Innovation: The One Thing Health Insurers Must Do to Cut Costs Now

The New York Times recently reported on research that looked at 6,000 patients who had just suffered a heart attack (myocardial infarction). The patients were divided into two groups, with one paying the usual co-pay and the other getting prescriptions without a co-pay. The study found what most economists, business people and parents already know - incentives matter. Patients were more likely to take prescribed drugs if they did not have to cover a co-pay.

The health results were striking. According to the Times, "Those in the zero co-pay group were 31 percent less likely to have a stroke, 11 percent less likely to have another major 'vascular episode' and 16 percent less likely to have a myocardial infarction or unstable angina." It is reasonable to expect patients to share the costs of health care so that it is not excessively consumed, but it does not make sense when encouraging a particular action is statistically proven to decrease future medical costs. For example, if using a particular drug or getting a certain exam cuts long-term costs, then customers should be incentivized to take those actions. Insurance companies should pay 100 percent of the cost in those cases. This would drastically cut costs on additional health care for the patient in the future. Another relatively easy solution for insurance companies to cut health care costs would be to invest in tech solutions to monitor diet and exercise. This simple solution has been proven to prevent diabetes, cardiovascular disease and a host of other health problems. Diabetes in particular is a growing problem. Some 103.8 million Americans are either pre-diabetic (79 million) or are already suffering from diabetes (25.8 million). In 2012, diabetes cost our health care system $245 billion: $176 billion for direct medical costs and $69 billion in reduced productivity. Diabetics suffer from a range of related illnesses, including diabetic retinopathy, circulation problems, problems related to obesity and treatment costs. Yet, Type 2 diabetes, which is 90 to 95 percent of the diabetic population, is preventable through nutrition and exercise. Insurance companies and employers should be investing in options that help people take control of their health through positive lifestyle choices. Many creative tech solutions are being developed to monitor exercise and collect caloric burn data, while giving consumers an easy way to monitor and adjust their caloric intake. Among these is a great solution provided by Fitbug, a Chicago health care company that is increasingly selling to both businesses and the consumer retail channel. Fitbug offers a variety of tracking devices, including a low-cost wristband that monitors physical activity, calories burned and sleep, and compares achievements against daily goals. Other systems have been introduced by Motorola, Body Media, Fitbit and others. Companies are increasingly providing Fitbug and similar products to their workers. The results show that these devices are extremely effective in encouraging healthy behavior and lowering health care costs by reducing the likelihood of preventable diseases such as diabetes. Fitbug devices range from $25 to $80, with affordable options for monthly data plans. Instead of waiting for the worst to happen and paying huge costs for care when patients are sick, insurance companies should be spending their money on solutions that will keep people healthy. With hard research that shows requiring co-pays cuts down on vital drug use, why don't insurance companies start selecting certain drugs and exams they will pay 100 percent reimbursement? And why haven't insurance companies explored technological advances like providing monitoring devices to their most at-risk customers? If insurance companies are to remain profitable and relevant, the executives that lead them should take a lesson from the competitive consumer electronics industry and begin to innovate and think differently. Doing so will boost their bottom line and benefit the health of millions of Americans. Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro.