October 23, 2019

Back in the early 70s, an older relative of mine graduated from high school; and, as is the case with many graduates, he received money toward a new car.  His parents gave him enough cash to purchase, outright, a brand-new Volkswagen Beetle; but that wasn’t his style.  He opted to take the money and put it toward a Mustang Fastback, agreeing to pay the overage out of his own pocket.  Now, the VW Bug would have gotten him where he wanted to go just as efficiently as the Mustang, but he chose to pay more for what he perceived to be a posher ride.

When it comes to health insurance, most of us are making the same decision.  If I may extend the above analogy a bit, we are paying exorbitant rates to obtain Cadillac coverage, when perhaps all that is necessary is a cheaper, but reliable, Corolla.  To “drive” home the point, most insured Americans have coverage through their employer or their government-sponsored plans.  With the commercial plans, you pay a high premium and often an increasingly high deductible, but you are generally well covered for most conditions.  However, the question arises: do all Americans really need a Cadillac when a Corolla will take care of their needs nearly as well and with less investment?

To put it in broad terms, there is an emerging market for a no-nonsense, no-frills, more-targeted type of coverage that doesn’t cost an arm and a leg.  We’re not talking about “catastrophic insurance plans” with their untenable deductibles, but something that is smart and streamlined and tailored to the individual’s needs.  There are some in the industry who are giving great thought to this issue and are seeking a low-cost solution to healthcare coverage—a “value line” of insurance, if you will.

Identifying the Need

Thought leaders at PricewaterhouseCoopers (PwC)—a multinational professional services network—have noted that average deductibles have tripled over the last decade and amount to nearly $1,300 for an individual who has employer-based insurance.  According to their studies, 52 percent of consumers would find it difficult to meet these deductibles. Then, there are the 60 million Americans covered by Medicaid and the nearly 30 million Americans who have no healthcare insurance whatsoever.  In the midst of these increasingly dismal statistics, PwC executives have noted a glimmer of hope on the horizon, stating:

“In response to these pressures, some companies are starting to build new, lower-cost delivery models to capture this market, bucking the trend by reducing fixed costs, rethinking which clinicians deliver care and addressing the social determinants of health.”

An Idea Takes Shape

Clearly, those with high-deductible health plans, the underinsured and the uninsured could potentially benefit from of a “value line” of health insurance and healthcare.  The PwC analysis indicated:

“Providers that understand the consumer segments they want to serve can design an operating model for the future—perhaps as ‘integrators’ serving a payer mix and consumer base that are both diverse, or as ‘health managers’ targeting the frail elderly, complex chronic, chronic and mental health consumer segments.”

Based on these working principles, healthcare entities may increasingly consider partnerships that deliver lower-cost, high-quality care.  One example of this synergistic effort is found in the mission of Redirect Health—an Arizona-based patient advocacy organization—that works with employers across the country to help provide healthcare to even low-wage employees.

Putting Theory into Practice

Redirect Health offers employees unlimited primary care visits paid for by their employer, and is in current discussions with hospitals about identifying ways to reduce unnecessary and expensive utilization by uninsured patients, as well as Medicaid beneficiaries.  The concept relies on the patient advocacy organization to manage patients’ ongoing care in partnership with health providers.  One of the primary goals is to avoid unnecessary emergency room visits that often go unpaid.

Another area that would benefit from the low-cost concept is prescription drugs.  According to PwC:

“Pharma has yet to fully embrace the idea of value lines other than generic drugs and patient financial assistance programs.  It could build on existing patient support programs to tackle social and lifestyle barriers to patient adherence.”

The PwC analysis concluded that the drug companies could develop value lines in the direct-to-consumer market with digital therapeutics such as Natural Cycles, a contraception app approved by the FDA in August 2018.

In summation, we are entering an exciting phase of possibilities as it concerns healthcare delivery and coverage.  Necessity is indeed the mother of invention, and the need for a low-cost suite of services in the healthcare space is clearly evident.  To meet these challenges, innovators, such as the patient-advocacy entity discussed above, will continue to emerge, offering Americans greater flexibility in their healthcare choices.  In so doing, healthcare facilities may also benefit from reduced utilization costs.  All this leads us to conclude the following:  While some will continue to prefer the Caddy, a growing number will be on the showroom floor, kicking the tires on the Corolla.