Health Discount Card
Health Savings Account
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How DIY Health Reform Can Help You Win The Talent Wars

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Game Over for Incentivized App Downloads

Editor’s note: Guest author Dave Chase spent the 90’s working at Microsoft in various senior marketing and general management roles, including founding Microsoft’s global healthcare unit that has grown to be Microsoft’s most significant vertical market. Prior to joining Microsoft, he was a senior consultant with Accenture’s Healthcare Practice working with a wide array of healthcare providers and systems. Dave has also been a successful investor and adviser to several early-stage companies. He can be found on Twitter as @chasedave or on LinkedIn.

The talent wars that were common back in the late 90′s appear to have returned whether it’s using LOLCats or cheeseburgers to recruit talent. While I love the creativity, when it comes down to making a decision to join a new company, the lumbering tech giants (Google, Microsoft, Amazon, Zynga, Facebook) which startups compete against for talent have one giant ace up their sleeve — great healthcare benefits.

When I left Microsoft 8 years ago, my wife expressed only one concern — losing health benefits. At the time, I told her that it’s just a matter of paying those costs directly. The reality has been that it’s been a significant hassle and cost that we’d rather not deal with.  The excitement of working with startups has outweighed that hassle, but even to this day it remains a burr in the saddle. Periodically, I will get an offer to join some company and her first question is “how are their health benefits?” Startups have repeatedly shown an ability to outmaneuver the behemoths we compete with but this is one area where the behemoths still have an edge.  It’s time to turn the tables with what I call Do-it-Yourself (DIY) Healthcare Reform.

While the behemoths stick to the old health payment model, which is a Gordian Knot designed by Rube Goldberg, there’s a better way. The big companies can stick with a model that has led to health costs increasing 274x in my lifetime (compared to 8x for all other consumer goods and services). What’s better is that startups are beginning to offer key parts of the solution.  There’s a Seattle startup called Qliance that is backed by Nick Hanauer (aQuantive founder, Second Avenue Partners), Rich Barton (Expedia/Zillow founder), Jeff Bezos and Michael Dell. (I am not an investor).  In the Bay Area, there’s a similar model – One Medical Group – that has been written up in the NY Times

Qliance and medical approaches like it recognize the budget-crushing impact of burdening the health equivalent of a car tune-up with insurance bureaucracy and profits. There’s a 40% “tax” that makes healthcare insurance unnecessarily expensive. Instead, in Qliance-like models, the health insurer gets disintermediated from day to day healthcare. It keeps insurance for what it does best—covering you for catastrophic items you hope never happen (major medical issues, house fire, car accident).

The Solution

There are steps an individual or companies can take today that can save a massive amount of money.  I will explain three items that may be new to you but are important to understand and take advantage of depending on the scope of coverage you want for yourself or your employees.

  1. Direct Primary Care (DPC): A relatively new concept that is a derivation of Concierge Medicine but targeted at the mass market. They typically cover everything from day to day items (physicals, flu, etc.) to urgent care. Sometimes there are added charges for items such as an X-ray (Qliance now includes this in their pricing) or lab tests where they pass along direct costs. Because it’s completely outside of the insurance model (you pay a monthly retainer not unlike a health club that you can use as much or as little as you’d like), doctors are happy to be available by email and phone. In a typical insurance/fee-for-service model, they wouldn’t get compensated unless they see you in person so it’s understandable why they are reluctant to be available for their patients in this manner.
  2. Health Savings Accounts (HSA): These allow pre-tax dollars to be put into an account that rolls over if they aren’t used. Funds in the account can be used to pay for qualified healthcare expenses. As pre-tax money, you are essentially getting a 20-30% discount depending on your tax bracket. The funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year to year if not spent. HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. More on them can be found at the federal government’s Web site and on Wikipedia.
  3. Health Discount Card: Think of this as a Costco Card for health & wellness services. It’s NOT insurance. Your Costco Card doesn’t allow you to take Cheerios off their shelf and not pay for them. Rather, they have aggregated the buying power of individuals and small business to save their members money when they purchase something. With the card, you can access items often not covered by insurance from Dental to Vision to Alternative Care to Prescriptions at a significant pre-negotiated discount.

The following are examples of the range of coverage you can provide to your team. I would always recommend at least having a very high deductible insurance plan.

  • Bare bones: At least offer a Health Discount Card even if you can’t cover the employee’s High Deductible Insurance Plan. Just be sure to communicate that it is not insurance as many will think it is. The Costco analogy helps people understand (i.e., you can’t walk out without paying for what’s in your cart, it just costs less).
  • Good: Couple a High Deductible Plan with a Health Discount Card
  • Better: Combine the “Good” with a HSA that you fund with pre-tax dollars. Employers such as Whole Foods have taken this approach and found their employees getting much savvier on spending “their” dollars. See the Wall Street Journal’s piece by Whole Foods CEO on how they do this. Even if you don’t fund the HSA, it’s great to offer one as a way for employees to extend their dollars.
  • Best: Combine the “Better” with a Direct Primary Care membership. Prices vary widely but Qliance charges $69/month for a 40-49 year old, for example. Many find that combining these can actually cost less than conventional insurance. Some are going a step further and offering corporate wellness programs such as those offered by startups such as Lime-Ade.

My experience initially working as a management consultant to nearly 30 hospitals followed by founding Microsoft’s healthcare business has led me to the conclusion that it is virtually impossible to reform a fundamentally flawed model (i.e., the payment side of the equation). I outlined this in more detail in my Huffington Post piece entitled Health Insurance’s Bunker Buster. But taking giving employees new healthcare choices is one way startups can compete with larger companies in the talent wars.