Employers won't buy your health insurance much longer -- here's why that's okay

By Erin Griffith , written on September 19, 2013

From The News Desk

The future of health care in America is happening today, guys.

That was the surprisingly optimistic message I took from a panel of people who have front-row seats to the industry's changes. Earlier this week, to celebrate its sixth birthday, doctor appointment-booking startup ZocDoc hosted Senator Tom Daschle, Senator Bill Frist, Steward Medical Group COO Richard Fernandez, NYC's Deputy Commissioner of Health-care Access Amanda Parsons, and Blueprint Health founding partner Brad Weinberg in a panel on the future of healthcare. It was ambitious topic for a 30 minute conversation.

The most incendiary remark came from Weinberg. The Blueprint Health founder predicted that in five to ten years, companies will stop buying health insurance for their employees.

While it sounds awful -- no more employer-provided health insurance?! -- Weinberg insists this will be an improvement. Instead, health care will more likely come in the form of a benefits package where employees get to pick and choose what they want. For example, employees could get $5,000 to distribute between doctor's visits, insurance premiums, life insurance, or even a gym membership. And it's entirely up to them how they distribute it. The package will be more transparent about how much each piece costs.

People will resist the change, he said, particularly because human resources departments at companies want to keep their jobs. But Weinberg expects that once one giant corporation, like, say, Wal-Mart, moves to an exchange model for employees to buy their own health insurance, the rest of the country will follow.

That idea reflects a shift toward transparency around costs, which empowers health care consumers. The same thing has happened with information. Thanks to the Web, consumers are armed with more info about their health and their options. Once patients get access to their medical records through online portals as part of Obamacare, they will be that much more empowered in their decision-making.

Daschle said consumers are tolerant of risk, provided they know the extent of the risk and are able to calculate it. Frist agreed, noting that the risk has shifted to the consumer, who is motivated by high deductibles. "That will drive more risk taking and more change," he said.

Health care providers, on the other hand, are still risk-averse. That's the challenge startups hoping to innovate in this changing industry need to overcome. Fernandez of Steward Medical Group said that his company doesn't jump into deals with young companies because of the high risk.

Parsons noted that that avoidance of risk comes down to switching costs. If a provider spends six months switching to electronic medical records, only to find that the tech company they chose is going out of business or selling out, they're going to lose a lot of money. "Doctors are saying, 'What am I really getting into? How easy will it be to extract and revert if it doesn't work out?'" Parsons said.

It's no surprise, then, that a startup like ZocDoc would scale up as fast as it possibly can. It has worked -- thousands of providers have embraced ZocDoc for booking appointments and checking in patients. With 450 employees, the company is one of New York's biggest startups. It's also one of its most promising. Founded in 2007, the company makes health care more accessible for 2.5 million monthly users in 1800 cities. (As a user, I became a fan of the service after I had a medical emergency at SXSW this year.)

Overcoming that fear of risk will always be a challenge for health-tech startups, just as it is for ed-tech startups. But as the shift in power toward the patient continues, new innovations may actually be able to flourish in a broken system.

Update: Walgreen has announced it will switch its 160,000 employees to such a system.