Jeff Welch on HCSC, Bloom, and Defined Contribution

Unfortunately I’ve been swamped lately, but I wanted to get out the notes from the last interview I did at the World Health Care Congress (#WHCC12) in DC. I had the chance to sit down with Jeff Welch from Health Care Service Corporation (HCSC). Jeff’s the Divisional Vice President of Consumer Markets which is obviously a very hot area these days as everyone is talking about the “retailing of healthcare“.

Jeff’s focused on some of HCSC’s consumer efforts including their work with Bloom which they bought with Wellpoint and BCBSMI. As we know from lots of surveys (e.g., Medco survey, Towers Watson survey), consumerism is a hot topic with lots of recent articles about the work that companies like Change Healthcare and Castlight are doing (see Money article or Bloomberg article). From Jeff’s presentation at the conference, he pointed out that 6M Americans are in consumer driven health plans today and that $550-$600B in premium dollars are already controlled by individuals. A key driver in this area is the adoption of defined contribution plans in healthcare which like retirement plans is a model where employers set aside a fixed amount of money for employees to spend on healthcare and then give them options from which to choose.

Bloom Health, established in 2009, provides employers and employees greater flexibility, access and choice of health care services by simplifying how they select and pay for health insurance. Through its platform, Bloom Health helps employers define and better manage their health benefits spending through a defined contribution model. The employer contributes a defined amount per employee toward the cost of employee health care benefits. Employees and individuals are presented with a wide selection of benefit plans through an online “marketplace” to best fit their individual needs. (from Bloom PR link above)

Bloom is a platform for defined contribution to help consumers manage multiple choices and to facilitate them making choices. Essentially, as Jeff explained it, Bloom allows the employer to act as an automated broker. Bloom provides both technology and call center support to enable front end enrollment (not claims processing). Right now, it sounds like they are focused on small groups and national accounts, but they are adding Medicare in the future. To me, it sounds like this is the kind of front end GUI that consumers need to help them begin to understand healthcare options and make educated tradeoffs about what choices fit them best.

One of the interesting things that we talked about is the Bloom “configuration engine” (my term) which uses survey data about individual health, financial, and personality data to match you with the best health offerings for your needs. Ultimately, this makes me think about how individuals can create a personalized health insurance plan in the future rather than picking from a subset of options today. I don’t think consumers are ready to do that since we’re not good at predicting the future, but there are algorithms that could help with this especially if Bloom were to load our claims history and health risk assessment data in and use it as part of the guidance process.

Today, the basic process is:

1. Employer implements a defined contribution plan.
2. Employer defines what the consumer can see in terms of options.
3. The Bloom Health tool helps the consumer select their best option.
4. The consumer selects their plan.
5. Bloom then transfers the process to the plan for implementation and ongoing management.

So, what does this mean in the future? This will play into the Health Insurance Exchange part of the health reform. Bloom offers a private exchange platform today. I think the Kaiser Family Foundation does a good job of identifying several key components of Health Insurance Exchanges:

1. Offering consumers a choice of health plans and focusing competition on price
2. Providing information to consumers
3. Creating an administrative mechanism for enrollment
4. Moving towards portability of coverage
5. Reforming the insurance market

Perhaps not surprisingly, even with health reform’s fate still in the air, the government and health plans appear to be moving down this path based on an article yesterday.