Category Archives: Insurance

Extirpating the “Health Insurance” myth

Extirpating (ĕk’stər-pāt’) v.

  1. To pull up by the roots.
  2. To destroy totally; exterminate.
  3. To remove by surgery.

I recently took a great road trip with my two boys. We rented one of the new Kia Soul’s which my boys recognized from a very funny commercial developed to highlight its hipster (hamster?) vibe. The commercial reminded me of the old Hamburger A or Hamburger B commercials from Wendys back in the late 80’s wherein this ludicrous contrast is set up to demarcate the dichotomy between two distinct choices.

This modern reinvention of that age old contrast struck me because it is something that I deal with everyday in explaining Crossover Health to people. It all stems from a pervasive misconception about the term “Health Insurance”

Understanding the components parts of our modern conception of "Health Insurance" is the our first step toward meaningful reform.

The challenge is that “Health Insurance” is a confused term which most people equate with both Health Care (care delivery) and Health Finance (how you pay for it). Our current employer based system (wherein your employer provides and in most cases pays for your insurance) as well as a third party insurance payment system (we have the insurance pay for us) creates all kinds of weird incentives but also results in no accountability in terms of cost, quality, or outcome. It is currently imploding before our eyes.

Our reaction, both opportunistic as well as obligatory, is to do something totally different by blowing up the current Health Insurance model and separating out Health Care from how you pay for it (Health Financing). We say that there is a better way to do BOTH – pay your physician directly for the care you need and then get smart about how you pay for it with the right insurance product. In fact, you should “self insure” with the highest deductible plan you can find and then take responsibility for your health for all the small stuff or hire someone to do that for you (like Crossover Personal Health Advisory Service). There is no reason to intermediate with a parasitic organizations that are taking your premium dollars and wasting it on overhead, fancy offices, mindless phone trees, and my all time favorite “this is not a bill” disinformation pamphlets.

As people begin to take this in (they always get how the practice model is a radically improvement), they immediately revert back to the combined “Health Insurance” concept.  Does Crossover Health want to replace my current “Health Insurance”? The answer is slightly nuanced, but a resounding YES!  I want to replace what you call “Health Insurance” with a direct “Health Care” product (Crossover Health) and a smarter Health Finance product (highest deductible you can get).

We believe there are large and significant opportunities to roll this into a single product that can be purchased by employers, families, and other organizations seeking fresh alternatives that can demonstrate not only trend bending improvements but trend busting outcomes.



Filed under Crossover, Health Finance, Innovation, Insurance, Value

Day 55: Stuck between a rock and hard(ly Health “Insurance”) plans

Stuck (stŭk) v.

  1. Caught or fixed
  2. Baffled

* This article was submitted to us by one of our summer interns. Their name is being protected because they currently are in a health care start up protective witness program *

Have you ever felt trapped when deciding your health insurance options?  I have.  Each year I study my health insurance options closely to determine which insurance plan type will provide me with the most value, the best quality and the easiest access to my health providers for the lowest cost. You could say that I am a value (outcomes/price) shopper.

Lets review the options:

The PPO. Most people gravitate toward the “promise” of the doctor-rich PPO plan with the low deductibles and minimal co-insurance. Unfortunately, this attractive insurance coverage is completely unaffordable because the premium typically cost more than  $1,250/month for my family of six!  It is hard to imagine paying >$15,000/year in health insurance premiums alone just to have access to a larger network of physicians and to keep my healthcare copay or coinsurance low should I need to visit a doctor.  Remember, on top of the ~$15,000 for premiums, I am still shelling out several more thousand dollars in out-of-pocket co-pays, co-insurance, and related costs for medical services.

The HMO. Alternatively, I can select an HMO plan for my family for about $600/month, a savings of >$650/month when compared to the PPO.  The HMO includes affordable copays when visiting the doctor or hospital and manageable total out-of-pocket costs in the case of a major healthcare expense.  But, the HMO has its own limitations.  First, the HMO doctor network is small and restricted, with no out-of-network benefits.  Second, HMO docs are paid to “manage costs” and this management all-too-often results in long patient wait times, antiquated facilities, pre-authorizations to visit specialists and typically shorter than 10 minute face-to-face visits with the doctor.  Third, although I’ve never experienced it first-hand, we’ve all heard the HMO horror stories that a disease or condition not being managed well because of the excessive focus on controlling costs (which could also be applied to the PPO option).

