Searching for a digital silver lining in healthcare order

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(Editor's note: Today, President Trump announced the end of cost-sharing reduction subsidies that help cover costs for certain customers on ACA plans. Please see postscript.)

After months of fits and starts for Affordable Care Act reform bills in Congress, President Trump decided to take action in the form of an executive order to attempt to patch flaws in current healthcare law.

The order, signed yesterday, does the following, according to Bloomberg:

  • Allows small businesses to band together to buy insurance across state lines (and redefine how small businesses are classified in order to allow more of these purchases)
  • Lets insurers sell short-term plans curtailed under Obamacare
  • Permits workers to use funds from tax-advantaged accounts to pay for their own coverage

The first two points are of particular interest to insurance technologists. Product development and distribution is getting increasingly digital. In fact, niche insurance products are some of the biggest targets for insurtechs, who seek to meet consumers' unique needs with digital tools in order to reduce costs and friction in the buying process.

Whenever these regulations are finalized -- and there will surely be several challenges to them -- there will be an opportunity for enterprising companies to reach these particular customers with next-generation tools. Someone will have to provide the short-term plans. Someone will have to find ways to write low-cost coverage for certain small business owners. And one thing the ACA has surely done, with its emphasis on the online exchange model, is help build an infrastructure around buying health insurance online, like you can with so many other lines of business.

In fact, private health insurance exchanges that serve small business groups, which have been worked on in the past, stand to gain if these regulations become reality, says Michael Trilli, senior analyst for Aite Group.

"This squarely aims to jump start the defined-contribution models that these digital enrollment and eligibility tech platforms are designed to serve," he says.

But one could also imagine companies doing something similar to the insurtech Slice, which identified a certain kind of coverage gap in homesharing and built an entire infrastructure around it. Insurtechs that sell a very specific plan to a very specific audience are not unheard of. This move could open up a new vector for disruption in the business.

Postscript, 9:15 AM Eastern Oct. 13, 2017: With the announcement this morning that cost-sharing reduction payments will be halted, the individual health insurance market faces chaos. That's likely to push most insurance innovation into the realm of resiliency.

"We're definitely in an area where the normal public policy playbook has been thrown out the window," Ben Isgur of the PwC Health Research Institute said in an interview when the Graham-Cassidy repeal bill was being discussed. "The advice i would give anyone in the healthcare industry is to move forward with investments that enhance your resiliency."

That could still include things like optimizing customer experiences for the current reality, Isgur says. But trying to stay afloat in a chaotic environment is likely to be the major goal of health insurers in the near term.

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Healthcare reform AHCA Digital distribution Insurtech Donald Trump