How the Digital Trinity is Transforming Health Insurance

surdakby Christopher Surdak, JD

In his recent post, “The Politics of Big Data,” my friend and colleague Jim Bacon asked some pertinent questions regarding how our government, and our society at-large, can put data to use for the common good. In a fairly short discourse Jim hit on a range of explosive topics, from privacy, data sovereignty, property rights, Universal Service, government regulation and legislation, universal health care, Obamacare and Medicare/Medicaid, predictive analytics and preventative medicine, and more. Each of these could fill a book in their own right; I should know, as I’m working on those books right now!

Of all of the issues raised by this discussion, the one that immediately came to mind was that of the use of our individual data to support the effective delivery of healthcare. As I have written and spoken of extensively in the recent past, healthcare stands to be the industry most disrupted by the application of Big Data in the coming decade. (Indeed, I’m keynoting a discussion on exactly this disruption at the American Health Information Management Association information governance conference this week.) In no other industry is so much valuable information put to so little use, for so little gain, at so much cost, thereby leading to suffering, the waste of human life, and the ineffective expenditure of so much treasure.

Why is this so? Why is our health system so sickly when compared to that of other countries? Why does healthcare seem to extract so little value from information, when compared to other industries? Is it from too much government regulation, or too little? Is it from the influence of commercial special interests such as the payers, or the professional special interests of practitioners, such as the AMA? Is it because our technologies cannot meet our needs, or is it because we are not prepared to accept the implications of those technologies? I would argue that all of these factors are at play in this discussion; that all of the ranting that accompanied Jim’s post were all equally spot on, and all completely off the mark.

All of these positions are equally accurate, and equally pointless in the real world. Whether healthcare providers put patient data to work for the common good or their own good is irrelevant; it will be put to work in any event, with significant unintended and extremely disruptive consequences. Whether special interests or patients will benefit from the use of data is not open to question. The answer is: both will. Whether or not our privacy will be sacrificed or not is also a pointless question; of course it will. And finally, whether or not we will willingly give up our privacy in order to gain these benefits from our data is a further pointless question; we already have.

Disruption in Insurance: The Canary in the Coal Mine for Healthcare

The best example I can give of what WILL happen in healthcare over the next decade, equally in Virginia as with the other 49 states, can be seen in what is rapidly taking over the insurance industry across the country. Insurance is an old-school, highly-regulated, data- and money-intensive industry. Insurers have both access to massive amounts of very private information on all of us, and intense motivation for putting that data to use. The potential for profit, and hence abuse, is exceedingly large.

But, the motivation for using our data isn’t necessarily nefarious. Insurers look at each of us to determine our risk profiles so that they can both make money (that is, remain solvent so their checks to benefactors or debt holders don’t bounce) and provide coverage to all segments of the population at affordable prices (or at least the perception of affordability).

The regulatory framework that governs the insurance industry is well over a century old. It is state-based, state-enforced, and is designed to provide universal coverage to people from all walks of life. If you drive a twenty-year-old pickup truck, you probably pay proportionately less than someone who drives a new European sports sedan. If you’re a 60-year-old who smokes a pack a day and loves Miller Time, you’re likely to pay more for your life insurance than a 24-year-old jogger and yoga nut. Our regulatory framework has been designed to try to make insurance available and fair for all, and to ensure that insurers remain profitable, but not excessively-so.

Despite all of this, insurance is going through a fundamental, massively disruptive, and permanent transformation right before our eyes. This transformation is being driven by what I call the Digital Trinity of mobility, social media and advanced analytics. These three technologies trends are completely transforming how we live, work, play, and interact with our world, and they are causing enormous unintended consequences across our entire society. These changes are comprehensive, and old-school, hard-line, heavily regulated industries such as insurance are the MOST likely to be disrupted, rather than the least likely.

