The $1.29 trillion US health insurance market is feeling the strain from soaring healthcare expenses, perpetual policy shifts, and stubborn access gaps. Insurers are struggling to keep their heads above water, and so are the patients, healthcare providers, and employers that support the system. The crushing truth is that, in the bleak context of American family economics, premiums for family coverage have skyrocketed by 22% since 2018 and are expected to reach almost $24,000 a year in 2023.
The human cost of this strain is demonstrated in the story of Amanda King, a dental hygienist with stage-4 breast cancer who was profiled by The Wall Street Journal. Even with insurance, she was burdened by overwhelming medical debt, a situation far too common and an effortless indictment of a system that many deem shattered. A more effective approach is necessary and that is what is driving innovation. InsurTech startups, established carriers, and policy leaders focus on applying technology to ease friction, contain spiraling costs, and improve access to quality care. Something we are witnessing in this previously stagnant industry is a surge towards what could be extremely transformative change.
Dynamic Benefit Plans: A Focus on Value and Transparency
Dynamic benefit plans, which focus on value and price transparency, are a new area of innovation. UnitedHealthcare now offers Surest, a product that exemplifies this shift, as it moves away from traditional networks that relied on co-pays. Surest enables consumers to select preferred healthcare providers based on their price and quality of services, rather than being confined to arbitrary in-network restrictions. Results so far have been very encouraging.
An AON study found that employers who adopted Surest reported, on average, a 10% reduction in their health insurance expenses. This model has the potential not only to mitigate the ever-increasing healthcare costs but also to offer consumers more flexibility as well as a better understanding of the value they are receiving. These dynamic benefit plans are gaining rapid traction, specifically in the commercial insurance sector, as highlighted by Brad Otto, and are expected to become the predominant choice for employer-sponsored coverage within the next few years.
Reinsurance Revolution: A Safety Net Streamlined with Technology
Reinsurance, which is the process by which insurers cede a portion of their risk to other companies, serves as a critical financial safety net, especially when dealing with catastrophic claims. This slower-paced industry is now undergoing its own surge of innovation in the form of precision underwriting and sophisticated analytics. These innovations enable more accurate risk assessment and cost reduction via predictive modeling. Startups are enabling this disruption by applying these technologies to create tailored reinsurance solutions. This, in effect, enhances the resiliency of the healthcare system against the rising financial strain and complexities of claims.
Health Reimbursement Arrangements: Empowering Employers and Employees
The development of InsurTech innovations, particularly the ICHRAs adoption, changes the business landscape tremendously. These health arrangements, made possible by bipartisan policy innovations, allow employers to offer health reimbursement accounts to individual employees or tax-advantaged reimbursements for individual health insurance premiums and other eligible medical expenses. Unlike the traditional ‘group’ health plans preferred and used by many large and medium-sized employers, these permit greater flexibility in plan selection by the employees as well as providing a predictable healthcare cost to the employer.
For instance, Gallagher Home Health Services recently adopted the ICHRA model with the help of Take Command Health. This was done for cost control purposes and to enhance the personalization of plan designs available to employees. Analysts predict that ICHRAs will dominate the sponsored benefit market in the next decade, profoundly impacting the health insurance industry.
A Future Restyled by Technology.
The anticipated innovations in InsurTech are accompanied by the opportunity of addressing some of the most challenging aspects of the U.S. healthcare system. With value- and transparency-driven dynamic benefit plans, reinsurance 2.0, and the enabling flexibility of ICHRAs, these alterations bring hope for a recuperated, patient-centered, more equitable, and more affordable U.S. healthcare system. For those in the field, there comes an unmistakable narrative: the solutions are here, they are dual-accelerated by need and potential impact, and the time is now.
