Health and Wealth

There have been several articles about the potential convergence of healthcare and financial services.  Can a Fidelity become a one-stop shop where you invest your money and also get your insurance (health, auto, home)?  If consumerism really transfers the healthcare spend to the individual, are they in the best position to manage that money and help you plan for the future?

It is both a scary and interesting question.  Do they understand healthcare?  Would they focus on outcomes or just return?  [Is that different from most payors today?]  Would we make different decisions if we were evaluating our out-of-pocket costs for healthcare versus buying a few more shares of a stock?  I think it would certainly drive a different view of the patient as the consumer and push all their lessons learned around behavior and customer service into healthcare which would be good.

You have the Blue Healthcare Bank and OptumHealth Financial Services (previously Exante) as two examples of historical healthcare companies (BCBS and United) who have expanded into this converged area.

Going back to a McKinsey article on this topic from June 2005 called “The coming convergence of US health care and financial services”, they laid out several opportunities:

1. Savings oriented health care products (e.g., HSAs).  They estimated there could be 25M HSAs by 2013 generating $55-$75B in revenues.  (Big market)  They quoted a statistic that as many as 80% of consumers don’t reach their plan deductibles which creates an opportunity for financial services companies to make money managing their deductible dollars.
2. Consumer health care payments and financing.  They estimate that there is $375B in out-of-pocket expenses that could be managed and $60B in consumer bad debt related to healthcare.  These create opportunities around debit cards or credit cards.
3. Supplemental risk products.  I think this is a clear opportunity to provide the safety net for consumers around long-term care and major accidents.  They estimated this to be a $3-$5B in net profit opportunity.
4. Benefits administration.  They estimated this to be a $50B space growing at 15% but with lots of established players (Accenture, Hewitt).
5. Payment assurance and transaction processing.  They estimated that streamlined operations here could save as much as $4B in operating costs.

Obviously, this forecast and many of these opportunities have led to dozens of acquisitions and investments since the report came out.  But, we still haven’t seen any major sea change.  I predict that once the election is over and the future direction from the government is set that we will see some additional energy here.