The HSA. Another affordable plan is the High Deductible PPO tied to an HSA. HSA’s continue to make steady, albeit small but gaining, increases each year. In this model, I pay about $300 / month for my premium and come out of pocket for the first $7,000 of medical expenses. This could include small stuff (simple visits for cough/colds are all out of pocket to me) as well as big stuff (we actualy like having the babies because it served as the medical “jackpot” in the rest of the year was “free”). But for all its cost savings (resulting from financial incentive of using your own money), it still does not provide steerage, care coordination, enhanced communication, or any of the other proactive health and prevention features required to truly keep costs down and you health up.

Considering my options. I have recently been using an HMO product for my family. Recently, I had the need to go out of network to visit a specialist doctor.  Since I currently have an HMO plan that doesn’t include out-of-network benefits, I had to test the waters of paying cash for services.  To be honest, I was a little nervous.  I was worried that I could be on the hook for thousands of dollars in fees that wouldn’t be covered by my HMO plan since I was visiting a non contracted doctor.  I called ahead to get a sense of the cash price for a visit and I was told the fee for a cash paying customer is $200 for your first visit and typically $100 for each follow up visit.  This wasn’t so scary.  To me, $200 isn’t insignificant but it isn’t $2,000 or $10,000.  This experience made me think:  why would I pay $1,000/month in premiums for access to a wide network of doctors or settle for an HMO that heavily manages cost by limiting access when I can pay cash for the basic or primary care services?

The answered seemed simple: select an inexpensive insurance plan (i.e., affordable premium) that provides catastrophic insurance coverage at a level (deductible) with which I’m comfortable and for everything else, pay cash.  I naturally thought about selecting a Health Savings Account plan with a very high deductible.  This would make a lot of sense if I lived in any other state except California, but California has a unique phenomenon whereby HMO plans are still very affordable.  In fact, of the health insurance plans available to me, including a high deductible PPO plan with an HSA, the best/cheapest catastrophic plan is the HMO.  In other words, although my HMO plan covers primary care and preventive visits, I only plan on using my HMO plan in the case of a major medical emergency.  With the savings from not choosing the PPO plan, I’m going to spend that money to pay cash to the doctors I choose to visit.  If it happens that I need to visit the doctor 5 or 6 times this year then I might expect to pay $1,500 in out of pocket costs for seeing the doctor on my terms.  If my health is worse than this, then I have my insurance that will step in and help me–after all, isn’t this what insurance is meant to do…pay for unexpected events?  If my health is better, then I can save those dollars for the next rainy day.

Isn’t that funny – essentially using an available HMO product as the lowest cost catastrophic plan but paying cash for all primary care services. This certainly highlights the opportunity for some enterprising and innovative health insurance plans to develop a new catastrophic plan that can carve out risk to some tolerable level that I choose. Sounds like a real winner . . . particularly when wed with the new products that Crossover Health is bringing to market.

Next article will discuss that product and how we “add it on” to the current mix while we wait for someone to develop a specific major medical plan for us (hint hint all you insurance companies out there!).

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Filed under Crossover, Innovation, Insurance

Sermo makes the connection: Health Reform leads to Cash-based Practices

Connection (kə-nĕk‘shən) n.

  1. The act of connecting.
  2. The state of being connected
  3. An association or relationship
Sermo finally makes the connection between all the health insurance reform conversations and the inevitable consequence of pushing a large percentage of providers toward a cash based practice. I have highlighted the rise of direct practice multiple times, and believe enough in the model that I am currently creating a direct practice network for Southern California. There are multiple emerging tools that will make this much easier and I believe the inevitable financial reimbursement fallout will result in a dramatic rise in the number of physicians moving to this model.

