“It creates changes”: How some startups bypass payers
The insurance industry is viewed by many as a barrier to accessing health care. In 2021, a survey found that the health insurance industry received the lowest average Net Promoter Score, which measures customer satisfaction and loyalty, among all types of insurance. Now there are efforts to take insurance companies out of the equation altogether, whether through drug prescriptions, direct primary care, or alternative payment options.
“First and foremost, we see a continuing desire to rationalize an irrational market,” said Bill Fera, a director at Deloitte. “And the second these digital applications and solutions continue to evolve, we see increased adoption. And third, this fits with the way patients/consumers operate in every other aspect of their lives. These will continue to be ways that customers and patients demand and experience healthcare.”
One such company is DiRx, an online pharmacy. DiRx CEO Satish Srinivasan worked in the pharmaceutical industry for over 25 years before founding the startup. What he has discovered in his career is that prescription drugs themselves are not expensive; it is intermediaries such as drug wholesalers who make prescriptions expensive for patients at the point of sale.
“That’s fine if it works for everyone, but the large number of uninsured and underinsured patients in the country bothered me… The system is built on insurance reimbursement,” Srinivasan said. “So the way it’s calculated at the point of sale or at the point of care, it’s all based on how much maximum reimbursement someone can ask for. For someone who does not have adequate insurance and has significant expenses, it becomes a very large number.”
This prompted Srinivasan to found East Brunswick, NJ DiRx* Buying recipes directly from the manufacturer to achieve the lowest cost. It is then shipped directly to patients who can purchase without insurance. His program called Annual savings plan allows patients to pay either $119 per year per person for 500 products or $299 per year per person for 1,000 products. It includes shipping, 24/7 customer support, and unlimited orders/refills.
Other healthcare sectors bypassing insurers include chronic disease management, care navigation and behavioral health, said Fera and Andy Davis, also a director at Deloitte. And there are two major reasons for that: efficiency gains and cost management, Davis said. Companies developing products or services in these sectors are particularly beneficial to mid-market employers looking for ways to save money.
“We’re always talking about the rising costs of healthcare,” Davis said. “Those who are likely to feel this the most are the mid-market employers … because they’re trying to offer competitive advantages.”
Fera said this new breed of business aims to improve the current market, where consumers are often removed from providers by having to go through insurers. Employers, who often pay for care, are also being removed by the providers providing the care, he added.
“As these digital solutions mature, there seems to be a new force to address this issue,” Fera said.
Not only are these companies growing in popularity, but they’re gaining interest from investors, Davis added. According to Deloitte, venture investments in digital health companies reached $29 million in 2021, almost doubling the 2020 figure article.
“I think there’s more interest now in investing in solutions that can be offered as disruption,” he said.
One of those disruptors is tip health, a billing platform that supports direct primary care. Vendors joining the platform can reach consumers directly. These patients pay a $50-$100 monthly membership for unlimited access to primary care through telemedicine. Some doctors also contract directly with employers, who pay a fee on behalf of their employees. San Francisco-based Hint Health handles membership administration, registration and payments, and charges a software fee to the physicians who use the system.
Zak Holdsworth, co-founder and CEO of Hint Health, grew up in New Zealand, where he had a GP who he could seek treatment from similar to a direct primary care model, he said.
“When I came to the US I was a bit shocked by the system and how difficult it was to get care and how expensive it was,” he said.
Holdsworth and co-founder/CTO Graham Melcher concluded that they needed to develop a business model to “redesign the system”, but one that differed from the fee model. Additionally, they wanted to restore the integrity of primary care, Holdsworth said.
The idea is that by investing more in basic care, people will spend less later on more expensive procedures, he added.
“What we’re actually proposing is that we spend more money on basic services,” Holdsworth said. “Let’s make sure the money that’s being spent on basic services is efficient… Let’s really invest in all of that and expand the scope of basic services. If we give patients more access, we spend more time with them.”
While Hint Health is focused on a direct primary care model that bypasses other insurers Companies offer patients a variety of ways to pay for care when they have little or no insurance coverage. This includes the San Francisco-based fintech company stiltwhich offers a product called onbo, an application programming interface that allows companies to lend money to people. Through the product, companies can introduce a line of credit, a personal loan product, or other lending methods.
“Onbo is exactly that infrastructure product that any business can use to lend their customers money, so they don’t have to make all the loans themselves,” said Rohit Mittal, co-founder and CEO of Stilt.
The company began by lending money to immigrants coming to the United States. Because they had no credit history, it was difficult for them to get a credit card or get a loan. Eventually, healthcare companies began turning to Stilt to put their products on patients, Mittal said. He declined to say who Stilt’s healthcare customers are, but said they are startups that primarily serve hospitals, doctor’s offices or other facilities.
“I think once we built the platform and saw immigrants using our loans, we realized the potential is much bigger,” Mittal said. “It gave us the confidence to use everything we had built to offer to other companies so they could serve their customers.”
Patients who choose Onbo often use it for elective surgeries that aren’t covered by insurance, Mittal said. When this happens, companies typically offer a payment model called “buy now, pay later,” where patients can pay for surgeries in four equal installments with no interest or late fees. Another example is an unsecured personal loan instead of a deductible. In this case, the patient pays back the loan at an interest rate over 12 to 24 months and then has insurance cover the rest.
While startups like Onbo, Hint Health and DiRx offer patients various ways to avoid insurance, payers will always play a role when people try to avoid the financial risks of illness, Deloitte’s Davis said. But that doesn’t mean insurers should be complacent.
“I think these new entrants — in the conversations I’m having with health plans today — are forcing them to reevaluate how they’re actually offering insurance models to their members now,” Davis said. “I think it creates change.”
MedCity News reached out to several commercial insurers for comment, but none responded.
However, how insurers will change has yet to be determined, Deloitte’s Fera said.
“Are insurance companies going to stand up and take notice and figure out how to use these digital tools and new mechanisms to eliminate this inefficiency themselves?” Fera said. “Or will… there come a time when we basically separate insurance companies into their respective parts?”
Photo: doyata, Getty Images