large sum premiums to health insurance entities without any control of resource consumption and spending?

A better model would provide consumers with 1. pricing knowledge about all services and goods consumed in the health care process and 2. control of resource consumption.

HSA accounts seem to be a great instrument for (2). For example, employer health benefits pay $x to insurance companies on a monthly basis. The insurance company takes in this revenue and often incurs no expense. The HSA instead would receive this money and the consumer would keep the cash whenever health care services are not used because of healthy living.

Fair Cair Proposal by Ronney and Perrin

Patrick Rooney and Dan Perrin propose an interesting funding model in their America's Health Care Crisis Solved Book. The foundation to their proposal is for the government to eliminate the employer tax deduction for health care benefits for employees and instead provide tax free money for individuals and families direct to chosen private health care insurance companies.

The concept is simply the current employer paid program for all US citizens. The elimination of tax givebacks to employers would fund the tax free payments to US citizens.

With the Fair Care dollars, an individual or head of household could then select the most appropriate health care plan from private insurance companies.

Value Proposition to US Citizens:

1. Choice and Access
   
2. Money to fund choices
3. Integrated with HSA for future use