To see these disruptions consider this. Car insurers have deployed smartphone apps that allow them to track the driving behaviors of their customers in real-time, turn by turn. These apps keep track of how fast you accelerate, how hard you brake, how fast you drive down the residential streets of your neighborhood, and whether or not you text or talk while driving. These apps create huge amounts of extremely sensitive data, they are massively invasive of your privacy, they provide an enormous source of information for discriminating against you in setting your insurance rates; and they are massively popular.

If I told you three years ago that car insurance companies soon would be tracking all of this information on the drivers that they cover, you might think I was crazy. If I then told you that customers would sign up for such apps by the tens or hundreds of thousands, in order to gain a discount in their rates, you’d probably think I was certifiable. Americans are voluntarily giving up extremely intimate details on their behavior, surrendering their Constitutionally inalienable rights, and opening themselves up to all manner of government and commercial scrutiny in order to save 15% on their car insurance? Yes they are, in droves. You may think this sounds crazy, and you’d be right.

Yet, this is exactly what is going on right now. Innovators such as Progressive Insurance started these behavior-tracking apps, providing discounts to drivers who demonstrate good behaviors. These apps have been so successful, that now all insurers are scrambling to deploy similar apps with similar capabilities, while they still have time.

These apps allow insurers to create millions of more classes of consumers than their old data used to allow. Insurers can still claim to not discriminate between their clients within a class (the basis of nearly all of our insurance regulations), but this new data allows them to create millions of classes of one, which effectively annihilates the regulatory framework that took a century to build. In a relative blink of the eye, the Digital Trinity has completely disrupted an entire multi-trillion-dollar industry.

Unintended Consequences

The dark side of all of this great new technology and insight (and there is always a dark side) is that our present use of the carrot will necessarily be joined by extensive use of the stick.

Insurers aren’t supposed to penalize their customers for their bad behavior; that would be unseemly, and is perceived to be unfair meddling in their personal freedoms. Such logic sounds good during a legislative hearing, but in reality, it’s bunk. If insurers know that you’re a good driver most of the time but a bad driver on a certain stretch of country road, early on Saturday mornings, how long will it be until they start sending notes to this effect to the local police department? If insurers know that this group of people are factually bad drivers, how long until factually good drivers in the same insured class will demand insurers penalize the bad drivers (or or drop penalties against the bad drivers)? How long can Universal Coverage be justified and held as rational when none of us remains anonymous?

Once you start changing behavior by using the carrot it is only a matter of time until you start punishing with the stick. This is a slippery slope, and we’ve already pushed ourselves over the top of the moral mountain. Very soon, it is likely that if you’re a bad driver — prone to speeding, braking excessively hard and so on — you’ll get an automated ticket from your local government, a small penalty from your insurer (automatically deducted from your Apple Pay account) and an instant coupon for 20% off your next brake service at your car dealer.

Healthcare Disruption

The same thing is coming to Healthcare. Given the enormous inertia in the system, the Digital Trinity will take a bit longer to manifest itself in healthcare. Nevertheless, these changes are already coming, as can be seen in hundreds of startups implementing healthcare solutions and apps that border on the hairy edge of legality and morality. These apps deliver compelling and desirable results to early adopters, even as they challenge nearly all aspects of the regulatory frameworks and societal norms that presently govern healthcare.

In the very near future, “Going to the Doctor” will mean that you’re seriously, seriously ill. Instead, when you’re merely sick, you will “see your Doctor” via an app on your smartphone, in real time, from the place of your choosing, probably sponsored by some pharmaceutical company. Your diagnosis will be made remotely, using minute-by-minute tracking data and predictive analytics to prevent you from getting sicker. If this vision makes you uncomfortable, tough. This reality is coming because enough of us will think that we’re better off for it. It turns out most of us are willing to give up most of our Constitutional rights most of the time, as long as the price is right and the app that we use is sufficiently addictive.

Ben Franklin is often quoted as saying: “They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.”

Perhaps a modern-day Franklin would be read blogging: “They who can give up their rights to obtain great coupons deserve neither rights nor great coupons.”

Deal with the Devil?

