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Individual Health Insurance Markets That Work, Part Two

 |  By jfellows@healthleadersmedia.com  
   November 20, 2013

Fresh from an overseas trip focusing on health insurance markets and consumer empowerment, the chief marketing officer of a Massachusetts payer observes that in Australia, consumers are trained in healthcare financial literacy.



Debbie Gordon, Chief Marketing Officer, Network Health

Deborah Gordon, vice president of business development and chief marketing officer for Medford, MA-based Network Health, fast tracked her plans for a retail strategy after an eye-opening trip to Australia, New Zealand, and Singapore. Network Health's first retail space opened this week in Worcester, MA, and Gordon says the company will soon have a presence in some CVS pharmacy locations.

Gordon studied consumer empowerment in healthcare in other countries as one of nine 2013 U.S. Eisenhower Fellows. In part two of our discussion, Gordon told me that consumers in both Australia and Singapore have more control over their healthcare spending than Americans currently do, and with the ramping up of health insurance exchanges, U.S. insurers need to start planning for a similar trend. Part I of our conversation is here.

HLM: Singapore was where you thought you would find examples of consumerism, but it sounds like you learned a lot more about retail healthcare in Australia.

Gordon: There's much more of a private insurance market in Australia. The other thing is that Australia has years of pricing individual products. Because they have more history, they have more assurance that the population buying insurance will look like a balanced risk pool.

As an industry, we haven't been particularly focused on pricing the individual market, and the rules are changing with community ratings. I think carriers are rightly anxious about who is going to start shopping, the risk profile, and will we lose our shirts or make money. [Also] what' the appropriate balance of pricing a product attractively to draw customers without being so low that we lose money and it's not sustainable?

One of the key challenges on the exchanges will be pricing. It's a different set of circumstances in Australia, but we may want to look over there for what they have learned about the methodology and approach to pricing products for individuals. We'll have to work it out through trial and error here.

HLM: How does Australia approach pricing in a consumer-driven healthcare market?

Gordon: A leading consumer advocacy organization in Australia surveyed their consumers, and found that people were really surprised when they got a bill for certain services. As a result, they worked on implementing a framework called "informed financial consent."

In the U.S., we are familiar with informed consent. They have that, too. But, in Australia, it's almost like when you take your car to the mechanic; the mechanic gives you an estimate.

One of the things we think in healthcare is that it's too hard to predict the cost. You don't know until you get in there what procedures are going to be needed. I would say that it's just like your car. They don't really know until they get under the hood what things they're going to need to fix, but they can at least give you an estimate.

So, in Australia, when patients go to the hospital, they [are given] an estimate of what the bill might be at the end, and it is signed just like informed consent. When we talk about consumer empowerment, to me this is a great example. You could do this on a small scale or a big scale, but the idea is right.

They also involve the Australian Medical Association, and put out communication for consumers, such as checklists for what a patient might ask the doctor or the insurance company. They're training consumers as patients in healthcare financial literacy.

In the U.S. we have been somewhat reluctant to engage in [that] until relatively recently. Now that so many more Americans are in high deductible plans or paying out of pocket before insurance kicks in, we need to catch up with some basic framework [for] how to talk about it. You don't buy a car or a house without asking questions. That was one example that I thought we could learn from, and that it tactical and tangible for our industry.

HLM: Some organizations are pushing that idea through revenue cycle strategies. What is the resistance?

Gordon: For a thousand reasons, it's hard. It's hard to estimate cost. The prices differ depending on the deal the provider has with insurance company.

If consumers start to push, if health plans and providers start to encourage that push and prepare to respond, we will figure it out. We'll only figure out the hard things if we have to. We've got a lot of challenges, but we may not willingly take on the next big challenge without a push or a without a model that shows it can be effective.

In the U.S., I think we're going to have a push from consumers who are financially exposed and want to shop. What I'm saying is we could borrow some tools from Australia, and that's the value of a trip like this.

HLM: Did Australian officials indicate that other health plan executives from the U.S. were also interested in some of the components of a foreign healthcare system for potential adoption in the U.S.?

No. What I heard was the complete opposite. Australia is very far away. I know that sounds very basic, but it is far, and that could be a barrier. Practically speaking, we've got our hands full in the U.S. There are plenty of working examples. In Australia they do not, so they have to look inward. But, by not looking overseas we miss opportunities to broaden our thinking

HLM: Was the retail component of healthcare in Singapore similar to Australia's?

Gordon: No. It was quite different. In Singapore, there is not a very mature health insurance system. Their system is a layered and thoughtful, sort of a complex mix of government and private sector interplay. What I didn't see is a really robust private insurance market.

The most compelling thing about Singapore was that they mandate health savings. It's called the Central Providence Fund, and they save for retirement, generically, and for healthcare. We, in the U.S., pay into Social Security and Medicare, but those funds we pay are pooled, so a 20-something American is not paying for himself, he is paying for his mother or his grandmother, so to speak.

In Singapore, all wage earners pay a portion of their income into their health savings account, which is called Medisave, and those accounts are like our 401k accounts. They (Medisave accounts) are individual assets, and there are rules about when you can use them, for what, how much you can use, and how much you can take out. So people are in command of their own healthcare dollars.

Singapore also only spends about 4% of their GDP on healthcare, and of that only one-and-a-half percent comes from the government. The balance comes from out-of-pocket spending and their Medisave accounts.

What you have is a predominantly privately-funded, high-performing healthcare system where people essentially buy their own services. The government sets limits on what Medisave will pay for, but the doctor can charge whatever he or she wants, and the consumer can decide what to buy. The government does not set prices. They'll determine what you can use Medisave for, but if you want to go to a certain doctor, that's fine, you'll just pay the balance out-of-pocket, or you can use private insurance.

While I didn't see the physical manifestation of healthcare retail, what I did see was a very important feature of retail healthcare, which is consumer control over spending.

Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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