June 27 2013
by John Backus
ObamaCare’s Silver Lining
Most agree that big changes are coming to your health care as a result of the Affordable Care Act (ACA), otherwise known as “ObamaCare.” But the best, unintended consequence of the ACA is quietly brewing right now: over the next ten years, a robust, competitive, cash-based marketplace for all health care services – from the simple flu shot to the complicated heart transplant – will be introduced.
In a country that spends $2.6 trillion on health care, this will dramatically bend the cost curve down for consumers. There’s an ecosystem of innovation emerging that will dismantle the pricing game that is crippling the US health care system. This ecosystem will make patients more engaged in their health care decisions and give respected providers a more direct avenue to treat their patients.
The ACA introduces some common-sense insurance reforms, that will let kids stay on parent’s policies through the age of 26, that will eliminate lifetime dollar limits on coverage payments, and that will restrict an insurer’s ability to deny coverage based on pre-existing conditions. More than 30 million Americans that don’t have health insurance will have access to coverage, and both States and the Federal Government are rapidly standing up new health insurance “exchanges” which create a marketplace where you can buy insurance.
Simultaneously, employer-provided health care is about to go the way of employer-provided pensions. In other words, it is disappearing. Soon, your employer will offer you, say, a $6,000 health care allowance, or perhaps a $12,000 allowance for you, your spouse and your spouse and your family. Along with that health care allowance, your employer might offer 2-3 employer sponsored plans, while also pointing out the options available on the public exchanges. No longer will your employer offer comprehensive health care as a benefit. It is too expensive. They are already pursuing pricing transparency for prescription claims through companies like Truveris, which we invested in, to get their arms around health care expenses and contain them. Whatever health option they choose, employees will start spending money on health care carefully and wisely, much like they shop for most high-priced items. First they will select the plan that is right for them. Younger employees are likely to seek the least expensive policies with the highest available deductibles. Employees with families will quickly realize that the new health care allowance won’t pay for 100% of comprehensive insurance. They, too, will move to higher deductible plans to not have to incur much up front in out-of-pocket insurance costs. America’s Health Insurance Plans (AHIP) estimates enrollment in high deductible plans tripled over the last six years and I believe that number will only grow more exponentially.
Soon, a large group of Americans will be spending a lot more of their own money, in the form of higher deductibles, before their insurance kicks in. And incidently, those consumers, spending their own money, will demand pricing transparency from providers and begin to create a cash marketplace for health care services.
At the moment, dissecting Explanation of Benefits from insurance companies is an impossible task for most consumers – trying to understand what the doctor charged, the price the insurance company is willing to pay, how much you have to pay, why certain charges were denied, how to appeal those denials, how all of this relates to your individual deductible, your family deductible and your out of pocket maximum. I’m literally willing to bet that Web marketplaces like PokitDok for example, that make cash pricing available directly from medical practices, will lead the way, which is why we decided to invest in this space.
Consumers aside and employers aside, health care providers will seek steady, more predictable revenue streams. It is estimated that by 2016, 25 percent of independent practices are shifting away from the insurance reimbursement system and requiring patients to pay for treatment directly. They are sick and tired of insurance companies and the government (via Medicare and Medicaid) trying to “save money” by driving down how much they pay doctors per visit or per procedure. They are looking for cash-paying customers who will pay the same amount (or even a lower amount) without the high transactional costs of the claims-based insurance system. And they’re adopting simple tools like ZocDoc and PokitDok to market what they offer and let patients find convenient appointment times with doctors online.
Cash pricing is hitting retail too. CVS bought MinuteClinic, and posts cash prices for services at every store. Other medical services, like Qliance, which we got behind alongside Bezos Expeditions and others, are pioneering “Direct Primary Care” offering you unlimited access to and service from your primary care doctor for less than $100 a month, whether you have insurance or just want to pay directly, in cash, like you would a gym membership.
The cash marketplace – all unintended benefits of the ACA.
So be prepared for the big changes coming – new, simpler, more direct, economical access to doctors.
It will be the best thing that has happened to health care in 75 years.