Among the disruptive results brought about by the Digital Trinity, digital populism may be the most dramatic. Over the coming decade, you will see more and more “legislation by plebiscite,” where old social and legal norms are swept aside by online popularity contests and digital protests, all enabled by apps.

The taxi app Uber may be illegal in half of the places in which it operates, but unfortunately for incumbent taxi companies, Uber just works better. No amount of regulation, lobbying or yelling from an ethical bully pulpit will overcome millions of people who vote with their smartphone every day. Such populism is presently seeping into nooks and crannies under the foundations laid by our society for the last two hundred years. These foundations are being compromised by the same forces that make our lives dramatically more convenient, day by day.

We are coming to a reckoning. There will be a time, in the not-too-distant future where we will have to ask if all of the conveniences brought by the Digital Trinity are worth the unmeasured costs we are paying. Unfortunately, by then it may be too late. In the meantime, organizations will use our data to improve our lives, because you and I demand that they do so.

Christopher Surdak, the author of “Data Crush,” is a global expert in information governance, analytics, privacy policy, social media and eDiscovery who lives in California.

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23 responses to “How the Digital Trinity is Transforming Health Insurance

  1. I am interested in how you foresee the so-called Digital Trinity interacting with the Genetic Information Nondiscrimination Act in the insurance/health care sector.

    I can understand your Uber example, but let’s be clear: Uber is violating what most in society feel is a “monopoly.” It is much easier to mobilize “digital populism” in such a scenario. Whereas GINA is an act that confers rights on each individual. Can “digital populism” overcome your right not to be discriminated against due to your genetic composition?

    While I am no health care expert, it is not really difficult to see how your projected changes in how health information (analytics) may be used starting to conflict with GINA.

    I can also see conflicts with HIPAA. Can your idea of a Skype visit with a doctor fulfill HIPAA’s privacy rule requirements? Yes, some consumers may say, “I prefer convenient service over privacy.” However, I think you may be overestimating that sentiment. There are plenty of people from Millennials to Boomers who would be furious at the disclosure of their sensitive personal health information.

    Thanks for any insight you can provide.

  2. I’d have to disagree with the overestimation argument. To the contrary, I’d suggest you’re underestimating the power of digital populism. My skype example isn’t a hypothetical, it’s already here. Several apps are already providing this service, and they’re growing like wildfire. Check out drondemand, as an example.

    HIPAA and GINA reinforce the notion that regulators somehow still have control of this genie that is out of the bottle. This is quaint, but completely illusionary. Any regulation that governing bodies push out (after a decade or more of discussion) has already been designed-around long before they’re enacted.

    In all likelihood, you use gmail for communicating to others. You may talk about quite a bit of personal and private stuff on gmail, and have some expectation of privacy around that content (Ms. Clinton certainly had them). This expectation is completely misplaced, and hopelessly naive.
    If you use gmail, you no doubt remember having to re-accept their new terms of service a year ago. Certainly you read all forty pages of the user agreement, and all of its ins and outs. When you accepted the new terms, you gave Google proprietary rights to all of your emails, both inbound and outbound. So, when the FBI wants to see your personal emails, they merely call Google and ask for them; no warrant required.

    Who gave them permission to do this? You did. Indeed, your continued use of their services constitutes your consent to any new changes to their terms of service that they care to implement (read the agreement, it’s right in there). So, this notion of privacy, of control, and of adherence to regulatory standards is an illusion created by those controlling information for those who are willing to give it up in return for something of value.

    Digital populism isn’t an abstract concept, rather, it is how our society now functions; like it or not.

  3. Excellent article. And of course the problem is going to be far larger and pernicious than insurance. Imagine the intended and unintended consequences of the automatically driven car.

    For one of endless examples, if you do not get 8 or more hours sleep the night before, your car will not turn on. The list of controls others soon will be able impose on each of us will soon the endless as a matter of fact.

    Equally frightening, the tenor and rising intolerance of our society and elites, including the political class and its Leviathan State is rapidly growing every day to soon take of the Control of all of us , each and every one, all the time.

