The burden of our tremendous expenditure on healthcare, as discussed in "How Digital Health will Disrupt the U.S. Healthcare System," is felt not only by the federal government, healthcare providers, hospital systems and insurance companies -- but also down to individual consumers. The Affordable Care Act (ACA) gave millions of uninsured individuals the opportunity to purchase health insurance, either through state-managed insurances markets (exchanges) or through federally-managed options. At the most basic level, health insurance companies were mandated to provide a standard set of benefits to their members. Known as “Essential Health Benefits (EHB),” ACA created a level playing field for consumers who were in the market for health insurance. Preventive care and chronic disease management was one of the new categories developed under the ACA.
The Before and After of ACA
Basic health plans with the lowest premiums offered newly insured consumers much needed peace of mind. To remind you of the reality before ACA, many consumers were excluded from purchasing insurance. Individuals who were self-employed or worked in certain industries (e.g service, hospitality) or those with pre-existing medical conditions were either not eligible or could not afford costly premiums. Since a majority of insured individuals were part of their employer's health plan, in a group plan (e.g. family or union), or were part of special populations (e.g. Medicare, Medicaid, Children’s Health Insurance Plan (CHIP)), others more or less were in that gray area and between coverage. From that standpoint, ACA was, in many ways, a relief. But after closer examination of basic health plans, one could argue that newly insured consumers armed with health insurance may not be as valuable as what they appear.
Plans similar to those described above existed before ACA. Termed “Cadillac” plans, these plans were also affordable at face value. Lower monthly premiums were exchanged for high out-of-pocket costs. Routine doctor's visits, prescriptions and co-pays cost more than other plans. Annual deductibles under these plans were in the thousands, usually $5,000 and up. Essentially, consumers under this type of plan paid for their monthly premium AND higher out-of-pocket costs leading to their annual deductible. The value of holding this type of health insurance kicks in when costs of care are in the thousands, typically only for hospitalizations and recurring treatment for chronic diseases. Basic plans meeting the ACA’s EHB resemble “Cadillac” plans. Higher out-of-pocket responsibilities on top of low monthly premiums. And value counts in a similar way - hospitalization or recurring care. Additionally, as this analysis summarizes, insurance premiums have spiked in almost all states when compared to last year. Something has to be done to support consumers as they strive towards personal health and well-being.
Opportunity for Innovation in Healthcare
Crowdfunding in recent years has been an alternative to traditional sources of financing such as personal or business loans or through credit. In 2013, the industry raised $5.1 billion. Most recently, as this Forbes article describes, a growing subset of the industry offered patients the opportunity to leverage their communities and others sympathetic to the cause to help defray or finance costs of care.
But the opportunity is greater than just depending on the crowd. For example, consider Acorns. Acorns is a new smartphone app that leverages silent investing, by taking pennies from each purchase and using the funds to invest or save on behalf of the user. Change collected from routine purchases is deposited into an Acorns portfolio then invested into the stock market. Depending on investing goals, Acorns assists how diversified a person’s portfolio is. Investments are updated in real time and can be viewed on demand.
The startup community can build on this platform and help address the issues described above. It has the ability to innovate and leverage silent investing such that it acts like a Health Flexible Spending Account (FSA), where savings can be invested on a daily basis and still generate a return if and when funds aren’t used.
Health is a person’s most vital asset in daily life. Without it, holding a job or career would be difficult. And health insurance provides people more security as it comes to protecting their health and well-being. The startup community has a chance to bring more value to consumers as they feel the increasing burdens of higher costs of healthcare.