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How will health tech startups fare under the ACA?

Out-of-pocket costs are rising, but increased access may ultimately benefit health tech startups

Technology trends and news by Faith Merino
March 14, 2014 | Comments
Short URL: http://vator.tv/n/35a9

The Affordable Care Act.

OoooBAAAAmaCAAAARE!

It’s been talked to death—how it will affect businesses, how it will impact the middle class, who it will benefit, et cetera ad infinitum. The deadline for enrollment is quickly approaching, but the effects of the ACA are already being seen and felt. So far, 4.2 million previously uninsured people have enrolled, with the (now believed impossible) goal being 6 million by the end of March.

We’ve talked about how the ACA will affect businesses—particularly hiring—but how will it affect health tech startups?

Obviously, different health tech startups will be affected in different ways. Those offering a service covered by insurance, for example, can expect to be impacted in ways that those offering alternative services will not. Fertility tracker and alterna-insurance platform Glow, for example, will likely see big gains based on the fact that the ACA still does not require insurance plans to cover fertility services. And even if it did, those insurance companies would likely raise the out-of-pocket expenses for families requesting fertility assistance, which would make the low cost of Glow even more enticing.

Insurance costs are rising. Just taking a quick glance at the Covered California website, a family of four living in San Jose and making a combined income of $75,000 a year can expect to pay roughly $350 a month in premiums and slog through a family deductible of $10,000. That’s $10,000 before insurance even kicks in.

Those high costs could make preventative care prohibitively expensive, which is particularly evident when it comes to treating mental illness. In 2012 (the most recent year for which the Substance Abuse and Mental Health Services Administration has data), 43.7 million Americans experienced mental illness. Less than half—41%--received help. The number one reason for forgoing mental healthcare services: the cost. Some 48% said they simply couldn’t afford treatment. Those with private health insurance were less likely than those with Medicaid or CHIP to receive treatment, but those without any health coverage at all were the least likely to receive treatment.

So we have a quandary here: those with no insurance are less likely than anyone to see care (10.4% of adults who sought treatment in 2012), but those with expensive insurance aren’t much more likely to seek treatment (14.2% of adults). Meanwhile, 21.4% of adults who sought care in 2012 had Medicaid or CHIP.

That could spell trouble for a startup like Breakthrough, a telehealth platform that allows users to access mental health counseling and treatment online. Three-quarters of Breakthrough’s users pay with insurance, while 25% pay out-of-pocket. The rising out-of-pocket costs of treatment could pose a threat to Breakthrough’s growth if patients simply don’t feel like they can afford it.

But there’s something to be said for increased access. Medicaid has been expanded to cover all individuals earning up to 133% of the federal poverty level, which is $$30,675 for a family of four. This will also cover people who previously didn’t qualify for Medicaid even if they were making below the poverty level. The CBO predicts that 11 million people will gain Medicaid coverage by 2022. That’s 11 million more people who will now seek mental health treatment where they wouldn’t have previously. 

“Although the shift of healthcare cost from employers to employees in the form of high deductible plans and HSA accounts began before the ACA was put in place, it has definitely accelerated that shift, giving rise to a new ‘consumer patient’ who is looking to maximize the value of each healthcare dollar spent,” said PokitDok founder and CEO Lisa Maki.

PokitDok, which allows patients to shop and compare prices between healthcare providers, is poised to be a massively helpful tool for those attempting to navigate the new costs of healthcare. It’s not uncommon for there to be a discrepancy of thousands of dollars between the way two hospitals charge for the same procedure. For those with previously low-deductible insurance plans, these costs were often handled by the insurance. But now that more people are going to be on the hook for a good chunk of their own healthcare costs, the need for clear pricing is more important than ever.

 “Pre-ACA, when healthcare was essentially free, consumers didn't demand the same kind of transparency they receive in other markets. Now that the average American consumer is paying for more care with their own money they're shopping and demanding to know the price before an appointment, not after a procedure is complete,” said Maki. “A year ago, insurers and employers were more in an ‘I'll wait and see’ mode, now they're actively seeking programs and tools to deliver on the promise of the ACA and that's great for us.”

Other health tech startups, like HealthTap, will capitalize on the search for alternatives to expensive office visits for routine medical questions.

I, for example, could have saved hundreds if I had checked with HealthTap’s network of doctors first before flying into my son’s pediatrician’s office, screaming, “My baby has whooping cough! I know it’s probably not whooping cough, but seriously, I think it is!”

“With more than 25 million new Americans entering the healthcare system under the ACA, we’re facing a critical shortage of primary care doctors (estimated at 44,000) in our already taxed system,” said HealthTap CEO Ron Gutman. “This means increased wait times to see doctors, and less time in-person with doctors when we do see them. One important impact health startups are having is helping us tackle the challenge of how to improve the quality and regularity of our interactions with doctors, while simultaneously making them faster, better, and less expensive.”

HealthTap’s network now counts 55,000 U.S. doctors among its ranks, allowing patients to seek answers to questions that they can’t afford to take to an in-office visit. If the doctor’s answer is anything other than “it’s fine, it’ll go away on its own in a few days,” you can schedule an in-office visit with that same provider.

Gutman says HealthTap is already seeing increased engagement from both patients and doctors as a result of the ACA. Additionally, more doctors are joining HealthTap’s Medical Expert Network to set up their own “virtual practices,” thereby relieving some of the pressure they experience due to the large number of people they see in their clinics.

Overall, Gutman sees a golden opportunity for health tech startups.

“When you create much-needed or even essential services, and price them right, and find a cost-effective way to communicate their existence to the market, customers will follow en masse,” said Gutman. “Given the prevalence of high deductible plans, the limited number of available doctors, and the increased availability of digital health information and services, startups are well-equipped to offer consumers new ways to save on healthcare by bridging the gap between costly insurance offerings and customers’ immediate needs.”

 

Image source: urbanfaith.com


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