It’s changed how we’ve consumed nearly every other service. Once health-care reform comes into effect, how will the web change how we deal with insurance companies? The Internet has enabled cost-slashing innovations in many markets–but not in the health care industry. What makes health care so different?
To start, the number of people who pay directly for their own health care is minuscule. Instead, the vast majority of people who have access to medical care on a regular basis have coverage under either a private insurance plan or a government-funded program. These two middlemen–private health insurers and the government–are the ones who negotiate services and prices with medical providers, and actually pay the bills for medical care. They are not going away anytime soon. In spite of that, can the Internet be used to change how we buy health care, and in so doing reduce cost? The answer is yes… and no.
In many markets, the Internet unleashes consumers who are enlightened, engaged and empowered. We now know what do to with all that stuff in our basement (sell it onEBay), we can shop at midnight in our pajamas (on Amazon), and we have access to the same airline booking tools that used to be the private domain of travel agents (with sites like Travelocity and Kayak). Consumers rule on the Internet. And wherever consumers rule, providers of goods and services are forced to compete for business by keeping service quality high and prices low.
Even though we can’t fundamentally alter our third-party payer health care system, entrepreneurs can use the Internet to empower people to become more careful health care consumers.
Of all the players in America’s complicated health care system, perhaps none is more highly motivated to control costs than employers. According to the Employee Benefits Research Institute, employer group health insurance premiums have effectively doubled in the past 10 years. Many employers are staggering under the high cost of insurance premiums, and there is no end in sight.
While a few employers are discontinuing benefits altogether, the majority are seeking ways to control costs while continuing to offer benefits. Many are doing this by shifting more of the cost of health insurance to employee–either by asking them to pay some portion of the premiums for health plans or by raising deductibles. Others are engaging their employees to manage the dollars allocated for their health insurance and health care through tax-advantaged health accounts.
But we are just two and a half years away from a seismic shift in the health insurance industry due to the health-care reform bill, the Patient Protection and Affordable Care Act (PPACA). One provision of the law that will go into effect in 2014 guarantees individuals the right to health insurance regardless of pre-existing conditions. In other words, no matter what your health status, insurance companies will not be able to deny you coverage.
This is a game changer because it shifts the balance of power in health-insurance transactions. Consumers will have the upper hand because they cannot be refused coverage. This also will open up an entirely new path for employers seeking a way to control health benefits costs. Employers will be able to transition their employees to the individual insurance market –where they can buy and own personalized insurance plans–yet continue to subsidize those plans by contributing funds into tax-advantaged health accounts.
Of course, employers also will need a way to provide their employees with guidance and tools for finding, comparing and purchasing these plans. And that is where a second provision of the PPACA comes into the picture. Also going into effect in 2014 are state-run health insurance exchanges, which will use the Internet and other technologies to enable consumers to quickly and easily do side-by-side comparisons of health plans from different carriers, enroll in plans, pay premiums and be reimbursed for out-of-pocket medical expenses.
Experience with already-existing private health insurance exchanges prove that when the Internet brings buyers of insurance together with sellers in a safe exchange, sellers are forced to compete. So, at least when it comes to health insurance, the table is set for the Internet to empower consumers, promote competition, and drive costs down, even if it can’t yet fundamentally alter the American health-care landscape.