In my last post I outlined the four dimensions that are defining the opportunities for health insurtech innovation: the health of the American people, marketplace trends, the role of regulation, and the players.
Incumbent health insurers are pursuing legacy tactics to compete in the ACA world: M&A (big deals either approved -- Centene/Healthnet; facing regulatory challenges - (both Aetna/Humana and Anthem/Cigna); increasing premiums; and leaving the public exchanges (notably, United Healthcare withdrew earlier this year and Aetna just announced its withdrawal from 11 of the 15 exchanges).
Innovators addressing the root of user pain points can influence how plans are selected and health care is consumed. The levers are not easy to move. Success requires compliant ways of combining big data analytics and personalization with user-centric digital experiences.
The headline of a recently published New York Times article, Cost, Not Choice, Is Top Concern of Health Insurance Customers would seem to state the obvious. Yet insurers have expressed surprise at the policy mix and which plans are proving to be most popular among people signing up for health benefits in the public exchanges. Participating carriers report poorer actual performance than anticipated in premiums (lower) and claims (higher). Users are gravitating towards lower-cost plan options, and show a trend to self-select into higher-cost plans when they know a big health care expense is coming.
This is not just an issue for incumbents. Oscar, among the most visible innovators in the US health insurance marketplace, reported a $105MM loss in 2015. Lack of scale is a challenge, but the company has also been impacted by the user decision-making dynamics affecting established carriers.
The results suggest (at least) three pain points:
# 1 People don't see value because they don't understand what they are buying. When people think something is too expensive, it is because either they cannot afford it (i.e., it really is too expensive) or the perception of value does not justify the price. Reportedly one in seven employees do not understand the benefits being offered by employers, of which health insurance is by far the biggest piece.
# 2 People are being held accountable for health decisions that they are not equipped to handle. Faced with a complex set of choices and opaque information, it is no surprise that many opt for the easy option: saving money now.
# 3 People don't always make rational decisions. A basic primer in behavioral economics will highlight that emotion, bias, and other limitations drive decisions, not rational analysis, and people discount perceived upside relative to potential downside. There is not enough upside to pay more in the short term.
Players who manage to affect these behavioral drivers stand to gain. Here are examples of companies working the issues.
Connecting disparate sources of data
PokitDok creates "APIs that power every health care transaction." They aim to enable data connectivity across the silos that in today's world require manual navigation. They define an ecosystem including Private Label Marketplaces, Insurance Connectivity, Payment Optimization and Identity Management. The company closed a $35MM B round last year. PokitDok is a pure technology play. Achieving their vision could be the "holy grail": better economics and better patient experiences and outcomes without owning underwriting risk.
It hasn't been lost on the startup world that 150MM employees purchase health care via employers, which is why many companies are focused on improving the benefits buying experience and promising to help employers lower costs. The ACA requires that all companies with more than 50 employees offer health insurance. This aspect of the regulation, coupled with the fact that health benefits expense has risen steadily, provides a specific and large innovation space.
These companies are within the wide range of B2B players aiming at employers' role in delivering benefits:
Lumity, who reported raising $14M last Fall, acting as an insurance broker. The company claims to be "the world's first data-driven benefits platform for growing businesses" promising to simplify benefits selection for employers and employees. Employees are asked to provide health data, which are compared with aggregate profiles using proprietary algorithms. The big question: Will employees see enough benefit to share potentially sensitive information?
Zenefits, recovering from widely publicized regulatory issues, has new leadership. The company acts a broker, and focuses on small businesses.
Collective Health is targeting a wide range of businesses via "ready-to-go," "configurable," and "advanced" solutions. The employee experience components of the offering are aimed at helping users make better-informed decisions with less hassle.
SimplyInsured aggregates health insurance plan options for small businesses to make comparisons easier, and aims to automate processes presumably essential to creating a viable cost structure for serving this segment.
A number of benefits consultants including Aon and Towers Watson (the latter via their acquisition of Liazon in 2013) offer larger employers private exchange capabilities - these include portals for employee benefits enrollment enabled by data analytics and a friendly user interface. They act as or engage brokers to create benefits plans tailored to employers' goals. Such portals can be helpful to employees, and check a box for employers seeking to improve the benefits experience, not just reduce expenses.
Health advocacy: a workaround to fix a broken patient experience?
Health Advocate, founded in 2002, is the largest example of a relatively new industry positioned to help patients navigate an increasingly complex system, to get right care and reimbursement. The question being raised around these solutions - although as the de facto advocate within my own family I'd love to have a professional advocate to whom I could outsource - is whether they are a workaround adding yet another layer of expense to an industry that earns among the worst customer satisfaction scores of any. As an employer, however, such services offer a benefits option that could be valuable given the stress of managing the health care process many employees undergo, no doubt with associated productivity impacts and/or lost wages.
Motivating people to adopt healthier habits
Vitality, reported on in an earlier post, is a cobranded platform offering deals and rewards designed to motivate people who take steps towards better health. Hancock offers the HumanaVitality program, integrating Vitality's rewards program into the insurance relationship. If people see near-term benefit to behavior change this could be a good use case upon which to build.
Facilitating patient payments to providers
Patientco is a "payments hub" supporting "every payment type," "every payment method," "every payment location." Focus is on efficiently increasing revenue for providers, secondarily to improve the payments experience for patients. The company provides the ability to integrate its solution with other health technology solutions.
Providing better experience capabilities to carriers
Zipari is a customer experience and CRM platform providing a product suite including enrollment, billing, and a 360-view of members across engagement channels. The company targets is product line at insurers, both direct-to-consumer and group or employer channels.
The multiple miracles that would have to occur for a quick fix make it unlikely that we will see a simple, logical health insurance experience any time soon. We are relatively early in what is likely to be a long game. But, insurtech innovators and even more mature companies operating within and around the sector are demonstrating the capacity to go after the possibilities that data, technology and the ability to see creative solutions offer to mitigate the pain.
Amy Radin partners with people who want to transform and grow businesses, bringing a combination of insight, vision, and pragmatism to realize the opportunities arising from change. She links client insight, marketing, big data, and digital technologies to financial goals. Amy serves on Advisory Boards, is an angel investor, keynote speaker, author and consultant. She works with companies from startups to Fortune 500 applying a Framework for New Growth (c) to help companies attract new clients and expand client relationships.