Friday, April 23, 2010

Insurers as Advocates?

The suggestion that health insurance companies could act as advocates for consumers in procuring cost effective, quality health care might seem incongruous to some. From an economic perspective, it makes sense since both are payers and both seek to minimize cost while attaining optimum outcomes.

Historically insurers have sought to minimize their own risk even at the peril of the insured person, taking no interest - or responsibility - for the fate of their customer. We continuously hear about attempts by insurers to weed out insured persons who have potentially serious medical conditions that could run up high medical bills. The policies are terminated, leaving the consumer out in the cold with a pre-existing condition that prevents them from getting new coverage. It is a scenario that inspired Congress to put guaranteed coverage into the recently passed Health Care Reform bill.

eHealth (EHTH: Nasdaq), the online health insurance brokerage, recently teamed up with Healthcare Blue Book (private) to proved competitive information on prices for health care procedures. Healthcare Blue Book offers a free consumer guide on fair pricing by location for health care services such as surgery, hospital stays, medical procedures or doctor visits. They target people who pay for their own health care or have those high deductible insurance plans. eHealth is making the pricing information available to their policy holders.

It is an appealing collaboration and a very interesting move for an insurance brokerage to provide pricing information to consumers. Yes, insurance companies have made efforts to impact cost by negotiating fees with hospitals and doctors and making those fees a part of their policy offering. Insured persons are limited to those providers and also subject to the restrictions placed on their treatment choices. The final choices may or may not be in the interests of the insurered person. Could this get any more collusive? more oligopolistic?

eHealth is taking a different approach - putting the insured person in charge by putting more information in their hands and leaving the final decision up to the consumer. It is a compelling scenario and we will be watching carefully to determine if the approach will generate new business for eHealth.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Buy rating on EHTH shares.

No comments: