Amazon Health recently announced the launch of its health plan collaborative via Haven, the organization pooling Amazon, JPMorgan Chase, and Berkshire Hathaway employees. The concept of self-insurance is not new, but this is certainly a new entrant in the market. Here, we will cover the entrance of Haven’s first plans, discuss self-insurance, and call out what is still missing. Despite this new take on a proven concept, there is room for additional cost savings and health management.

New players, same game
In October, news broke about Haven’s first health plans, which will launch in 2020 in Ohio. This pilot will cover approximately 30,000 JPMorgan Chase employees. It is important to note that all three previously mentioned companies were self-insured before Haven’s launch, so what changed? National scale.

With massive national scale, Haven unlocks opportunities across three key areas:

  1. Risk Pooling: By pooling all three employers, Haven will manage care for one million covered lives; that’s putting them on par with Walmart  in terms of size and bargaining power. How’s that for pooling and diversifying?
  2. Bargaining Power: Due to the huge, unified population, Haven will have extreme bargaining power in most national markets. This will likely win them preferred rates, better than any that the three employers could negotiate alone.
  3. Flexibility: This new scale allows Haven to find the best healthcare options, regardless of where those options are. Walmart showed this is a cost-effective approach, and now Haven just has to follow suit.

What is self-Insurance?
It is important to understand what we mean by self-insurance. Let’s start by covering the traditional insurance model. Typically, “fully-insured” employers hire insurance companies to evaluate their employees’ risk and price plans according to their risk. Insurance companies charge a premium for the risk pooling, benefit administration, and claims processing. In some cases, employers negotiate with plans directly, while in others they will use a benefits broker or consultant to negotiate rates. This latter model works for smaller employers.

However, as employers get larger, the population typically is diverse enough that it can make sense for employers to consider taking on the risk and paying the claims themselves. In these cases, large employers are “self-insured” and pay out the cost of claims for their employees. How does this work? Usually, they need to use a third-party administrator to print cards, deal with claims processing, negotiate the reimbursement rates, and much more. But this unlocks the ability to negotiate rates with health systems, pharmacy benefits managers (PBMs), and other programs to improve employee health. Now that businesses have defined themselves as financially responsible, they can choose what to cover.

Does self-insurance work?
Historically, self-insurance focused on traditional, reactive health care. It was a novel payment model, shifting the risk to employers. But the care offerings looked pretty similar. However, the rise of wellness and diabetes prevention programs (DPP) in the last few decades have helped shift toward more proactive (preventive) and holistic care programs. Employers have found that it is important to go upstream, focusing on curative and preventative measures that improve outcomes and save money.  

Today, there is still a large gap in terms of managing chronic conditions such as diabetes, obesity, and hypertension. These conditions contribute significantly to rising costs but are not successfully managed by all employers. As we look to Haven, it’s imperative that they focus on these conditions when defining their benefits.

Where does this leave Haven?
With Haven’s national scale, diverse population, and bargaining power, they can define a new kind of national health plan that could save costs and improve lives. That is, if they do it correctly. Risk pooling alone does not lead to success and execution is key.

Haven must focus on the overall cost drivers. While pre-chronic and chronic conditions have the chance to impact costs today, they will lead to significantly more expensive downstream issues. It is imperative that any new health plan address these conditions to improve the metabolic health of the covered lives and to save the responsible party via reduced claims.  

Additionally, Haven needs to focus on resolution, not management. There are digital solutions in this area, but many focus on the maintenance of certain health conditions instead of resolving the root causes of those same conditions. As a whole, the healthcare industry needs to move away from fee-for-service to solve the real problems. That’s where the future of health care is going.