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14 11 2017

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Health Care Sharing: Hacking Insurance?

20 09 2017

Employer based health insurance is a curious fixture of the US health system. With approximately 56% of Americans covered under some type of insurance through their employer, we’ve come to accept this system as a given for most of us. Private payers control 33 percent of all the expenditures for healthcare, which translates (very roughly) into controlling six percent of the entire economy. Health insurance is a relatively new invention, beginning in 1929 as a means of managing the costs of an extended hospital stay. It became a fixture of employment during World War II. It has evolved into a massive industry with an outsized impact on the fortunes of Americans as it is a significant part of the total compensation package for employees.


The annual premium for family coverage in employer sponsored plans rose an average of three percent to $18,764 this year. While this is relatively modest growth compared to some of the increases we’ve seen from the Obamacare exchanges, these increases still outpace inflation and workers’ wage growth and premium increases are much higher for smaller businesses. And similarly, while there are many drivers of cost in the healthcare system, the administrative overhead to simply manage the commercial insurance system accounts for a significant percentage of every dollar paid in premiums. Regulations in the Affordable Care Act (ACA) set the Medical Loss Ratio (MLR) for commercial health insurers at 15% of premiums (for large group policies), mandating that 85 cents from every dollar must be paid for patient care. Similarly, the average physician’s office has a ratio of one to three administrative staffers to every full-time physician. Quite simply, a huge amount of overhead is devoted to the business of insurance: claims authorization, submissions, reimbursement, collecting from patients, etc.

As one thinks about “hacking healthcare,” hacking the traditional insurance model is clearly a possible point of leverage. Health Care Sharing Ministries may not be for everyone, but they exemplify a novel and community-driven approach to managing the cost of care. Health Care Sharing Ministries, or HCSMs, began with faith-based communities and were a means for like minded people to pool funds together to share in the cost of healthcare. In many ways they are the descendants of the “mutual aid” societies that flourished during the early 20th century. In keeping with their roots as ministries, most of these organizations require some statement of faith (typically Christian), adherence to principles of individual responsibility for one’s health and charity towards others. Most have a closed membership, like Mennonite/Old German Baptist communities, but some are open to the broader, and in some cases, the secular public.The trade organization representing some of the largest ministries reports that almost 1,000,000 people in the US are covered under some type of HCSM.


It is important to be clear that these arrangements are not presented as health insurance even though they have a similar financial structure. HCSM organizations are not overseen by state governments, so typical insurance regulations about funding reserves, reinsurance, etc. are not applicable to them, although in order to be recognized as an HCSM by Health and Human Services under the ACA, these organizations must be regularly audited by a CPA for solvency as well as other specific requirements. Members in these types of faith-based organizations that meet the requirements would be exempt from the Affordable Care Act mandate to maintain traditional individual health insurance.


Photo by Nina Strehl on Unsplash

HCSMs typically operate by having members identify as “self-pay” at the provider of their choice. Once the service or treatment is rendered, the provider bills the member directly as though they were uninsured. The member then submits the bill to the HCSM organization that will review the bill to see if it is within their “shareable” coverage. If it is, the HCSM organization will advocate on behalf of the member to negotiate the most favorable rate for the service and then pays the member directly, who then would reimburse the provider. Typically, there is some “personal responsibility,” or what we might call a deductible in health insurance language, for the incurred charges but then the HCSM would pay for the balance. Each ministry’s rules are slightly different with some items covered and others not, but the coverage can look very much like insurance and typically have significantly lower monthly costs.

“The night before my surgery, the lady who’d helped me locate the right providers and everything called me back and said, ‘Would it be OK if I prayed with you for your surgery tomorrow?'”

-Medi-Share patient, quoted on NPR

By pooling like minded individuals together to manage healthcare costs, HCSMs can attract a generally healthy selection of the population and by engaging members more directly in the discussions about the cost of treatment may be making them better consumers as well. Some ministries encourage mutual support and even prayer for members suffering from illness. This kind of community involvement may not appear to have measurable clinical impact, but it’s really not all that different from wellness programs that try to affect population health. A key element of the HCSM arrangement is the negotiation of rates with the provider. A ministry that pays every provider at “retail” uninsured rates (which can often be astronomically high compared to the negotiated rates of a public or private payer) is going to struggle with member costs and solvency. Policies and coverage vary greatly among HCSMs, so consumers should choose carefully. There have also been HCSM failures and missteps with members, but overall HCSMs generally have high rates of member satisfaction.