    We are entering into a very rough and frightening time.

  4. While I agree with quite a bit of what Mr. Surdak surmises about technology, innovation and disruption – about all industries including health care – and I MUCH APPRECIATE the discussion without turning it into a left-right philosophical food fight.

    HIPPA that governs employer-provided insurance does not allow discrimination based on health status, demographics, and history as most insurance does do – except also Medicare, MedicAid and obamacare.

    For instance, insurers cannot deny insurance based on pre-existing conditions – and everyone pays the same premium for a class, and everyone pays for maternity care whether they are male or 60.

    People with 3 kids pay no more than People with no kids of child-bearing age.

    if a child is born – the premium does not go up for “family” coverage.

    If you are 68 years old and a lifetime smoker – you still pay 105.00 a month for Medicare.

    so – yes – if you are 68 years old and drive like a bat out of hell – you’ll pay way more for auto insurance – but the same 105.00 a month for Medicare.

    so – technology, innovation, disruption and the trinity won’t change the way we do health care.

    and – it doesn’t change the way that health care is done in the other OECD countries either.

    and even though the OECD countries leverage technology and innovation far more than we do for health care – for instance – electronic medical records – the still don’t “incentivize” “healthy habits” any more or less than we do.

    by the way – here’s what HIPPA says about employer-provided health insurance:

    ” HIPAA’s umbrella of protection:
    Limits the ability of a new employer plan to exclude coverage for preexisting conditions;
    Provides additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events;
    Prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information; and
    Guarantees that certain individuals will have access to, and can renew, individual health insurance policies.”

    http://www.dol.gov/ebsa/publications/yhphipaa.html

  5. Car insurers already have contemplated the self-driving car and the response of all of them has pretty much been, “ain’t no way.” Google has contemplated it too, which is why Google is now licensed to sell car insurance in over 40 states.

    Disruption and digital populism caused by the digital trinity? We haven’t seen anything yet.

  6. It’s already happening in healthcare in the US, as a direct result of ACA. ACA sets a floor for the industry; the minimal service available to all. ACA is hopelessly unaffordable, but it’s where we are.

    As a result, the level of service provided under these minimums will continue to erode which creates a cornucopia of opportunities for alternatives. These alternatives are already launching, because those with the means to pay for better care certainly will.

    What will that look like? As I discussed with some of your state’s leadership last summer, we’re already seeing online auction sites popping up, where doctors can auction off appointment openings to the highest bidder. Don’t want to wait 6 months to see a specialist? Just bid higher and you’ll be seen tomorrow. The doctor gets 80% of the bid price, the app provider the rest.

    Oh, and all of this takes place outside of the present pay and regulatory structure, so it’s the Wild, Wild West and will likely be massively popular and profitable.

    Is it legal? Possibly. Is it moral and ethical? I don’t know. But what I do know is that if my six year old needed special care and I could cut three months out of the wait time, I’d bid high and bid often.

    It’s already here, and it’s just the start.

    • ACA is not “hopelessly unaffordable” at all. where does that conclusion come from?

      all health care is a balance between cost and rationing…

      what the ACA does is the same thing other insurance does.

      people who get seriously sick – don’t “bid” on appointments…

      they hope and pray their insurance covers their expenses …

      treating health insurance like auto insurance is totally bonkers.

      sorry.

      if you fundamentally want to change health insurance – you repeal HIPAA, take away the 40% tax break and let insurers cancel the people that cost them money – and see what happens… politically.

  7. I’m basically AGOG here that folks think that health insurance functions the same way that auto insurance does.

    nothing could be further from the truth.

    and if that actually were the truth – that employer-provided health insurance could dump people who got seriously sick – all hell would break lose. All this talk about Ocare would evaporate as families across the US realized that if they had a kid with a serious condition that their employer insurance could refuse to cover that kid – all hell would break lose.

    all I’m asking is that folks recognize that reality – when talking about innovation and disruption and the prospects of such disruption would have on changing the way health insurance actually works.

    come on guys… let’s deal with the realities here.

