In the cellular industry there are carriers that can offer prices far below the main three carriers by avoiding overhead costs and just offering what you need. They may not offer meals or allow carry-on bags, but their prices are far lower than the competition and cost-conscious people flock to them. In the cellular industry there are carriers that can offer prices far below the name brands we all know by avoiding overhead costs and just offering what you need. Is there room in the healthcare system for a discount carrier to come in and offer good care at a cheap price? Can a carrier really offer you a substantially lower premium and still offer the benefits you want? Is the old mantra “you get what you pay for” true in healthcare? This article will explore these questions and guide you to a place where we must decide if cheap coverage can actually be good coverage.
When you go to a discount carrier with your travel and or cell phone coverage, what are you giving up? Often you are being limited or giving up:
- Flexibility (Choices / Changes)
- Luxury Items (Devices / Services)
- Customer Service (Individualized Experience)
If a healthcare carrier offered a product with limited flexibility, limited luxury items, and limited customer service would this be worth the cheaper price?
Limited flexibility with an airline means flight changes would not be possible, and making spur of the minute changes would be impossible or cost prohibitive. Limited flexibility with a cell phone carrier means you may not have as many choices as you would like, and would have to make compromises to make it work. When it comes to travel and cell phones, people are willing to give up flexibility if the price is right. In healthcare, as soon as choice is removed, members are not happy and feel like they are being controlled. Members quickly think they know what is best for themselves and want to be able to make those choices.
Limited luxury items with an airline may be the removal of meals or first-class seats, while the removal of luxury items from a cell phone carrier may be not allowing the enrollee to have the latest and greatest phones or services. In healthcare it appears most people believe they are always entitled to the best money can buy, and do not want to have to pay extra for it. A discount carrier in healthcare would not always be able to offer the fanciest items as they are oftentimes not the most effective for the patient. It may mean staying in an older hospital because its quality scores are better, even though their building my not look like a high-end hotel.
Both the airline and cell phone industry know when offering a super discounted option there are sacrifices that need to be made. Many times, the place you can see the cost cutting is in the level of customer service that is able to be offered. There is a level of administration that always needs to occur for a business to function, but there is also a perceived level of service that can be discounted. When you are looking for something cheap you go into that experience knowing you will often have to give up some customer service in order to get it. Many times, this may come in the form of giving up actual human interaction for a digital system, but it also may equate to the way you are treated due to the fee you have agreed to pay. Wait times may be much longer and or you may not even be able to talk to a real human being. If a healthcare company was able to offer a product with lower customer service, members would not feel cared for or appreciated. The value they would receive in the form of premiums would not be remembered when they have to deal with a system that is not easy to use. The cookie cutter approach to customer service would not work well as each member is dealing with much different situations and conditions.
The truth of the matter is discount carriers would not, and could not, work in the United States healthcare space. Americans put a high value on being able to make choices and place a high value on what they are entitled to. Many mis-informed members believe carriers big and small are creating narrow networks in order to start selling products that sound like a discount carrier option. This is not the truth as narrow networks often have been created to increase the average quality of the providers, while also removing much of the waste from the networks. Narrow networks often limit flexibility while helping members avoid the consumption of luxury items that are not needed. Members often feel like they are being controlled and blame it on the insurer having bad customer service and no longer caring about them. But these are not discount carrier products, in fact these are much the opposite. These are high quality, high efficiency networks that function at higher levels than the normal products.
“The low-cost carrier model as we see in airlines and cell phones will not work in healthcare.”
The low-cost carrier model as we see in airlines and cell phones will not work in healthcare. The only version of it that could work is where quality is the centerpiece of the product. A carrier would need to increase its quality of care while preserving enough flexibility, access, and customer service to keep the members engaged. The carrier would need to help the member understand that “member choice” is not always the best path to a good outcome. In other words, the closest we will get to a low-cost carrier model is a high-quality managed care plan. Managed Care plans are not cheap carriers offering only bargain products, but rather they are carriers deeply concerned with your health and attempt to manage your care to the best possible outcome. They are not skimping on the quality they offer, but rather are managing care in a fashion that lowers costs, increases quality, and increases member satisfaction.
Conversely, this would be like a major airline having flexible seating arrangements in all it planes that convert to the needs of the people on the flight. They would offer a meal when it is appropriate, and the times of the flights would also be flexible to account for the best time of the day to make the flights. In the end, the airline could maximize its efficiency while also giving the flyers what they need, but not necessarily always what they always want.
Lowering the cost of healthcare is a high priority for all involved the health space. But it is not going to be done by streamlining admin costs or some new way to communicate. Real change will occur by the managing of care in an evidence based, cost-effective manner. Lower costs work for getting people to buy an airplane ticket, or to sign up for a cell phone plan, but they do not always equate to the best healthcare outcomes. HDHPs have low premiums, but the out of pocket cost to the members quickly wipe away any perceived savings. We all need to place a high value on our healthcare and to realize cheaper is not always the best answer.
About the Author
Joshua W. Axene, FSA, FCA, MAAA, is a Partner and Consulting Actuary at Axene Health Partners, LLC and is based in AHP’s Temecula, CA office.