The End of Health Insurance

By Kim Bellard, February 20, 2019 

Paul Tullis has an interesting article in Bloomberg about how self-driving cars might kill auto insurance “as we know it.” After all, if human error is responsible for 90% of auto accidents, and those humans are taken out of the equation, what’s left to insure? 

Many people don’t think much about autonomous vehicles, but Mr. Tullis reports that Michelle Krause, an Accenture insurance expert, says that their impact on auto insurance “…comes up in every strategic conversation” within insurers. 

It made me wonder: what would it take to kill health insurance…as we know it? 

Let’s think about what health insurance is for: Averting losses, Budgeting and Subsidization. I’ll take these in reverse order: 

Subsidization

Health insurance is not the right mechanism to do wealth transfers. It’s not what it is designed for, and it is not what it is good at. 

Budgeting

We need to stop expecting health insurance help us budget for expenses that, in any other aspect of our lives, we’d be paying for ourselves. 

Averting losses

Even if we accomplished both of the above, health insurance would still probably not look too different than it does now. Our healthcare system would still have catastrophic expenses, and we’d be looking for protection against them. We’d still have networks, negotiated prices, and tensions between those who deliver health care and those who pay for it. 

We have to attack the root problem, which is not just the prices, but also the costs. Some examples of how this can happen: 

Virtual care will allow us to get advice and even treatment where/when we want it, and increasing reliance on A.I. rather than human expertise will both cut direct costs and, hopefully, unnecessary treatments. 

DIY health is a trend that has promise to greatly impact costs. Whether it is hearing aids, insulin pumps, or “biohacking,” we’re starting to move away from reliance on expensive solutions from traditional healthcare sources to cheaper, even home-grown solutions.

Robots, right now, fall within the “more technology, more expensive” ethos of our current healthcare system, but that cannot last. Robots will get smarter and more versatile, we’ll get better at building them, and they’ll allow us to take costs out of healthcare in the way they’ve taken costs out of manufacturing. 

Hospitals are, as I’ve stated previously, “19th century institutions operating under 20th century business models in the 21st century.”

Prescription drugs are one of the biggest pain points for consumer healthcare spending. Part of this looks a lot like greed, part of it is the U.S. not negotiating prices as other countries do, and part of it reflects the long pipeline for drug discovery and development. The former two are more price issues than cost ones, but the latter one is one 21st century technology can help address.

We shouldn’t accept the status quo; not in how care is delivered, not in how much care costs, and certainly not in how it is financed. If auto insurers are discussing merging with automakers, Apple is thinking about its post-iPhone era, Ikea wants to become the “Amazon of furniture,” and Amazon’s own future may be more about cloud computing than retail, then certainly health insurers should be looking to a very different future.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting