We may have different views on the Affordable Care Act (ACA), its desired effects and practical realities, but one thing is clear: The ACA has triggered massive market disruption and created a treasure of new businesses and business opportunities. Established players are shifting their strategies toward a future where money and customers flow in new ways. By no means have we reached a panacea of solutions that actually work (or even help lower costs…yet) but the path to change for the better is afoot. Many companies will not survive. Some will and they will be transformative. Here are some categories that have been created and/or benefitted from the ACA:
The public insurance exchange is complicated. Health plans have little control over the health risk of people that purchase their insurance in the online marketplaces (e.g. www.healthcare.gov). The government has agreed that if a health plan assumes risk that is greater than some market average then the government will facilitate payment for that additional risk through a vehicle called risk adjustment (low risk health plans pay money to higher risk health plans). Risk coding is the act of a physician properly diagnosing a patient and the insurance company submitting that coding to the government to get paid more for that risk. If an individual with assumed risk (e.g. a diabetic) is not coded then the insurance plan doesn’t get paid but they still incur the costs of providing expensive care. Companies like Arrohealth
are making a big impact in this market by providing coding services for health plans. They actually will go to physician practices, look at their charts and make sure they are coded correctly. There is big money in risk coding. In fact, it is the result of poor risk coding that has many health plans licking their wounds in the Exchange.
We all know it’s important to create a culture of prevention and hundreds of companies have jumped in to serve this market. Why? Well, employers are spending more money (estimated at $6 billion/year) on employee wellness to control costs, build culture and improve productivity. Additionally, the ACA created more incentive for companies to offer premium differentials (up to 30%) for participating in a wellness program. There are a lot of rules (and conflicting rules) around HIPAA and the ADA but the market is big. Companies like Limeade
, and Virgin Pulse
, are taking the higher end of the self-insured market. Many of these companies are positioning themselves as the “platform” where they integrate other app content and manage a broader suite of services like benefits, reporting, analytics, and incentives.
The launching of the individual public exchanges created a tectonic shift with the prospect that many small employers will send their employees to the exchange to source benefits in a 401K style contribution fashion. When this happens at scale, the broker community that sells insurance to these groups will need to find a new purpose. So brokers are working to become more relevant to their customers. Companies like Maxwell Health
have built a benefits management platform that brokers can offer their customers. Zenefits
is completely disrupting the small group market by giving away their human resource management platform and making money as an online broker when companies buy insurance through them. Gravie
is helping employees that are moving to the individual market figure out how to have a better shopping experience. Speaking of better shopping experience, there are exchange companies like Array Health
that are developing the shopping platforms and big consultancies like AON Hewitt
are launching their own individual private exchanges. The world is moving the individual marketplace and companies are positioning for that growth.
Consumer Tools and Services
The ACA is a catalyst for the growth in Consumer Directed Health Plans (CDHP’s). CDHP’s are high deductible health plans which means that consumers bear a significant out of pocket obligation before their insurance kicks in. It is estimated that by 2017 a majority of employers will be offering CDHP’s and it is an example of how risk is being transferred to the individual. As the consumer bears more out of pocket expense, market forces take over which means that consumers want to know how they can reduce that expense and employers want to make sure they aren’t just passing along costs without the ability to offset. It is a reason that devices like Fitbit
, fitness applications like EveryMove
, telehealth companies like Teladoc
, and price transparency tools like Healthcare Bluebook
are taking off. In other words, consumers have access to an increasing number of services that will help them better manage their health (and the costs of the services they incur) because there is real financial risk if they don’t.
Population Health Management
Speaking of transferring risk, providers are being asked to take more responsibility for the health outcomes of their patients. Health plans are partnering with providers to deliver tools and innovative reimbursement strategies that are tied to managing a patient’s health rather than just billing for a visit (known as fee for service). In order to better manage risk, providers need more insight into which patients are at risk. Population health software companies have landed on the market in a big way. Companies like ZeOmega
, and Amplify Health
have all found a way to wedge in with their analytics capabilities. As they say, you can’t improve what you don’t measure and population health is helping to measure along the guidelines that health plans are subscribing to, such as HEDIS and Medicare Stars rating systems.
By no means is this an exhaustive summary. Check out companies like Rock Health
and StartUp Health
that have been formed to cultivate many of these innovative ideas through funding, mentorship, and collaboration. While many new entrants might look at a healthcare start-up opportunity as a “no brainer”, it is critical to get very specific on the problem that you are solving, how you are going to reach your target customer and finally, who is going to pay you for it. Now get after it!