Healthcare reform puts consumers in charge

By Teresa Wang and Sarah Jacobson

Given the legislative landscape, it’s no surprise that healthcare consumer engagement, which we define as consumer tools for the purchasing or selection of healthcare services or health insurance, has consistently been in the top 6 categories for digital health funding. The underlying cost shift that is turning patients into savvy-consumers is especially noteworthy. Beginning on January 1, 2014, the Patient Protection and Affordable Care Act mandated individuals to maintain minimum essential coverage each month or pay a penalty. And thanks to the ACA, 16.4 million previously uninsured Americans now have coverage. The health insurance exchanges and expansion of Medicaid to people who earned up to 138% of the federal poverty level were essential drivers of this drop of uninsured Americans.

85% of enrollees from the individual marketplace selected a high deductible health plan.
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Being insured comes at a price—and it looks like individual consumers will be paying it. In 2013, out-of-pocket expenses grew 3.2% to account for 12% of national health spending, and this number is only expected to continue to rise with the abundance of high deductible health plans (HDHPs). Eighty-five percent of enrollees from the individual marketplace selected a HDHP. Individual plans with a deductible of at least $1,250 or a family policy with a deductible of at least $2,500 are considered HDHPs. This means an individual consumer is responsible for paying $1,250 out-of-pocket before insurance coverage kicks in. Given this cost sharing, there has been a significant change in purchasing behavior. Over 50% of the individuals who purchased insurance on this past year “shopped” around before purchasing their health insurance plan. Individuals are no longer passively receiving treatment and information from the healthcare system, and instead are incentivized to become actively engaged in decision-making processes. This may be a scary change for many patients, but the shift creates much needed tailwind to push healthcare up with the rest of the consumer-facing industries.

As individuals become accustomed to being responsible for out-of-pocket healthcare expenses, digital health companies can take advantage of the trend towards consumerism to educate and empower patients to make smarter purchasing decisions.

Opportunities for digital health companies

For most people, purchasing health insurance will not only be the single largest purchase of the year (behind buying a home or car), but also one of the most confusing. Deductibles, co-insurance, co-pays, networks—all this vocabulary is foreign to the average consumer. Now that individuals have to make this decision, call centers struggle to efficiently answer customer questions and concerns. This presents an incredible opportunity for digital health companies to leverage technology to help guide and navigate the purchase. For instance, Stride Health is making the plan selection easily digestible, and personalized. As you input basic facts about yourself, including preferences for physicians or expected treatments, Stride Health’s algorithm engine uses historical claims data to help predict your all-in cost for the year and recommend plans based on your needs.

The healthcare industry must adapt to reflect consumer preferences for convenient and user-friendly services and products. (Tweet this)

With 48% of exchange networks considered a narrow network (one that only includes access to 31-70% of all hospitals in the area), consumer choice has been restricted. It is important to find ways to provide access to resources that can empower consumers to make the best medical—and economical—decision. Today there is little transparency around what patients are paying for. The ambiguous correlation between price and quality means we need more than just online review sites. Digital health companies, like MDSave or PokitDok, try to make prices transparent by allowing patients to get upfront pricing or quotes for their procedures or treatments. Other companies, like Amino, are working to help each individual consumer make sense of all this data. Amino analyzes patient-doctor interactions to identify facts that matter about common medical treatments and conditions. It personalizes results to give users a sense of how much a treatment might cost and what potential complications to be aware of. Industry players are also jumping in on this. Large payers, like United Healthcare and Aetna, have also released digital tools with price transparency to help consumers better understand and navigate providers and treatments. Most notably, as part of the Health Care Cost Institute, insurers are revealing costs of medical services across the country on the price transparency site, Guroo.

Consumers are used to paying only for things they want. The industry must adapt to reflect consumer preferences for convenient and user-friendly services and products. Insurance companies must have recognized this need, evidenced by them switching to more modern logos. For example, in 2012 Aetna adopted a no-caps, purple logo to be more vibrant, energetic, and flexible. Except clearly changing logos isn’t enough. New insurance entrant Oscar capitalized on this by branding themselves as an insurance company that is simple, intuitive, and human. They offer online and mobile experiences that help make it easy to interact with your insurance company, whether it’s being able to shop and connect with doctors on-demand or helping you track all of your visits, prescriptions, and lab tests.

Currently, the healthcare insurance market is facing a key test in the Supreme Court case, King v. Burwell. If the highest court in the land ultimately decides that people who buy coverage on the Federal Exchange are not entitled to subsidies, then over individuals could lose coverage. This would unravel the individual mandate as people are no longer able to afford health insurance. Yet regardless of the outcome, the increasing financial burden patients have already begun to face as a result of the individual mandate has already catalyzed an unstoppable movement. The growth in healthcare consumerism has created a new ideal patient archetype—one that is informed, empowered, and engaged.

This is the final installment of a 4-part Healthcare Reform Series.

Part 1: How healthcare reform impacts digital health
Part 2: How laws and policies are shaping telemedicine
Part 3: The shifting center of care
Part 4: Healthcare reform puts consumers in charge

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