The new health insurance companies want to empower the consumer

Founders of Bind Benefits and Gravie want to put the consumer in charge of their insurance

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Last week, Vator, UCSF Health Hub and HP held their latest salon called The Future of Health Insurance, in which insurance company executives, entrepreneurs and investors got together to discuss what's happening in the industry and what needs to change.

One of the big themes of the night involved the consumer, their role in the insurance industry, but also how to best put some of the power back in their hands so that they can make better choices for themselves. Not surprisingly, it was the up-and-coming insurance disruptors that championed this change. 

This topic was broached by Shawn Wagoner, co-founder of Bind On-Demand Health Insurance, a company that works with self-insured employers to offer health plans that provide coverage flexibility and cost certainty without deductibles. 

In an interview with Bambi Francisco Roizen (Founder & CEO, Vator) and Archana Dubey (Global Medical Director, HP), Wagoner described Bind as "a new health insurance company with a health insurance benefit product design."

Disrupting healthcare, he said, is about more than just putting a nice bow on a bad product, but instead means actually giving people something better.

"You can't throw a nice customer service layer on it and treat people really well and take puppies for them to pet at an open enroll. You can't just think you’re going to use data on broken underlying insurance and underwriting scheme. We said, ‘In order to create something better, we think we need to create a better product.’ So we start from the product perspective."

Bind's product eliminates things that the company considers to be "not very useful, valuable and don’t get the results we want." That means getting rid of deductibles and coinsurance layers, while giving everything that it covers a transparent price tag. That, then, empowers the consumer to understand what they're buying and allows them to make better choices.

"If you can actually give them a price, people know how to shop; you couple that with an easy benefit without coinsurance deductibles and give them clear answers on coverage, they can also search Google. If you give them the ability to search Google for what is covered, and you return prices to them, they can make better decisions, which is what we’ve seen," said Wagoner. 

Francisco then asked Wagoner if the fundamental problem of healthcare insurance is that "consumers have just been so far away from the actual experience of buying the services." Basically, are there too many layers between the consumer and the product and is that why people are so disengaged?

"I’m a believer that, throughout history, if you’re on the side of the people, the people always eventually win. Pick your favorite revolution or pick your favorite consumer movement, if you’re on the side of people, people always eventually win. So, I definitely believe that empowering people and giving them what they need, they will win in the end. And I definitely believe that they haven't been given the power," he responded.

He pointed out that most people currently get their insurance through their employer, but employers are not giving their employees much choice in their insurance, which is part of what causes that distance between the patient and their insurance product.  

When asked about how to actually engage users with their insurance, Wagoner pointed to part of the Bind product that addresses what insurance actually covers, and, again, how it fixes that to give people more choices. 

"If you go and look at the consumption patterns, and what health insurance is really funding, essentially it covers nearly everything. When you look at other insurance, it fundamentally is designed for low frequency, high-cost events that are unforeseen. If you look at your health insurance coverage today, is everything that’s covered by your insurance low frequency, high cost and unforeseen? I think the answer is no," he said. 

Dubey pointed out that "the health insurance industry is the only industry in which we get wellness visits and health maintenance things covered," to which Wagoner responded that, "Some of the maintenance stuff is important," since it reduces the risk of the pool.

"It does make sense to have the pool invest in maintenance services. It doesn't make sense for them to invest in the equivalent of a new kitchen. Your homeowners policy doesn’t fund that. That’s the equivalent in healthcare of getting a discretionary service, or a discretionary procedure, that’s no better than not doing anything," he said.

Things like heart attacks should be covered, but not unnecessary surgeries that actually pose a higher risk to the patient. Instead, Bind created a product where there are 45 procedures that can be planned ahead of time that are available for coverage on demand, including sinus and nasal septum surgery, bunionectomy and hammertoe surgery​, hernia repair, knee arthroscopy and repair, and lumbar spine fusion​. Allowing patients to get these procedures on demand thereby reduces the burden on the rest of the pool while also giving the patient the ability to choose what they want when they want it.

"You can actually buy coverage for those things when you actually need it, when your needs change and after your clinical team and your friends and family have worked with you and convinced you that you should purchase it. So, we’ve introduced a new concept of coverage which is, ‘I can buy coverage for things in healthcare on demand, but I don’t have to saddle myself with the cost of the way through.'"

Giving consumers the power of the purse

Another new health insurance startup is Gravie, a company that wants to make it easier and more affordable for employers and employees to buy insurance. 

Abir Sen, CEO and co-founder of Gravie, talked about how he is trying to disrupt the space, noting that his company puts the consumer back in the center by giving them more choice over how healthcare dollars are spent. The company puts that money into the hands of the employee, rather than allowing the employer to decide for them what healthcare they can have.

"Say the employer wants to give the consumer $10,000 - or whatever the number is - we give that to the consumer and now the consumer has the power of the purse.’ So, they get to pick the things that they want and the next year if they didn’t like what they got they just switch, they can go to a different plan or a different provider."

This is very different from what happens today, said Sen, pointing out how quickly in the process of buying insurance the consumer loses their ability to have any choice in their coverage.  

"If you think about it, the insurance company, which is really producing the product, who’s their customer? Well, if you ask a layperson, the customer is the consumer. But, for the insurance company, the consumer is not the customer; the broker is the customer, the employer is the customer. The consumer just happens to be an audience, a captive audience at that, that just gets dragged to the table every October and they pick out option A or option B. So, all the ability of the consumer to exert choice right away has been taken out," he said.

The reason that giving employees choice doesn't work in the traditional model, he explained, is because the incentive structure doesn't allow for it. 

"In the traditional model, if you think about the incentive structure, the insurance company wants to sell more stuff, so they give brokers all sorts of incentives, which is the dirty little secret of that supply chain. If you sit with a broker, and there are some good brokers out there, the first question they’ll ask you is, ‘What's my compensation for this product?’ And if you don’t pay a high enough compensation, it’s never going to get to the consumer because broker is never going to present it to the employer," said Sen.

"And the employer now is trying to save money, trying to reduce administrative costs, etc and the poor consumer just wants to be healthy and if something bad happens they want someone to pay for it. So, in the traditional model of the system, the incentives are broken, and we’re trying to change that by aligning everybody’s incentives with that of the consumer. We believe one of the main ways to do that is by giving the consumer the power of the purse." 

When Francisco asked him where Gravie is eliminating waste, Sen responded that, rather than calling it "waste," he calls it "a non-rational purchasing process."

"So, the way that health insurance is bought is you have a consultant who has a relationship with the benefits manager. They go out, they play golf, they have drinks, it’s all relationship-based. And the reason it’s all relationship-based is because it’s a super complex purchase and nobody understands it, even the insurance companies don’t really understand it," he said.

"So, you’re getting rid of all the golf games?" asked Francisco.

"Partly," Sen answered with a laugh. "Wine sales will probably go down." 

"What we are doing is making that purchase decision a little bit more rational," he said. "We are the quarterback, if you will, the administrative quarterback, sitting on the consumer’s shoulder, if you can picture that, and as they’re going through their healthcare lives, we’re helping them back better decisions. Better decisions about what care I purchase, what insurance I purchase, all the way down to how and when I can go and get that care."