Health insurance premiums have far outpaced income growth in the past year, and new reports point to several reasons, including the high medical costs of the newly insured under the ACA, which have necessitated premium increases by health insurance carriers. In addition to these premium increases, there have also been increases in out of pocket expenses, including copays and deductibles.
Faced with this, the American consumer has had no choice but to start looking for choices. The rise of consumerism is a direct consequence of the transition from fee-for-service to value-based care which has resulted in a dramatic shift of risks with consumers being at the receiving end. Consumers have to spend several thousand dollars out of pocket today before they can expect their insurance carriers to pick up the tab.
The rising consumerism represents a tremendous opportunity for some. Digital health start-ups raised 4.5 Bn in VC funding in 2015, higher than 2014 levels and representing 7 percent of all VC funding. Many of these start-ups have developed products targeting consumers directly with personal health trackers, wearables, and sensors that focus on wellness. Over 165,000 mobile apps are available now on iOS and Android, according to the IMS Institute of Health ( though only a small number are “clinical-grade” from a physician’s perspective).
A new category of startups is emerging to provide less expensive (and often more convenient) alternatives to traditional healthcare offerings. Interestingly, even health plans have gotten into the act and have begun to offer cash inducements to “nudge” consumers to opt for cheaper alternatives, often providing them with options to consider.
Show me the money
The shifting burden of financial responsibility towards consumers is driving a whole new set of behaviors among consumers and the healthcare system alike, focused at stretching the available dollars for maximum benefit through price-comparisons for a range of healthcare services.
“Consumers are paying attention to their money”, says Steve Auerbach, CEO of Alegeus, a company that uses technology to help consumers manage their health savings accounts ( HSA ). HSA’s have been around since 2003 and were created so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses. Given the caps on HSA contributions and with deductibles now going through the roof, the need to stretch HSA dollars is all the more critical for the healthcare consumer. Mostly importantly, HSA’s ( and the related FSA’s) allow consumers a degree of flexibility in how they spend the funds set aside in these accounts, in addition to tax benefits.
However, all of this can be overwhelming for the average healthcare consumer. And it takes a village to help them.
While start-ups are developing brand new business models to help consumers engage with healthcare on their terms, large tech firms such as Apple are focusing on giving consumers more control over their data through new platforms such as HealthKit and CareKit. Companies like Alegeus are stepping in to help consumers maximize the value from their existing options, and make the best possible decisions with their HSA and FSA dollars. They are doing this by integrating a range of partner offerings into a single platform. Using the Alegeus platform, a consumer can shop for affordable care using a service such as Healthcare Blue Book, consult a doctor via phone on Teladoc, and use a Copatient to consolidate all the bills and negotiate for fair prices (this last piece has been a topic of much attention lately with many healthcare consumers facing unexpected bills for hospital procedures).
Improving healthcare consumer experience: Partnerships, data, analytics
Taking a page from the playbooks of consumer-oriented sectors such as retailing, a truly consumer-driven healthcare model will need to have the ability to segment and target consumers with offerings and recommendations tailored to their needs.
This is where analytics comes into the picture. Through careful segmentation and analytical models, patients can receive timely and relevant recommendations through applications which seamlessly integrate with the databases and systems of the healthcare carriers and third-party administrators (TPA's).
Realizing the potential benefits, insurance companies and TPA’s are increasingly embedding platforms such as Alegeus into the overall package so that consumers have the necessary tools and enablers from a wide range of providers to make informed choices. By making a range of options available within a single user interface, insurers can see increases in consumer engagement as well which ultimately drives down healthcare costs.
Consumers are dissatisfied today with their experience with the health insurance industry, including the recently launched insurance exchanges. This is driving venture capital investments in disruptive start-ups that are focusing on improving the consumer experience with the help of technology platforms, advanced analytics, and segmentation models. All this is unleashing competitive forces in healthcare not seen before. Ultimately, the winners will be those that can lower the costs of insurance but also improve the quality of the experience by providing consumers with a range of offerings in a unified manner that enables them to make more informed choices about health care.
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