The insurance industry is seen by many as an obstacle to obtaining health care. In 2021, a study reported that the health insurance industry received the lowest average promoter net score, which measures customer satisfaction and loyalty among all types of insurance. Efforts are now being made to take insurance companies out of the equation entirely, whether through prescription drugs, direct primary care or alternative payment options.
“We see above all the continued desire to rationalize an irrational market,” said Bill Ferra, director of Deloitte. “And second, as these digital applications and solutions evolve, we’re seeing increased adoption. And third, it fits into how patients/users work in every other aspect of their lives. These will continue to be the ways customers and patients demand and experience healthcare.”
One of these companies is DiRx, online pharmacy. Satish Srinivasan, CEO of DiRx, 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 the middlemen 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 worried me… The system is built on insurance reimbursement,” Srinivasan said. “So the way the point-of-sale or point-of-care price is determined is based on how much maximum reimbursement someone can ask for. For someone who does not have adequate insurance and has significant out-of-pocket expenses, this becomes a very large number.
This led Srinivasan to establish an East Brunswick, New Jersey-based DiRx, which buys recipes directly from manufacturers to get the lowest price. It is then shipped directly to patients, who can purchase without using insurance. His program called Annual savings plan allows patients to either pay $119 per person per year for 500 products or $299 per person per year for 1,000 products. Includes shipping, 24/7 customer service and unlimited orders/loads.
Other healthcare sectors that are bypassing insurers include chronic disease management, care navigation and behavioral health, said Ferra and Andy Davis, also a director at Deloitte. And there are two big reasons for that: to create efficiencies and to manage costs, Davis said. Companies developing products or services in these sectors are particularly useful for medium-sized employers looking for ways to save money.
“We always talk about the rising cost of health care,” Davis said. “The ones who probably feel it the most are the mid-market employers … because they’re trying to offer a competitive advantage.”
Ferra said this new breed of companies aims to improve the current market, where consumers are often cut off from providers by having to go through insurers. Employers who often pay for care are also removed from the providers who provide the care, he added.
“With the maturity of these digital solutions, there seems to be renewed vigor in trying to attack this problem,” Ferra said.
These companies are not only becoming more common, but are also gaining interest from investors, Davis added. Venture capital in digital health companies reached $29 million in 2021, nearly double what it was in 2020, according to Deloitte article.
“I think there’s more interest now to invest in solutions that can be offered as disruption,” he said.
One of these destroyers is Hint Hello, which is a billing platform supporting direct primary care. Vendors who join the platform can reach consumers directly. These patients pay a monthly membership of $50 to $100 for unlimited access to primary care via telemedicine. Some doctors will also contract directly with employers who pay a fee on behalf of their employees. Hint Health, based in San Francisco, manages membership, enrollment and payments and charges a software fee to physicians using the system.
Zach Holdsworth, co-founder and CEO of Hint Health, grew up in New Zealand, where he had a family doctor from whom he could receive care in a way similar to the direct primary care model, he said.
“When I came to the U.S., I was kind of shocked by the system and how hard it was to get care and how expensive it was,” he said.
Holdsworth and co-founder/CTO Graham Melcher concluded that they needed to create a “system redesign” business model that was different from the fee-for-service model. In addition, they wanted to restore the integrity of primary care, Holdsworth said.
The idea is that by investing more in primary care, people will spend less on more expensive procedures in the future, he added.
“What we’re really proposing is, let’s spend more money on primary care,” Holdsworth said. “Let’s make sure that the money spent on primary care is effective… Let’s really invest in all of this and expand the reach of primary care. Let’s give patients more access, let’s spend more time with them.”
While Hint Health focuses on a direct primary care model that bypasses insurers, others companies provide patients with various options to pay for care when they do not have insurance coverage or have inadequate coverage. That includes the San Francisco-based fintech company Kokilawhich offers a so-called product Onbo, an application programming interface that allows companies to lend money to people. Through the product, companies can launch a line of credit, a personal loan product or other lending methods.
“Onbo is exactly the kind of infrastructure product that any company can use to lend money to their customers, so they don’t have to build all the lending elements themselves,” said Rohit Mittal, co-founder and CEO of Stilt.
The company began lending money to immigrants coming to the United States. Since they do not have a credit score, it is difficult for them to get a credit card or get a loan. Eventually, healthcare companies began approaching Stilt to use its products for patients, Mittal said. He declined to say who Stilt’s healthcare customers are, but said they are startups that primarily serve hospitals, doctors’ offices or other facilities.
“I think as we were building the platform and seeing how immigrants were using our loans, we realized the potential was much greater,” Mittal said. “It gave us the confidence to use everything we’ve created to offer it to other companies so they can serve their customers.”
Patients who decide to use Onbo often use it for elective surgeries that aren’t covered by insurance, Mittal said. In this case, companies typically offer a payment model called “buy now, pay later,” where patients can pay for surgeries in four equal installments without any interest or late fees. Another example is an unsecured personal loan in lieu of a deductible. In this case, the patient will repay the loan over a period of 12 to 24 months with interest and then the balance will be covered by insurance.
While startups like Onbo, Hint Health and DiRx are giving patients a variety of options that bypass insurance, there will always be a role for payers as people seek to avoid the financial risks of illness, Deloitte’s Davis said. But that doesn’t mean insurers should be complacent.
“I really think these new entrants — in the conversations I’m having with health plans today — are forcing them to reevaluate how they’re actually delivering insurance models to their members right now,” Davis said. “I think it creates change.”
MedCity News reached out to several commercial insurers for comment, but none responded.
However, it remains to be seen how insurers will change, Deloitte’s Ferra said.
“Will insurance companies sit up and take notice and figure out how to use these digital tools and new mechanisms to drive out these inefficiencies themselves?” Ferra said. “Or … is there going to come a time where we basically break insurance companies down into their respective parts?”
Photo: doyata, Getty Images