The comments below are only available once you log into Sermo:

The past two weeks have seen polls come out that would appear to portray physicians with diametrically opposite positions in the current healthcare debate. A September 14th poll of 5,157 physicians in New England Journal of Med… indicates that:

  • 63% of physicians support a combined public/private approach to coverage (i.e. the healthcare reform approach currently proposed)

A poll two days later by IBD/TIPP of 1,376, also randomly selected physicians, indicated that [LINK]:

  • 65% say they oppose the proposed healthcare plan
  • 45% of the respondents stated that they would consider leaving medicine if the reforms were in fact enacted

In parallel, there has been a dramatic acceleration in the number of discussions around cash-on… While fee-for-service or “cash only” practices have long been a popular topic on Sermo, there appears to be increasing interest in this as the healthcare debate has progressed.  Given the growing impact of this trend, the media is asking the Sermo physician community to help asses this trend and the possible impact on the physician-patient relationship.


Daniel Palestrant, MD
CEO & Founder, Sermo

P.S. Get your colleagues involved. And help us make a big statement to the media. Cut and paste this link into your outgoing email:


Filed under Consumerism, Crossover, Innovation, Insurance

Utah leads out with new virtual health insurance exchange

Exchange (ĭks-chānj’) n.

  1. To give in return for something received; trade
  2. To give and receive reciprocally; interchange
  3. A place where things are exchanged, especially a center where securities or commodities are bought and sold

There have been several interesting health finance innovations that have been announced recently which have relevance to health reform in general and the some of my work at the Healthcare X PRIZE specifically. I wanted to first start with an announcement from the State of Utah that their version of a Health Insurance Exchange is now “open for business”. The Utah Health Exchange is based on a multi-year, multi-stage health reform effort in the very progressive but conservative state (is that possible?). The plan has three main components:

  • Defined Contribution
  • Virtual Health Insurance Exchange
  • Risk Adjustment

Each element is described in a detailed communication from Edmund Haisimaier, a Senior Fellow Research Fellow in the Center for Health Policy Studies at the Heritage Foundation. Before you dismiss this effort as some conservative schtick from the right, you should actually look at what they are doing and how they are doing it. It is actually a fascinating read.

My take: BRAVO! What Utah is doing in health financing is something we should be seeing alot more of in the future. Couple points of comment:

Defined Contribution. I also love the notion of a “defined contribution” coming from employers. This is also a no-brainer – let the employees both see how much you are contributing to their health as well as give them the flexibility to make their own choice. These ideas were made popular by Definity Health, and I love seeing this concept move forward. For me, this will be the “death knell” of employer based insurance if this concept takes off – which I see as a very positive outcome.  I have already ranted about Employer Based Insurance in the past and the sooner we decouple this unnatural relationship the better off our country will be.

Virtual Health Insurance Exchange. Leveraging a technology platform (eInsurance in this case) to bring together all the disparate information to make an apples to apples comparison of various health insurance options. This allows the consumer to make rational choices based on their own preference sensitivity of price, features, benefits, and other metrics. I love that insurers, and the brokers who push their products, will have to do more than convince an HR manager who makes a company wide decision, but rather have to compete consumer by consumer by offering the best value. The technology makes it possible to compare dozens of different plans based on age and family status simultaneously. The agent role turns much more into that of a value added advisor.

Risk Adjustment. This is actually much harder to follow. Essentially, Utah is laying the foundation to create a state wide pool with everyone who has insurance being a part of a single pool. On the “front end” when the consumer purchases the insurance there will be some variation in pricing based solely on age and family status. However, on the “back end” the insurer taking the diabetic will actually get a little bit more of the premium. Furthermore, any insurer who has an inordinate amount of large expenses or wide variations in claims will receive additional credits from the other insurers. This innovative wrinkle can actually entice other insurers to participate as these “adjustments” further minimizes the risk that their “pool” performs worse or costs more than others. Essentially, the Utah Health Exchange pools premiums from all the consumers, each insurer provides coverage during the year, and at the end of the year they redistribute a portion of their premiums to any insurer who took an excessive hit during the year. The details of how this will work in practice were not included but the concept is very interesting.

This is exactly the type of health financing innovation we need to be seeing. New ways to pay for insurance, new ways to acquire insurance, new ways to spread and pool risk, and new business models that will allow these concepts to flourish.