    • Larry, Chris never said, “Health insurance functions the same way that auto insurance does.”

      He used the disruption of the auto insurance industry as an example of the kind of disruption likely to occur in the health insurance industry. Because the two industries are somewhat different and work within different legal frameworks, disruption will not take precisely the same form.

      You can either acknowledge that disruption is coming and we need to prepare for it, or you can continue to live in LarryWorld where government knows all and solves all.

  8. Jim, well said, and far more PC than I would have bothered to be. Partisan deck-chairing on the Titanic sure feels good, and feels productive, right up until the waves of the North Atlantic start to lap at your feet.

    There’s a point at which I just let those who don’t realize what’s going on all around them keep enjoying their bubble, while it lasts. Why ruin the surprise?

  9. there is no “Larry world’. There IS the world of HIPPA which does not allow health insurance companies to function the way that auto insurance companies function.

    the “disruption” will not happen because the data collected will not be used to determine the premiums – based on the subscribers behaviors and history.

    this is not “partisan”.

    read HIPPA – I’ve given it to you:

    HIPAA’s umbrella of protection:

    Limits the ability of a new employer plan to exclude coverage for preexisting conditions;

    Provides additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events;

    Prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information; and

    Guarantees that certain individuals will have access to, and can renew, individual health insurance policies.”

    http://www.dol.gov/ebsa/publications/yhphipaa.html

    it boggles my mind that folks do not understand HIPPA when talking about health insurance…

    it boggles my mind when folks think Ocare is “new” and “unique” when it prohibits companies from using subscribers health status to determine premiums.

    all this fru fru over Obamacare when employer-provided has been subjected to the same rules – for decades.

    no matter how much you “instrument’ people with fitbits and blood pressure monitors and other sensors – none of it can be used by insurance companies to determine their premiums.

    which is totally unlike Progressive and GEICO and other auto insurance companies who CAN do that and CAN “incentivize” behaviors.

    how can anyone who is active in discussions about health care, insurance, and ObamaCare – NOT KNOW THIS?

    how can such a person be someone who can actually promote changes to health care – if they do not know the fundamentals with regard to HIPPA?

    come on guys.. geeze… you cannot “disrupt” if the law makes such disruption ‘illegal’ and changing that law – fundamentally changes the way that most Americans believe health care works?

  10. Try not to play with anything sharp. It might burst your little bubble prematurely.

  11. And it’s HIPAA.

    You are right, I haven’t a clue what is in HIPPA.

  12. listen – I am ALL FOR innovation and disruption but by nature I am a pragmatist… I try to recognize the obstacles…

    and HIPPA , decades ago – changed the way that health care works in this country – by essentially denying insurance companies the normal techniques that they’d use in mitigating risk – i.e. getting rid of those who are too risky to insure – for employer-provided health insurance – but not market insurance –

    thus we set up a winners and losers egosystem for health insurance where if you got a job with an employer who provided insurance – you were given “safe harbor” for you and your family – no matter if you were fat and unfit or had a family history of cancer or had five kids while other had none – you were guaranteed the same premium costs.

    and we ended up with a bizarre mindset where the folks who had employer-provided – and safe harbor – thought – it was the employer who did that not the govt and so it was taken for granted – so much that when Obamacare came along and prohibited insurance companies from denying pre-existing conditions – it was thought to be a radically new concept -not one that HIPPA had guaranteed for decades.

    and most legislators either knew it or were clueless because while they’ve been hot to trot to repeal Obamacare – not a single one has advocated repeal of HIPPA and a return to more traditional insurance rules where the insurer – works to keep premiums low – by shedding the folks who are risky and expensive…

    big data – the big kahuna data wave – won’t fix this… no matter how much the insurance company looks at your behaviors and risk – he cannot price your insurance accordingly if it is employer-provided, Obamacare or Medicare.