Want to go deeper on this issue? Contact me for a white paper on this concept that also includes:

  • How elements of Health Care Sharing Ministries could be leveraged in other alternative coverage arrangements and what those models could look like
  • In alternative models, what considerations need to be addressed for managing growth and member engagement?
  • Operational strategies for cost management
  • Management of social determinants of health for better outcomes

Value Based Payments 101 – Bundled Payments

17 05 2013



Value Based Payment 101: Bundled Payments

In order to dive into value based payments, we need to first understand how health care is commonly paid for today and why many believe this needs to change to improve health care.  Today, most health care is paid for by private health insurance, public health insurance (Medicare/Medicaid) or by the individual, out of pocket as fee for service, essentially paying on a per procedure basis.  If you go to your doctor for a simple issue like a sore throat, there’s a line item for the office visit and exam, a line for the procedure to swab your throat, the lab fee for someone to look at the swabbing and if necessary, the prescription that needs to get filled to cure your sore throat.

This happens in a exponentially more complex fashion if you go to the doctor and she determines for example,  that you have an issue with your heart and refers you to a cardiologist, who then recommends a surgical procedure at your local hospital.  Every item is billed to someone on a line by line basis.  It’s this complexity that was the subject of the recent Time article. But to take this further, let’s say you have to be readmitted to the hospital a week after being discharged and you spend 5 extra days in the hospital, requiring treatment by new specialists as well as your cardiologist.  Who pays?  Today, the payer has to cover the costs of what was a potentially avoidable readmission.  To be fair, people are readmitted to hospitals regularly for reasons that are not anyone’s fault, but the causes of many readmissions are preventable and the costs are real.  For example, 20% of all Medicare patients are readmitted to the hospital within 30 days of discharge at a cost of $18 billion a year, not to mention the risks and impact of any hospital admission on the patient and their family.

So, how do you get this to change?  Well there are carrots and sticks.  First, the stick.  One example is that the Center for Medicare/Medicaid Services or CMS, has started a Readmissions Reduction program that was conceived as part of the health care reform legislation.  In this program, officials are reviewing the number of heart attack, heart failure and pneumonia patients who return to the hospital within 30 days of discharge. Hospitals with more readmissions than Medicare expected given their mix of patients are penalized by losing up to 1 percent of their regular payments, with penalties going up in coming years. Over 2,000 hospitals are currently expected to be impacted by reduced rates.  You can see the latest list of hospitals and their readmission rates here.  Readmission rates are coming down already, some say in direct response to the program.

Another approach to improving quality and efficiency is through “bundled payments” that are meant to encourage cooperation between all members of the medical team.  As per my example, for a hip replacement Medicare typically pays a fee to the anesthesiologist, the surgeon, the nurses, radiologists, the hospital, suppliers etc.  Under bundled payments, one sum is paid for the entire procedure based on historical data.  The goal of bundling payments is to create an incentive for all those groups to work together and find efficiencies including negotiating rates with suppliers that allow the surgery to cost less than the bundled amount and share the savings as a profit to be shared among the team members.  That’s the carrot.

The main problems with bundled payments are that some diseases like diabetes are hard to lump into episodes that lend themselves to bundled approaches.  However, many procedures and illnesses can be, like cardiac procedures and hip replacements.  So, while it may not be immediately feasible for all illnesses, it certainly can be for some.  Another issue is that there are not many providers that are willing to accept this level of risk.  This is changing as the successes that are being seen in gain more visibility.  Finally, a third reason for not doing bundled payments is the lack of software that accommodates this type of billing.  Virtually all health care billing software is designed to handle traditional fee for service approaches today, but that is a function of the fact that almost all billing is fee for service today.  The market will most certainly meet this need if and when it is necessary.

More Reading

Taking value even further when looking at new technologies and drugs.

