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Consumer Revolution in Healthcare Coverage July 2013

Overview The US has the largest healthcare spending in the world. On average, an American spends c. 55% of his/her healthcare expenditure on health insurance, followed by c.25% on medical services and the remaining c.20% on drugs and medical supplies.1 As health insurance is one of the major spend avenues for consumers’ healthcare expenditure, efforts need to be made to identify loopholes and take action to contain healthcare coverage cost.

Factors Responsible for the Rising Cost of Healthcare in the US (% citing factor as “Completely Responsible” or “Very Responsible”) Insurance companies


Pharmaceutical & drug companies


People's failure to take responsibility for their health


Cost of malpractice insurance


The government




Advances in technology/treatment


Aging population Physicians

39% 30%

Source: Consumer Attitudes toward Family / Primary Care Physicians and the U.S. Healthcare System

As seen in the graph above, most consumers are citing insurance companies as a major reason for the rising healthcare costs, followed by pharmaceutical companies. In another study conducted by the Physicians Foundation, physicians are at the top when it comes to satisfy patient needs. In the same study, 55% of the respondents consider insurance companies to have a negative influence on the quality of patient care. 1

U.S. Census

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Consumer revolution in healthcare coverage – Empowering the consumers The key stakeholders including members (policyholders), providers, insurers, employers and government agencies are affected due to rising healthcare costs and uninsured population. However, consumers need to pay for all these rising costs in healthcare; either in the form of taxes, premiums or by paying directly from their pocket. Consumer-Driven Health Care (CDHC) is one attempt at reducing the cost burden on consumers by focusing on greater involvement from other members in their healthcare decisions. In a typical CDHC product, the Plan is funded by the members (and employers) and administered by the payer. The members reserve funds to pay for their own deductibles, co-pay and other out-of-pocket expenses. In return, they save taxes on this amount and receive interests. Other benefits from the payer include free preventive services and other health care services that are not covered in standard Health Plans. Most of the products in CDHC are attached with high deductible health care plan in general. Case in view The government of Indiana began offering its CDHC plans with health savings accounts in 2006. It is estimated to have enrolled c.90% of the state workforce into the program. The enrollees are estimated to have saved $7-8 million in 2010. According to the report (Consumer Driven Health Care: A New Agenda for Cost Control in Massachusetts), CDHCs can result in as much as 28% lower premium contributions from patients. CDHCs can also reduce premium contributions by as much as 20% in the first year for the employers.

This environment of rising costs pressure and drive towards making healthcare more affordable has also given rise to some of the following trends:2 1. The market is forcing insurers to design products for consumers and not employers – The employersponsored market is shrinking, and a growing percentage of people will be buying insurance directly 2

Fast Company: 4 Consumer-Focused Revolutions That Will Change Health Care

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2. Consumers are finding fresh ways to access healthcare providers outside of the established channels – Shortage of physicians are forcing alternative ways of care giving: •

Pharmacists can be reimbursed for counseling about diabetics

Consumers can visit Sharecare and Healthtap for getting their medical questions answered by a qualified professional

3. Cost sensitivity suggests consumers will opt for what is required rather than choosing what medical solutions are available – Healthcare management companies like Castlight and CakeHealth can provide the right information at the right time to help customers check on cost of healthcare 4. Use of technology has brought healthcare help within arm’s-reach of customers – Crohnology is an information-sharing platform for people with the inflammatory bowel condition. CareSpeak Communications uses simple mobile technology to encourage better compliance: a two-way textmessaging platform that sends reminders to patients and people who assist in their care

Market trends will force health insurers to develop products that consumers really want. New technologies and changing regulations have made access to clinical resources within customers’ arm’sreach, outside of established channels. A self-service model in healthcare is an important area for future market development. Processes and technologies supporting the healthcare system to provide solutions at the right time and place will further help contain the high cost of healthcare.

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