  13. In contemplating this subject, it is difficult to imagine that analytics can work without violating the ADA or GINA.

    It’s easy to talk about Uber. However, Uber was a “oh yeah, go enforce the monopoly” tactic.

    Analytics would expose insurers to enormous pools of liability under GINA, ADA (associational discrimination claims), and HIPAA….I don’t think they could do so without breaching their duties to shareholders (if they’re publicly traded).

    I’m also very skeptical of “digital populism” overwhelming government when I consider securities regulation. I recall quite a lot of the same predictions about finance 15 years ago (The SEC is outdated, it will never be able to enforce its regulations in the digital age, there will be too much demand for these “outlaw” products that the SEC won’t/can’t regulate them, etc.). To date, none of that occurred. The SEC adapted itself to the digital age and pursued message board and other digital pump and dump schemes the same way they did in the old days.

    And didn’t we also hear the same about the IRS? I remember the same prophets proclaiming that the paper based ancient tax collectors would be outfoxed, etc. in the digital age (go read some WSJ/NYT pieces from the late 90s, early 00s). I think most tax attorneys would agree that the IRS has adapted, and they’re probably now more effective in the digital age than the old days (i.e. no more Swiss bank accounts).

  14. CVille Resident, having personally met with the leadership of the various three-letter-agencies you mentioned (and many more) I can assure you that you’d be surprised to the extent that they are well behind on the issues caused by Big Data. They know it, they don’t know how to fix it, and they’re pretty scared.

    But that’s not the sort of thing they’re going to publish in their quarterly reports, now is it? Just like most of the Fortune 500 have been hacked and their (our) data has been compromised, but those (few) who realize it usually try to hide that fact, despite regulations that demand disclosure.

    All of this is part of our “New Normal,” which is the topic of most of my work.

    • Plus I am concerned with the apparent trend that substantial parts of the US government appear to growing ever more incompetent particularly relative to the growing wizardry of segments of the private high tech sector (and also that sadly more and more folks, including leaders, whether in government and the private sector, seem ever more lawless, whether they be acting alone or in concert.) All this amounts to a brew with the potential for terrific disruption.

  15. I have no doubt that the forces behind Uber and Airnb and many other big data technologies will change the way we work and live.

    Mark Warner, a high tech millionaire Senator is convinced the GIG economy is going to challenge the FICA funded Social Security as more people become independent contractors who pay their own FICA rather then employed wage earners where the employer pays FICA.

    those same folks are not going to have health insurance unless ObamaCare “sticks”.

    I think also – Doctors and other providers are going to yield to electronic medical records – perhaps later rather than sooner but it’s going to happen …

    but the question about health insurance – and whether it can shed higher risk people and/or charge them significantly higher rates in group policies – than others in the same group – is not going to happen without major political upheaval… as currently – about 70% of people expect to be able to get insurance from their employer without being denied and without paying more than others…

    it could well be that we’ll move away from that and everyone will be on their own – and if you have unlucky genes or just bad luck or you’re irresponsible – that you’ll have to pay sky high rates – and those who don’t use health care – will pay super low rates … per big data.

    we’ll see – but both Obamacare and HIPPA will have to be repealed.

  16. When OPM still calculates federal personnel pension benefits by hand, deep in a former PA salt mine, using hard-copy paper output from all the various federal agency HR systems because they can’t even talk to each other (I’m recollecting a series of articles in the Washington Post last year about this appalling state of affairs), how much do I have to fear Big Data in my daily life?

    That’s a rhetorical question. Of course we ought to be concerned about privacy and about missed opportunities for efficiency and all that. But horror stories and scare tactics do not map a practical, realistic, path forward. I agree with Larry on that.

  17. That’s ‘talk electronically to each other.’

  18. I know this might be shocking to the concept of GS 5’s mucking around with hard copies in a Pennsylvania salt mine – but OPM retirement is also online…

    https://www.servicesonline.opm.gov/

    on the gloom and doom conspiracy front-… sigh…..

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