In budget deal, health law foes took a different path

23 Dec 2015 | Author: | No comments yet »

5 must-do’s for succeeding in health tech.

Developments related to the nation’s health care reform law dominated benefits management news once again in 2015, with the most important Patient Protection and Affordable Care Act development happening during the summer.As the U.S. healthcare system’s historical transformation continues in 2016, we will see an increased focus on consumerism, cost transparency and value-based reimbursement. That was when the Supreme Court upheld 2012 IRS rules authorizing ACA premium subsidies to lower-income uninsured individuals who purchase health insurance in the federally operated public exchange as well as state-operated public exchanges. Here is a preview of industry changes to expect in the coming year: Healthcare costs continue to outpace inflation, creating greater incentives for insurers to offer plans with high-deductibles and narrow networks.

Indeed, the Census Bureau in September reported a big drop in the nation’s uninsured rate to 10.3% in 2014 from 13.3% the prior year, due in part to the subsidies. Equally important, entrepreneurs from across industry verticals are entering healthcare, believing that the time is right to attack a massive and growing sector, suffering from decades of lagging technology and productivity. According to a PwC’s 2014 Touchstone Survey, 44% of employers across all industries were considering limiting their offerings to high-deductible plans within the next three years. Employers complained about issues that included the lack of guidance on how much discretion they had to choose a plan for an employee, which delayed implementation of the requirement.

Unfortunately, we fear that many of the companies we meet with are doomed to failure, or worse niche status, as they run afoul of one or more of the “must have” tenets that are critical to this vertical – the five commandments for creating a successful healthtech company: Ready to think outside the (ad) box? While lawmakers heard employer complaints, experts say the driving force behind the bipartisan move to repeal automatic enrollment was the $8 billion in revenue that the Congressional Budget Office said would be generated by increased taxable income for employers. “There was a lot of uncertainty about how employees could unenroll,” said Ann Marie Breheny, a senior legislative adviser at Towers Watson & Co. in Arlington, Virginia. “The automatic enrollment requirement … was not ready to be implemented,” said Annette Guarisco Fildes, president and CEO of the ERISA Industry Committee in Washington. Department of Health and Human Services rule followed a 2014 high court decision that struck down earlier rules requiring such organizations to provide contraceptive coverage directly.

Lawmakers are expected to continue to press for changes to ACA, with much of the focus on repealing a 40% excise tax on that portion of group health premiums that exceeds $10,200 for single coverage and $27,500 for family coverage. In 2016, employers, insurers and providers will allocate more resources to providing online and mobile tools to help consumers understand their healthcare plans’ costs and benefits so that they can know the cost of their treatment while obtaining the healthcare services that address their needs. Tools that are well-designed and accessible can aid consumers in evaluating their provider networks, researching prices, learning about the importance and cost effectiveness of preventive care and screenings and improving their overall healthcare literacy and their personal health status. While mergers among health insurers have been common for years, two blockbuster 2015 deals look to winnow the five largest health insurers to three — assuming the mergers survive antitrust scrutiny. These tools also will be able to explain the differences between plan designs so that consumers enrolling through public or private exchanges can select the option that’s best for them.

During the summer, Anthem Inc. and Cigna Corp. proposed merging in a $54 billion deal while Aetna Inc. and Humana Inc. proposed combining in a $37 billion deal. If your product takes longer to deliver that return — or if the ROI you deliver is too soft, you’ll never get high on the crowded priority lists of financially strapped buyers. Several states are exploring ways to promote price transparency, especially in cases where consumers receive unexpectedly high bills from out-of-network providers they reasonably believed were in their plan’s network. Alarmed by the exposure of the Pension Benefit Guaranty Corp. to huge losses from failed multiemployer pension plans, Congress a year ago passed legislation to allow plans to seek Treasury Department approval to cut participants’ benefits in order to survive.

For employers, you can occasionally get their attention with a two-year ROI, but anything beyond that is too long to overcome employee turnover at most companies. In November, Mercer said 2015 group health plan costs increased 3.8% to an average of $11,635 per employee. “High-deductible plans tend to lower claim costs so that you either avoid the (Cadillac) tax or push out the potential tax liability for several years,” said Ed Kaplan, New York-based national health practice leader for The Segal Group Inc. In September, one of the nation’s biggest and most financially troubled plans, the Central States, Southwest and Southwest Areas Pension Plan, sought approval to do that. These developments will create challenges for organizations both big and small; many proposed transactions are likely to attract government scrutiny of their market impact.