Filed under Innovation, Insurance, Value

Cuomo Bully Pulpit: All Payers Database to be a reality

Bully pulpit (bʊl’ē pʊl’pĭt) n.

  1. Public Office of sufficiently high rank that provides the holder with an opportunity to speak out and be listened to on any matter.
  2. An effective mechanism to bring issues to the fore that were not initially in debate, due to the office’s stature and publicity.

I never knew that Andrew Cuomo had such a swing. One by one he is knocking ’em down in NY – United, Cigna, Aetna, and now Wellpoint have succumbed to Gotham’s keeper of the peace (and highly effective health care reformer). Several more payers are in his sites and given the domino effect it is only a matter of time before we hear the announcements regarding other health plans abandoning their current pricing opacity strategies.

And the price of that strategy just keeps on rising. To date the figures are impressive, and by the time the other states pile on, my prediction that we are going to top $1B will be validated. Here is where we stand:

  • United – $350M settlement with State of New York
  • HealthNet – $255M settlement with State of New Jersey
  • Aetna – $20M to participate in new organization to set UNC
  • Cigna – $10M to UNC organization
  • Wellpoint – $10M to UNC organization
  • MVP Health – $535K to UNC organization
  • Health Now – ?
  • Independent Health – ?
  • TOTAL: $645M and counting

The question remains for me who is going to administer this new database and more importantly who is going to have access to it. This could be the beginnings of a true national all payers database (we already have the other ~50% through federal Medicare numbers) that should become a public good. Once this information is made public then health plans will, by extension, have revealed their pricing information which would in effect eliminate their Provider Network pricing advantages. In fact, I would argue as I have before, that one of the greatest outcomes of price transparency is the elimination of the current provider networks solely based on price. This results in a race to the bottom in terms of who can negotiate the best rates with the most desperate providers.

Cuomo’s well timed swing for the fences actually turns that former paradigm on its head. No longer can insurers self-determine what is reasonable and customary, but they will have an objective, all-payer, non-conflicted database that will reveal what is reasonable and customary. Physicians should have access to this for negotiation purposes, consumers should have access to this for comparative purposes, and insurers will have access for competitive purposes. The surfacing of this information means that everyone has to move up the value chain – physicians have to deliver outcomes that relate to prices, consumers can become true consumers through comparative value shopping, and providers are going to have to compete on delivering value instead of network gimmicks. Competing on value (outcome/price) is what all health markets are designed to foster. This should bode well for all.

Particularly for the one man reform machine working the NY AD Bully Pulpit.

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Filed under Change Agents, Innovation, Insurance, Transparency, Value

The Price of Opacity: Lessons Learned from UNC

Opacity (ō-păs’ĭ-tē)

  1. The quality or state of being opaque.
  2. Something obscure, impenetrable
  3. Dullness of mind

I have been intrigued by the recent settlement by United with NY regarding underpayments to physicians based on faulty estimates of what constitutes a fair market rate (Ususal aNd Customer or “UNC”) for physician health services. As predicted, it has set off a rash of new lawsuits whereby physician groups are going after insurance companies with a fury, including the recently announced Cigna/Aetna lawsuits.

So what is the price of opacity? So far I have this tally (please help me add to it):

  • HealthNet – $255M with State of New Jersey
  • United – $350M with State of New York
  • Aetna – $20M to participate in new organization to set UNC
  • MVP Health – $535K to the above organization
  • Aetna/Cigna – TBD
  • TOTAL: $625M and counting

    I am pretty confident that this will top out over $1B when we are done. Nothing like a little wealth redistribution. Perhaps Bill McQuire will have to cash in on some of those back dated options in order to help the company he founded pay off their lawsuits. I guess these are the “Usual and Customary” lessons that must be learned by the health insurance ruling elite.

    I guess they figured they could play the float. In fact, this entire things reminds me of how we utilize insurance companies today. We allow them to be our transaction processors, we send them money ahead of the claim, they create mass confusion in terms of attempts to get reimbursed, which gives them time to play the “float”, and then at some point in the future they reimburse the claim.

