David E. Williams: This is David Williams, president of the Health Business Group. I’m speaking today with Joe Donlan. He is president and co-founder of ConnectedHealth. Joe, thanks for joining me.
Joe Donlan: Glad to be here. Thanks, David.
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Williams: Joe, what is ConnectedHealth? What’s the idea behind it?
Donlan: ConnectedHealth is a private health insurance exchange. We’re focused on helping employers grow their business by offering a compelling and competitive benefits package to help acquire and retain key talent. The idea is that by offering this type of defined contribution solution, we can get employees thinking about their health and financial security, thinking much more holistically about how they spend and allocate their benefit dollars across benefit options. We know that if an employee is healthy and financially secure, they tend to be more productive in the workplace and can focus on growing the business.
Williams: Joe, there are a number of private health insurance exchanges around. Some focus on specific areas. For example, some work more with retired employees, those that are Medicare-eligible. Does ConnectedHealth have a particular focus?
Donlan: Absolutely. Most of our focus has been on the commercial, under 65 market. We offer capabilities on a group basis as well as offering capabilities for individuals, while always going through the employer. We can help solve employer problems and provide competitive benefits packages both in an individual and group world to those employees.
A good example of what we’re seeing in the marketplace is employers that have both group-eligible populations as well as a lot of 1099 or part-time employees that might not be eligible for those group benefits but could benefit by having easy access to individual health insurance plans.
Our approach has been going to those employers and being able to solve for each and every single one of their employees, given their diverse employee population.
Williams: It’s interesting what you’re describing. From a health care policy perspective and with all the noise regarding the Affordable Care Act, you hear a lot about the employer mandate being a problem for employers. You’re coming at in the other way, which is to say an employer might want to offer benefits even to employees who wouldn’t typically be eligible, in order enhance their attractiveness as an employer.
Donlan: That’s exactly correct. The ACA and health reform really has accelerated much of our business. Our business was never predicated on health reform at all. It was predicated on the fact that employers still need competitive benefit solutions and given their size and challenges, those needs may vary. So, an employer that has fewer than 50 employees might have a different benefit strategy and approach than an employer that has 500 or 1000 employees. We try to solve for those different situations by leveraging our e-commerce shopping platform and oftentimes using a defined contribution approach in the process.
Williams: The idea of a shopping or a customer-oriented approach to selecting health insurance is a new one. It’s getting a lot of attention now because of the Affordable Care Act. But can you describe what the experience would be like for a user? And is it more like what they would do in a typical kind of insurance purchase or is it more similar to Amazon or some other kind of consumer e-commerce website?
Donlan: It’s a great question; Amazon often comes up in this type of discussion. And really, it’s pretty different from Amazon. When you go to Amazon, you tend to know what you want. You know what products you’re looking for and you’ve already done some research, and you go there and you type in that particular product and you buy it and take advantage of Prime and all the other great services that Amazon offers.
Our approach is that people in benefits don’t necessarily know what they want. I’ve been part of organizations that have been developing consumer-oriented health care decision support tools for the past 13 years. And so there have been a lot of lessons learned in terms of what works and what doesn’t work when presenting very difficult information or, said differently, providing solutions or answers to complicated health care questions. So we spend a lot of time thinking about behavioral economics and spend a lot of time thinking about how you establish frameworks and put decisions in context to make the decisions easier for the end user and consumer. We always start with the consumer in mind, and then work backwards in understanding the key factors that influence those decisions.
Health insurance and other related benefits are very complicated and can be very confusing. And when we start talking about an exchange or a marketplace environment, oftentimes we’re talking about creating more choice. But choice doesn’t necessarily ensure satisfaction. The approach we’ve taken is looking at the key factors and the influences: What are the attitudes? What are the behaviors that we can ask someone in order to provide a smart and intelligent recommendation about a particular product? And so, we ask things such as, what is your risk tolerance?
Certainly we don’t literally ask ‘What is your tolerance?’ We ask it in a way that helps people understand how they would balance their dollars so that they realize that if they pay less in premium they could end up spending a heck of a lot more money when they need care.
And that is a concept that, with the way we address the question and the graphics we use, makes it very intuitive for someone to understand. We also ask them how they typically use health care over the course of the year for themselves and their family members. We ask how many times they typically see a doctor and how many times they typically take prescriptions, et cetera. We then apply a proprietary algorithm to that data and information and, factor in their demographic information to all the different benefit plans that are available to them.
And we provide a recommendation from top to bottom depending upon how many choices they have. We don’t say, ‘Here’s your co-pay, co-insurance, deductible, premium.’ It’s ‘Here’s your premium, here’s how much we think you’re going to pay, an estimated out-of-pocket cost.’ So we provide premium plus cost of care, and then the maximum out-of-pocket cost; the total financial exposure.
