Time for Change: Three Forces Reshaping Health Insurance
A commonly held belief about starting companies is that if you have a good idea, a great team, and don’t make any big execution mistakes, you will be successful.
Few things, in my mind, could be further from the truth.
A key ingredient – a necessary condition if not a sufficient one – is timing. There are numerous examples of companies failing because they were ahead of their time, only to be reincarnated in a different form a decade or two later. In the 1990s, General Motors (in)famously built and then killed the EV1, the first commercial electric car; two decades later, Tesla is one of the hottest companies in the country making electric cars. Webvan spent hundreds of millions of dollars of investors’ money trying to commercialize home-delivery of groceries before going bankrupt in 2001. Today, companies like Instacart, HelloFresh, JustEat and others are thriving, and fighting what Techcruch calls “The Billion Dollar Food Delivery Wars” [1]. The list can go on.
With the benefit of hindsight, I believe a big reason why original ideas sometimes fail only to have similar ideas succeed later has to do with the concept of “necessary precursors” – conditions that a market and ecosystem must have satisfied before a new entrant can have a shot at success. For instance, when GM launched the EV1 in the late 90s, gas prices were about half of what they are today (inflation adjusted) [2], the EPA regulations on emissions were a lot more lax than today, and celebrities were still driving Ferraris and Lamborghinis (not EV1s). When Webvan was trying to figure out the delivery business, logistics networks were not as sophisticated as they are today, and consumers didn’t have smartphones in their pockets.
The ecosystem that these companies entered simply wasn’t ready for them.
Three of the most important precursors in my observation are technology, regulations and what I’ll call “consumer readiness” – the predisposition of the consumer to accept and embrace the new product or service. In order for the new entrant to be really successful, all three of these precursors must be satisfied. In the examples above, GM had the right technology, but the regulatory environment was not ideal, and consumers were not environmentally conscious enough to demand an alternative to fossil fuels in their cars. Webvan had the consumer demand necessary for its success, but the technology wasn’t where it needed to be for the company to be successful. The current incarnations of these companies are in a much more favorable environment, and are correspondingly enjoying much greater success.
You may be wondering, what does this have to do with health insurance?
We started Gravie with a simple yet strong conviction – that when people are free to make their own choices with their own money, they make better decisions and are happier with their choices than when someone else makes those decisions on their behalf.
We believe the time is right for this principle to be applied to the field of healthcare, specifically health insurance. In the Gravie model, instead of having traditional group insurance, employers give their employees money through our platform, allowing them to buy a customized plan from our benefits marketplace that meets their unique needs. No more one-size-fits-all group plans that play to the average. And happier employees. It’s an idea whose time has come, largely because of the convergence of the three things discussed above – consumer readiness, technological advancements, and regulatory changes.
Today’s Health Benefits Reality
Over the past several years, as the costs consumers have had to pay out of pocket for their healthcare have risen, they have started demanding access to more information. They are interested in the cost and quality of doctors. They have put pressure on insurance companies to be more transparent with their billing. When given the opportunity – such as in the individual market – they have shown the ability and the willingness to make smart choices. In fact, consumers who purchased plans in the individual market are more satisfied with their health insurance than those who have plans in the group market [3]. Consumers are more ready than ever to take on an active role in their healthcare.
Similarly, decision-making tools and technology have also rapidly improved. A couple decades ago, health plan enrollment was largely done through paper forms, by relatively unsophisticated insurance brokers. It was a costly, inefficient and frustrating process. Today, advanced recommendation engines can assess the consumer’s financial situation, their healthcare needs, their appetite for risk, and serve-up the plans they should consider, out of the dozens (sometime hundreds) that are available. If the consumer prefers to deal with a human, technology can also equip advisors with the appropriate information, and enable them to provide the best possible customer service. The advancements in technology have created a safety net of sorts for the consumer – by making relevant information available and consumable, the chance of bad choices is minimized.
Finally, regulatory changes have made the individual market more feasible for consumers. Today we have something called “guaranteed issue” – insurance-speak for the fact that no one can get denied insurance or get charged more for it simply because of their health history. Everybody is guaranteed to get insurance, at prices that have nothing to do with their health. Though it may seem unthinkable today, only a few years ago, millions of people in this country could not get insurance on their own because they were ill or were ill in the past. Thankfully, this has changed. And no proposal – Republican, Democratic, Green Party, whatever – wishes to take us back to the days of preventing millions of people from getting healthcare because of their health history.
Over the past several decades, employers have primarily played the role of decision maker when it came to their employees’ healthcare. As a result, hundreds of billions of dollars are being spent annually on the consumers’ behalf for health insurance that they are are deeply unhappy with. As Money magazine points out, satisfaction with health insurance has reached a ten year low (with employer-provided insurance the lowest), below that of airlines, and tying with the US Postal Service and land line telephones [4].
The time has come for change. The time has come for employers to stop being administrators and decision-makers of their employees’ healthcare. The time has come to give consumers the freedom of choice.
As Victor Hugo once remarked, “You can resist an invading army; you cannot resist an idea whose time has come.”
The time for Gravie has come.
– Abir Sen, Gravie CEO & co-founder
[1] Techcrunch.com, July 11, 2015 [2] inflationdata.com [3] 2015 American Customer Satisfaction Index (ACSI) [4] http://time.com/money/4116325/health-insurance-obamacare-satisfaction/