Lessons from Medicare’s Demonstration Projects on Value-Based Payment (Congressional Budget Office)

The Primer Series

16 05 2013


In my experience, health care can be a jargon rich environment that can isolate outsiders through the use of terminology and language which does not always readily lend itself to open inspection.  To be fair, health care is the epitome of complex subject matter with people’s lives at stake, so oversimplification can be dangerous.  Acknowledging that, I still do have to point out that many of the principles of how health care is delivered and paid for are like any other defined process: there are inputs, in this case, people with a variety of health needs from the minimal to the acute and there are activities that hopefully add value, i.e., the absence of illness that lets people live the lives they deserve, and all those who add value (doctors, hospitals, manufacturers) should benefit.

In the spirit of helping the lay reader understand some of this, I will be taking a selected industry trend and hopefully making it less opaque.  Some of my peers may find this rudimentary and tedious; on the other hand, some may be secretly relieved to find a simple explanation for a concept which it is sometimes assumed everyone knows already.  Plus, it helps me distill my reading and interest into a less amorphous whole. So, with that out of the way, I give you the first in a series of primers in health care with an explanation of value based payment, starting with bundled payments.  Look for it tomorrow.

Dispatches from the Field – January 2, 2008

2 01 2008

Hospitals Slow in Heart Cases, Research Finds

In nearly a third of cases of sudden cardiac arrest in the hospital, the staff takes too long to respond, increasing the risk of brain damage and death, a new study finds.

Researchers estimate that the delays contribute to thousands of deaths a year in the United States.

Fewer Small Firms Offer Health Insurance

Fewer small employers offered health insurance this year, despite the widespread availability of new, lower-cost high-deductible insurance plans, a survey released today by benefit firm Mercer shows.

Advocates of the high-deductible plans touted them as one solution to the growing number of uninsured, expecting the plans to appeal to small employers, who would continue to offer health insurance as a result.

“That’s not happening,” says Blaine Bos, a Mercer partner and one of the study authors. “In fact, the reverse is happening.”


Students Face Health Issues Without Insurance After College

Patrick Rastelli ’08 had hoped to take a year off after graduating from Brown this spring. But after some thought, Rastelli decided to travel last summer instead, and when he graduates, he wants to get a job as quickly as possible. He’s not seeking prestige or money, but rather something most college students take for granted: health insurance.

Report Links Higher Rates of Uninsured and Suicide

The higher the percentage of residents in a state who say they can’t afford health care, the greater the prevalence of serious depression and the higher the suicide rate in that state, suggests a report released to USA TODAY.

Who Is Involved in the IT Selection Process at Your Health Care Facility?

4 12 2007

Forty-two percent of nurses spend four or more hours a day using IT, but just 15% of staff nurses and 27% of nurse managers are involved in the IT selection process at their facilities, according to a survey of nurses by CDW Healthcare.

Survey results

Results are based on a July 2007 online survey of 1,028 nurses from a variety of health care settings.

 For complete story, click here.

Dispatches from the Field – November 21, 2007

21 11 2007

Interest in Wellness Programs Grows: Survey

More employers are providing financial incentives designed to drive employee participation in wellness efforts, a survey shows.

Employers Shift Focus to Prevent Obesity

The seven most common chronic diseases — six of which can be caused or worsened by obesity — are costing employers $1.1 trillion in lost productivity, a recent study says.

Program Quantifies Costs of Chronic Conditions

It’s no secret that chronic medical problems, such as high blood pressure and low back pain, can mean time off the job. What’s hard to quantify, is how much that absenteeism can cost a company. Until now.^1544416

Consultant: Prepare for PHRs

Patients will demand personal health records, so health care organizations should be preparing technology and privacy models now, a consultant specializing in emerging technologies says.

Drugstore Clinics Spread, and Scrutiny Grows

“We’ve got big problems in health care, and this is not the answer,” said Dr. Rick Kellerman, president of the American Academy of Family Physicians. “They are a response, they are a niche market and an economic opportunity, but we still have an underlying primary care crisis in this country.”

Patients, however, have flocked to the clinics, according to a new industry group, the Convenient Care Association.