The approach we’ve taken has been pretty been fascinating. We have been giving people peace of mind in their benefit decision because very simply, the way we display the benefit recommendations, they can see the total financial impact of their decision. They know their baseline of what they’re going to pay in premium and they know their worst-case scenario.
What people don’t typically know is that middle figure. We take the mystery out of it and present it in a way that the user can start to think about what trade-off they may want to make. So if they spend a little bit more money in premium, they can see what the total impact might be and the decrease in estimated out-of-pocket cost or total maximum out-of-pocket cost.
Williams: So, when people think about shopping on these exchanges or marketplaces, there are many barriers, especially for those who don’t make their living like you and I do, thinking about this sort of thing every day. You just went through co-pay, co-insurance deductible, premium. But of course there are other sorts of things to consider – PPO, HMO, POS, narrow networks – all sorts of things that someone may have to deal with. And even the just the notion of it, is it a marketplace or an exchange, it’s pretty hard.
I don’t want to put words in your mouth but to get to the point of making the sort of trade-offs that you’re describing, does the user have to understand all that terminology?
Donlan: They really don’t. Since we keep this focused on essentially the financials, they see what the impact is on those three levers – the premium, estimated out-of-pocket cost and maximum out-of-pocket cost. We provide filters and using sliders, just as someone might use when they’re shopping for an airline ticket at Kayak.com. You can very easily start to understand what the impact might be of your risk. So you have your ability and your tolerance for risk.
It’s very easy to say that, ok, if I’m willing to pay a little bit more every month, what might the decrease in cost be and how might it change the total financial exposure? These are the things that keep the stories off of the New York Times and the Wall Street Journal. We avoid a situation where a family chooses a plan without realizing that the maximum out-of-pocket was $30,000 and then, all of a sudden, they’re bankrupt. We are very clear and upfront about what that total cost is for the health plans so there’s level of transparency. What we’re finding with our clients is that it has given people a lot of peace of mind in order to buy.
We’ve seen with one of our grow their business based on number of applications submitted by over 130 percent. At the same time, they decreased their call center calls by nearly 40 percent. That tells us that people are coming to the shopping platform, they’re navigating it in a way that they would with any contemporary shopping/e-commerce site, and they’re transacting and making the purchase.
We’re seeing a lot of really positive results by taking this approach; it took us a long time to get here. We are applying the lessons that we have acquired over these 10-plus years; understanding the decision points and understanding the complexities of these decisions and figuring out how to make it simple.
On the backend, the way I like to describe it is it’s kind of like an iPhone. The shopping platform is very easy to use, very easy. All the magic essentially happens behind the scenes. We do the hard work behind the scenes so that the user can have a more enjoyable and seamless experience when they’re navigating the site.
Williams: I know you’ve been at this for quite awhile. But for most people, they’re just getting exposure to the kind of shopping experience that you’re describing. I’d like you to push fast forward and think about where we get to in five years. Once it’s kind of routine to use this sort of platform, what kind of extensions might there be on it? What’s next for an employer, beyond trying to get people to buy and use the platform? Where does it go from here?
Donlan: I think we’re just scratching the surface right now, David. And what’s going to be really fun to watch in the market is how levels of personalization continue to get enhanced just like you’ve seen in many other industries. So we spend a lot of time looking at the financial services industry as an example, and think that there are a lot of parallels into what we’re doing in the benefits world.
So the concept of someone thinking about their overall benefits portfolio and how an individual may want to allocate dollars across that benefits portfolio from a health and financial protection standpoint is pretty exciting to me. And in order to make that successful, data and information are going to be key to drive personalization. You can envision a world just as if someone was sitting down with their financial advisor and they’re saying that they want to have a child and they want to retire in 40 years and they want to have a house in Florida when they retire, etcetera. And that financial adviser answers, “OK, here’s what your portfolio needs to look like.”
But that portfolio may change once you have children and maybe multiple children. Maybe you choose to send one of your children to a private school instead of public school. I think the same will hold true when someone looks at this holistic benefits portfolio and how they allocate dollars. Having a child is a good example. You may adjust your benefits portfolio and start allocating more dollars towards life insurance than you would have when you didn’t have children.
So, that’s where the really exciting times are ahead of us is. It’s getting people to take ownership of their health and financial security portfolio.
Williams: I’ve been speaking today with Joe Donlan, president and co-founder of ConnectedHealth. We’ve been talking about private health insurance exchanges. Joe, thanks so much for your time.
Donlan: Thank you, David. I really appreciate talking to you today.