Everybody knows shopping for insurance stinks. Not only do we not like it, we’re not very good at it.
Minnesota state exchange CEO Scott Leitz says he saw consumers struggle last year.
“In many, many cases, it was hours of time that were spent kind of walking a person through what their choices were, answering their questions and helping them make a final decision,” he says.
With millions flocking to public exchanges under Obamacare, this shopping problem – which researchers have known about for years – is coming into focus.
Consumers must sort out co-insurance, deductibles, in-network, out-of-network and medications, then compare it all to screen after screen of health insurance plans. Wharton economist Jonathan Kolstad says don’t forget people also must attempt to guess what health problems they’ll have over the next 12 months.
“Ultimately, insurance is not just about the world as we know it today, it’s about knowing where we are going down the road,” he says.
There are more than 900,000 variables to consider when shopping for health insurance, Kolstad says, so it’s no wonder that we tend to make such poor choices. Here’s the thing: Those choices have real world costs.
Kolstad’s research shows that when employees don’t know what they’re doing, they leave $1,800 on the table. There’s certainly an opportunity here to both help people and to cash in. Several University of Pennsylvania professors – along with Kolstad – have launched software called Picwell in response.
Company CEO Jay Silverstein says their software is designed to “make the process easier, simpler, faster, better.”
Here’s how it works, according to Silverstein: Consumers first answer the four simple questions, “What is your age?” “Where do you live by ZIP code?” “What is your gender?” and “What medications are you on?”
Then Picwell’s algorithms cut, slice and dice the responses with a big data buffet that includes medical claims and credit scores. The result is Google-like. Almost instantaneously, the software spits out a list of the plans and ranks them by best fit. It also offers a total monthly cost estimate, which includes all out-of-pocket costs.
Industry consultant Ted von Glahn – who has no ties to the company – says Picwell is taking a lot of the mystery out of shopping.
“The golden rule is ‘do the math.’ Don’t make me go find that neurologist procedure and [ask] ‘Is it covered or not?’ Bring it right to me,” he says.
Compare Picwell to healthcare.gov. The federal exchange, says von Glahn, only offers the most basic tools forcing consumers to still do the math. Picwell is one of a dozen companies including GetInsured and Consumers’ CHECKBOOK in this small consumer choice space.
As these products mature, von Glahn believes, it will force the entire industry – insurers, hospitals and doctors – to become more efficient.
“They can’t compete on the mistakes that consumers make, the dazzle and confusion of choice,” he says.
Change may well be here sooner than it seems. PricewaterhouseCoopers says a third of private companies are considering moving their active employees onto private exchanges within the next three years.
“My gut on this is private exchanges are in the early stages,” says PWC’s Michael Thompson. “The value proposition isn’t as strong as it ultimately will be. As that proposition grows, you’ll see more companies adopt it. I think the uptick rates will be significant.”
Not only do employers need to be convinced they can save money – so do employees. To that extent, whether exchanges take off or disintegrate could turn on the success of outfits like Picwell. CEO Silverstein says business is good: They’ve already lined up private and public exchanges, including Minnesota’s. He says there’s a good chance their clients will grow from 750,000 this year to 40 million in 2015.
Picwell executives believe their tiny industry is moving toward a time when consumers can actually find value – quite a transformation for a product that today many don’t understand or trust at all.