New WellPoint Plan Increases Healthcare Consumer’s Level of “Skin in the Game”

When Warren Buffett used the phrase “skin in the game,” he referred to company managers investing in their own companies. In healthcare, we’ve discussed how equally important it is for consumers to also have some “skin in the game,” bearing at least some responsibility for their costs of care.

When Warren Buffett used the phrase “skin in the game,” he referred to company managers investing in their own companies. In healthcare, we’ve discussed how equally important it is for consumers to also have some “skin in the game,” bearing at least some responsibility for their costs of care.

A recent Wall Street Journal article (subscription required) discusses how WellPoint, the nation’s second-largest health insurer, has developed a group plan in which consumers would be responsible for the cost of medical services in excess of that offered by their employer plans. While WellPoint’s idea doesn’t appear groundbreaking at first, this type of plan would dramatically shift the dynamics of healthcare costs.

Here is how the Journal’s Anna Wilde Matthews described the WellPoint plan:

“Under the approach, workers are supposed to be given choices among hospitals, doctors or other providers to be used for a procedure—such as an imaging scan or even a surgery—each with pricing and quality information. If they pick one that costs more than the employer offers, they pay the difference. If workers opt for a provider that costs less than the employer’s price, an employer could choose to offer them a credit.”

Other companies are offering similar plans. Under these types of plans, known as reference-based pricing, the cost of care is borne by consumers, insurers and employers as with traditional plans but with the consumer having more control over how the costs are split. As consumers exercise the power given them to make choices, market forces – though still limited – will result in quality being rewarded and costs coming down.

Some questions remain: the definition of “quality” in healthcare remains under debate, and previous efforts for this type of plan had mixed results (apparently because customers didn’t really seek low-cost services). But WellPoint is working with online health rating service CastLight Health to provide the price and procedure data necessary for consumers to comparison shop. That combination of data and responsibility could turn consumers into players, without losing their skins.