Navigating through an environment of increasingly bigger competitors will make it more difficult for smaller entities to negotiate competitive reimbursement rates. The healthcare companies formed by mergers will need to create efficiencies in large, multi-layered organizations, leverage their diversity to create accountable care organizations and shift to value-based reimbursement models.

And when they do engage, it is either for an acute short-duration condition (e.g., recovery from an injury) or for a very serious condition (e.g., cancer or neurological condition). Choosing the right technology and using transparent, reliable, and comprehensive healthcare cost data to make effective strategic decisions will be a key element to their success.

So technologies that focus on ongoing social engagement for more basic health issues have a terrible track record — low virality and dreadful churn. A recent Standard & Poor’s Corp. report examined 16 health care systems that had started health insurance companies, finding they had more than $25 billion in premiums and more than 7 million enrollees in their plans.

Many attempts to build healthcare social networks have struggled to overcome the fact that healthcare is really thousands, perhaps 10,000, unique disease categories (e.g., stage 4 breast cancer patients have little in common with stage 1 colon cancer patients and are very different from patients with diabetes or high blood pressure). A National Business Group on Health survey found that 32% of employers plan to implement site-of-care management strategies in 2016, up from 18% in 2015, in directing employees to the lowest-cost place to fill and administer specialty drugs. Whether it is making pricing available through public channels, using data to understand markets, costs and utilization trends or developing multi-lingual mobile and online tools to aid in consumer decision-support, 2016 is sure to be a year filled with change. If approved by federal and state regulators, two multibillion-dollar mergers in the health insurance sector will shrink the largest national health insurers from five to three.

Shifting workers to high-deductible health plans, implementing wellness programs and providing consumerism tools, such as cost comparison tools, have helped employers limit increases in health costs, experts said. While it is true that chronic diseases do account for most of healthcare costs, it takes a long time for a patient to start incurring high enough costs to justify buying a product or service (see Commandment #1). In the latest twist, plaintiffs are challenging a July rule that allows religious organizations to pass on the obligation to provide prescription contraceptive coverage to health insurers or their third-party health plan administrators. This means you can’t be dependent on the participation or cooperation of whoever stands to lose revenue because of you (for example, counting on hospitals to share electronic health records to reduce admissions). Equally important, it is essential to know who you are helping — and to make sure that the problem you are attacking is big enough so your customer will stand up to the other ecosystem parties who want you to fail.

For example, Castlight Health’s customer is the self-insured employer; Castlight exists to decrease healthcare costs for employers, which necessarily reduces the revenues of healthcare providers, who the insurance companies depend on. Under a design proposed by a panel of the National Coordinating Committee for Multiemployer Plans and being reviewed by lawmakers, plan benefits would have to be funded at 120%.

To be successful in its early days, Castlight needed employers to go to bat on their behalf with insurance companies and pharmacy benefit managers to get the price and quality data they required. In turn, a provision in a 1980 law that requires employers withdrawing from underfunded plans to be pay a share of unfunded liabilities would not apply.

In many cases, it is employers, not consumers, who pay most of the medical bills. 50 million Americans are insured through self-insured employers (large companies that assume the risk of covering health benefits for their employees rather than working with an insurer). Patients with chronic diseases and anyone who happens to have an acute condition (like pregnancy or an appendectomy) is likely to exceed the out-of-pocket maximum. This leads to patients only acting like consumers for inexpensive and elective care, like lab tests, imaging, and flu shots, not the expensive things that could bend cost curves. Since employers aggregate potential users by the tens or hundreds of thousands, they can be terrific channel partners – accessing users at much greater velocity and lower customer acquisition costs. Health plans and doctors are very good today at identifying high-risk patients – plans through claims histories, and doctors with their intrinsic diagnostic skills.

So the good news is that we are finally seeing change and disruption in an industry that desperately needs it, and the talent pouring into the space is energizing. Bryan Roberts and Bob Kocher, MD, are partners at venture capital firm Venrock and active investors in many health tech companies, including Castlight Health, Grand Rounds, and Zenefits.

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