The Situation: The continued maturation of digital health’s cost, health outcomes, engagement potential, and distribution for primary care sets the stage for disrupting health insurance in the US.
Healthcare costs have increased at two to three times the inflation rate for a long time, based on the National Health Expenditure (NHE) published by the Center for Medicare and Medicaid Services (CMS) in December 2021. Yet, health outcomes are getting worse. According to CMS, 30% to 35% of Americans suffer from comorbidities like obesity, diabetes, or hypertension, and life expectancy declined one full calendar year between 2010 and 2020.
Health plans and providers are not paying attention to primary care as America’s demographics change and needs shift. They are entrenched in the legacy paradigms driven by fee-for-service (FFS), a commodity perspective that negatively impacts health outcomes. However, primary care driven by digital health could disrupt and correct the course of the triple aim objectives of cost, health outcomes, and experience of care. Digital-health-enabled primary care could make primary care affordable and empower clinicians to spend quality time with patients as the healers and guides they are meant to be, without administrative burdens.
Forget the family doc! Primary care options have grown exponentially
We can attribute the decline of primary care’s impact to two main reasons:
- the lack of personalization offered by primary care physicians (PCP), and
- the health plans’ administrative burden requires physicians to reduce their time with patients to do paperwork instead.
Consequently, patients may not get same-day appointments, doctors may spend less time with patients while abdicating more of their responsibilities to nurse practitioners, and costs of services rendered continue to increase without any improvement to health outcomes.
Primary care-focused digital health companies are changing the paradigm across delivery modalities (synchronous, asynchronous, video), and their efforts are increasing rapidly. Their digital-first approach designs service delivery and consumption to keep engagement in the center of the interaction. A key aspect is encouraging high levels of personalization, providing different same-day options for diagnosis and treatment, and pricing services affordably.
Health consumers have a long history of forgoing or postponing treatments due to costs. Many digital health companies like Alpha Medical, Forward, and Revive Healthcare address that issue head-on by setting prices that are easier to understand and more affordable. Many digital health primary care providers are subscription-based with monthly rates from $50 to $150 a month. They often include generic drugs, mental health, and anytime-access to care providers through online video, audio, or other asynchronous channels like text or SMS services. These monthly costs are typically lower than the average monthly cell phone bill, making primary care truly affordable.
Get more for less—a novel concept in healthcare!
According to Kaiser Family Foundation, the average health insurance benchmark premium (silver plan) on the US exchange marketplace is $438 per month in 2022; the average deductible is $1,945. This average individual would need to shell out $7,201 (see Exhibit 1) without financial assistance from the government or their employers!
Similarly, for a family of four, the average annual bill in 2022 would be approximately $14,500, with an average annual deductible of $8,400. This family is on the hook for nearly $23,000 before health insurance triggers.
Exhibit 1: Comparing insurance pricing vs. subscription pricing for primary care
Source: Kaiser Family Foundation, Government Employees Health Association (GEHA), HFS Research, 2022
However, if consumers choose the combination of subscription-based primary care and a high deductible health plan (HDHP), it could translate into a savings of about $3,000, or 40% lower than the benchmark plan for an individual. These are material savings that can give individuals more time with their doctors.
Yes, consumers will still need insurance, but only for the nasty stuff
Typical health insurance for individuals or families provides primary and acute care (hospitalization, surgery) coverage and medication. The benchmark silver plan has an actuarial value of 70%; individuals must cover 30% of every dollar of their healthcare expense. So, consumers using their health insurance for primary care only would be spending approximately $2,100, about double the subscription-based primary care offering.
Acute care and catastrophic care are expensive and will still require insurance; however, Center for Disease Control and Prevention (CDC) data shows us that hospital bed occupancy has stabilized despite an increase in the US population (see Exhibit 2). This is a strong indication that the quality of therapies and primary care is helping reduce in-patient or acute care needs or that people are living with these conditions as they can’t get help. However, with Medicaid expansion, there are options for everyone that cannot afford healthcare.
Exhibit 2: Hospital beds and occupancy rates have stabilized despite US population growth
Data: CDC, AHA, US Census
Source: HFS Research, 2022
The Bottom Line: Offering primary care options for consumers at a price lower than a mobile phone bill will likely drive better health outcomes. Combined with a high deductible health plan, these digital-first offerings could reduce an individual’s monthly healthcare costs by about 40%.
Americans are at an inflection point where doctors can start visiting patients at home—virtually, that is—and spend quality time addressing health and healthcare needs. Digital health companies focusing on primary care are well-positioned for this; however, they must improve their market presence and aid consumers in their healthcare-related financial decisions. Digital health companies that can facilitate that will be creating a whole new market they can rule.
While bundling primary care digital health and health insurance for acute care is a realistic option for better health outcomes and lower costs, consumers will need help. According to the CDC, nearly nine out of 10 adults struggle to understand and use personal and public health information, suggesting a dismal health-literacy level. Digital health will likely continue to struggle to overcome this barrier.