While Health Insurers Sleep, Nationwide Enters Health Insurance Market

As outlined in Healthcare's Trillion Dollar Disruption, over the next decade it is expected that $1 trillion of annual revenues will shift from one set of players to another. Despite this, from what I have observed most health insurance organizations are dooming their innovation efforts to failure.

The shift from fee-for-service to fee-for-value literally turns incentives on their head. Despite this, most incumbent healthcare organizations are simply making tweaks to their core model. This leaves open major new market opportunities. For example, yesterday news broke of a game-changing insurance offering that removes what some refer to as the 40% insurance bureaucracy tax.

Insurance companies outside of healthcare recognize the absurdity of insuring day-to-day healthcare needs typically addressed in primary care settings - the healthcare equivalent of a trip to your auto mechanic or a new paint job on your house. Nationwide Insurance, a leader in property and casualty insurance, is capitalizing on the lethargy of traditional health insurers by entering the healthcare market with a completely different offering in conjunction with a couple other organizations.

How the Employer Health Ownership Plan (EHOP) Works

Most companies are fully insured, meaning they contract with insurers for healthcare benefits that remain a fixed cost throughout the term of the contract. If they reduce healthcare expenses by encouraging employee wellness, those savings benefit their insurance company. Moreover, employers' premiums rise as health system costs increase, leaving them at the mercy of cost shifting in an inefficient market.

Self-insurance under the EHOP converts approximately 70 to 80 percent of a company's healthcare expense to a variable cost. As the company and the EHOP succeed in reducing healthcare spending, those underwriting profits flow directly back to the employer, who is now an owner of the 'captive' insurance plan. The EHOP also includes reinsurance to limit the employer's financial risk.

Finally, EHOP participants pay no out-of-pocket costs for care in their Direct Primary Care medical home. Having comprehensive primary care available at no cost enables employees to better manage a higher deductible for hospitalizations or specialty care.

The EHOP partners with Roundstone Insurance and the employer participant in the captive is covered by reinsurance written by Nationwide Insurance.

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