    This entire out of network situation feels the same – Insurance companies received premiums, held onto them as long as they could, made a bundle of cash, and then ultimately after much effort ended up paying out a portion of what they actually owed.

    This is shameful. Insurance companies need to start moving up the value chain or their own opacity will be their ultimate undoing.


    Filed under Insurance, Transparency, Uncategorized

    “An Unnecessary Effort”: Wuesthoff Health Pays for EOB’s

    Unnecessary (ŭn-nĕs’ĭ-sĕrē) adj.

    1. Not necessary; needless.
    2. Serving no useful purpose or function

    You have got to love it, huh? Did you see the most recent series of lawsuits just announced by the AMA. They must just be loving the opportunity to pile on their arch nemesis insurance companies at a time when their very future is in question.  It looks like the “price of opacity” is going to get a lot higher (will blog on that later).

    Apparently, there is also a “price of transparency” being offered up in the market as well. In a very interesting article (a take off of my Million EOB March post?) from Wuesthoff Health System revealed that they are actually paying consumers to have access to the EOB’s from other hospitals for specific prices of procedures. Wuesthoff is obviously interested in this information for a variety of reasons, including general business intelligence, competitively pricing their own health services, and to optimize their business operations. Paying consumers $100/EOB to get this information is revealing in that this is what is required to obtain market information in health care – we have to resort to these types of tactics (which I applaud!).

    Couple comments:

    • Social Networking tools as Collective Intelligence engines – I am an obvious big fan of Health 2.0 technology not for the buzz but rather for the bang when they are actually applied to meaningful problems. Utilizing collaborative pricing tools like Change:Healthcare that allow consumers to contribute to the overall knowledge of something (by sharing information) can be powerful. I believe incenting them to do so might be a great investment by not only gathering the information but ultimately breaking down the entire opaque pricing schemes of the insurance industry
    • Competing on Networks vs. Competing on Value – For too long insurance companies have competed on their ability to aggregate the broadest swath of physicians for the cheapest prices. The hold down costs by paying way less than market rates. Physicians respond by jacking up their retail prices to make up for lost revenue from insurance and the end result is everybody loses. The siren song of “increased volume” seduced many physicians, but those same physicians are now rejecting the “hamster wheel” medicine that it created. Instead of competing on the prices they can coerce in the physicians into taking, they should instead by competing on teh value they can create for their members. They should be offering tools, technology, alerts, and reminders that actually help their members stay healthy, that add to their ability to care for themselves, and to optimize their own health. If Insurance companies can’t do this, then they SHOULD be reduced to claims transactions shops that get commoditized.
    • “Completely Unnecessary effort, just pick up the phone and call us” – this was the money quote of the entire article from a competing health care organization, Health First, public relations team. Come on! Really – I can just pick up the phone and your going to tell me any of the prices I would like to know? If that is the case, why don’t you just publish your prices – both the retail as well as what you have agreed to pay to accept from health insurance companies. We all know that retail prices are IRRELEVANT, so only the contracted prices (as contained in EOBs actually matter). And because I seriously doubt organizations will provide contracted rates, I’m guessing we are left to aggregating EOB’s to get some real pricing information. And now, because of social collaboration tools, the information available in EOB’s has the very real potential to be aggregated and available to all.

    Be kind, save your neighbors some gas money, and REALLY make all this “petty” price gather efforts UNNECESSARY by posting your prices.

    A $100 gas card says you won’t do it . . .

    UPDATE: I received a call back from the Health First Public Relations person mentioned in the article. He was straightforward in informating me that this “Pay for EOB” concept was less about transparency and mostly about an anti-trust lawsuit that Wuesthoff and Health First are engaged in. Apparently, the pricing issues are an essential part of the lawsuit and instead of using typical legal discovery tools, Wuesthoff has appealed to the public to gather this information as well as pick up some additional publicity in the process. While this little wrinkle puts somewhat of a damper on the motivations behind doing this, the concept of increasing pricing transparency remains an important element in helping people obtain the best health care value.

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    Filed under Consumerism, Insurance, Irony, Transparency, Value