How Healthcare Reform May Breathe New Life Into Rewards
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15 September 2009
Last week, I came across an intriguing Op-Ed piece written by Michael Pollan in the New York Times. With the backdrop of healthcare reform and universal coverage (i.e., anyone, even with pre-existing conditions will receive health insurance), Pollan states that insurance companies will have more of an incentive to control behavioral-based conditions, such as diabetes, coronary disease and some forms of cancer. Pollan further argues that given that many of these diseases are linked to obesity, the health insurance industry may go after the agro-food business, as a way to limit the production/sale of unhealthful foods. Taking on the agro-food business and its lobbyists in DC would be a monumental task, even for the powerful healthcare industry. Rather than pursuing this path, health insurers may have a far easier option -- wellness rewards. To illustrate my point, let's do some simple, back-of-the-envelope math, just focusing on Type-2 diabetes. (All) Diabetes sufferers comprise about 8% of the population and require on average (according to Pollan) $6,600 a year in medical treatment. 8% of the 45 million uninsured population to possibly receive healthcare coverage under reform would be 3.6 million people, with a total annual treatment cost of $23.7 billion. Yikes, that's a lot of money, >$500 per currently-uninsured person. What if health insurers gave $250 to everyone who visited the gym 100 times a year? What if they gave $100 to everyone with Type-2 diabetes who kept the glucose levels under control? The savings (i.e., reduced need for medical care) would be significant. Rewards could be applied to any number of other conditions, pre-conditions or lifestyles -- they all hold the potential to save insurers money. Of course, wellness rewards are nothing new and have a number of regulatory/legal considerations (for more, please refer to Celent's report, Fit to Be Paid: The Dynamics of the Wellness Reward Market) . However, what is new is that whereas employers have historically funded rewards, healthcare reform may mean that insurers will start funding rewards as well. If so, it may mean new lines of business for wellness reward players such as Citi Prepaid, IncentOne and WebMD.