Austin Madison is Senior Vice President of The Crichton Group. He runs the employer benefits side of the firm, working with companies to build appropriate health insurance plans, along with keeping track of regulatory and compliance issues.
Like all of us in healthcare, Madison is watching significant changes in the industry, leading to realignment in relationships among the many stakeholders, as well as new mechanisms for consumers to take more control of their interaction with the entire medical system.
Our interview covered disruption and shifts among three groups: employers, payers and consumers.
Because Madison spends a lot of his time helping employers design the right plans for their employees, he is well-tuned to the needs and efforts of employers in making each healthcare dollar as efficient as possible.
“The bulk of health insurance in our country being provided or paid for in some form or fashion by employers. Frankly, that’s where a lot of the innovation is going to be driven […] There is a ton of disruption right now and in a good way.”
There are two primary reasons for this. One, as we just noted, is financial.
“We’re seeing a tremendous amount of employers in that middle market space move to self insured arrangements […] And their reason for doing that is because they’re seeing things out there in the space that can help them manage costs better […] and more efficiently than a big insurance company.
“Employers are kind of peeling the curtain back when they become self insured. Then instead of paying attention to what your insurance rate is, they’re paying attention to what their claim spend is. And the true driving cost behind behind healthcare is the dollars being spent on claims.”
The second reason involves human capital. Historically, health insurance became a benefit offered by employers as a way to attract high-quality candidates in the post-war boom. Though the economic and social landscape looks quite different today, the same basic need remains. Madison says,
“Employers are really wanting to find solutions [to paying for healthcare], because at the heart of this, the point of providing benefit is to be exactly that: a benefit.” Employers want good plans, and therefore want to be able to pay for them, so they’re attractive to prospective employees.
Insurance companies recognize the issues around paying for care as much as any other individual or industry segment. They want things to work more efficiently, as well.
“These large insurance companies, they’re not blind to this challenge and I think they are making a lot of effort to try to bring innovation to the table.”
The problem therefore isn’t a lack of recognition or will to change. Instead,
“The fact of the matter is that these companies are really, really large so they can make several efforts and invest in several things to try to drive innovation and try to drive creativity and try to simplify things.
“Health insurance is […] volatile and so the profit margins are thin, and so [insurance companies] don’t think that they can really give the time needed to see if something new that they’ve rolled out can take off.”
Still, there are signs of progress. Incumbents are showing a willingness to hand off some of the responsibility to newcomers (i.e., startups who are inherently more agile).
“We’re starting to see a little bit more from insurance companies […] Here in Nashville where we’re based, Oscar Health is teamed up with Humana to try to drive some more innovation.”
This partnership, Madison says, is disruptive for the industry.
“What they’re trying to do is […] provide transparency, provide convenience, provide concierge care.“
The transparency and convenience that companies like Oscar Health is useful for companies like Humana because it gives them something to offer consumers – who are becoming a larger part of the healthcare equation.
For the last several decades consumers pay part of their insurance premium and then pony up a copay for each office visit or procedure. But as the conversation shifts to become more consumer-centric, the consumer must take on new responsibilities. It’s not just copays anymore:
“Unfortunately we’ve all been conditioned to think about healthcare as, ‘hey, you know what? I pay $25 when I go to the doctor and that’s all I have to worry about.’
“When we approach healthcare from the standpoint that a $10,000 procedure is $25, well there’s a disconnect. And so I think we need help and transparency, but I think we also need help even more importantly on how consumers plan and think about what they need for healthcare.”
This goes back to a conversation we had last year with David Vivero of Amino. As we wrote then, “patients have had little say in the matter. It’s been top down, dictated by the industry. ‘We’ve always been viewed as passengers on this ship, not captains of our own vessels.’”
Amino, though, is part of the effort to change this structure. The company operates on the idea that healthcare is a personal finance category.
Madison agreed. Which leads to two things: First, consumers must change their mindset around healthcare spending (see the note above about $25 vs $10,000). Secondly, consumers need tools to make good decisions:
“What we’ve found over the past 10 years is when the consumer is actually seeing the cost of healthcare, they approach it much differently. It’s no different than if I’m going to buy a car, I’m going to do research on which, where I can get the best deal for that car, what is the best value for my money in that car. So lots of things that go into that.”
Aligning The Industry
Madison, like so many people we talk to, put everything together by highlighting the need for collaboration.
“At the end of the day, if the consumer doesn’t understand what those resources are or how to use those resources, then it’s the most giant waste of all time. And so I think that’s where insurance companies and providers and employers can really work together is how can we simplify things, how can we make it more user friendly?
“So where I see the innovation coming from is really in the insurance tech, in the healthcare startup stages.”
And that innovation is happening. In addition to Oscar Health, Madison pointed to “companies like Healthcare Bluebook and MDSave, who are really trying to drive transparency.”