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Is a slick technology “stack” for benefits more important than low insurance rates?

Boy is that a great question! Well, I’ve been at business for 20 years now and have seen a few bubbles burst – meaning disruptors in the insurance economy, specifically group health insurance, and have found the answer to simply be no. While there is massive disruption right now from well funded start-ups from brand name venture capitalists, it has in fact been discovered that a lack of true insurance financial underwriting leads to a massive churn rate of the clients smitten by nice UX of the new systems.

So why is this? Well unfortunately many venture-backed companies in the disruptive insurance-tech space are spending money like drunken sailors. That’s okay when you do not have a burn rate of a few millions bucks a year to a mere 8-figures a year, but for massively unprofitable growth companies, it seems out of order. Though I can applaud this newest revolution as it was both needed and timely, I can’t say it has not already been commoditized – the tech stacks that is. Unfortunately, one of the folks I love to quote is former Oxford Health Plans CEO, Kevin Hill, who has told me for years, “Chris, the graveyard is filled with insurance technology start-ups who imploded.” I reference Kevin often, and he may not even realize it, but while I’m watching a few implosions in our industry right now who will go nameless, he seems right again.

So who are the winners? Is it the smart agents/brokerages that have learned from getting their teeth kicked in by these technology start-ups? The smart ones are running to spend their own commission dollars to implement a technology stack that rivals the all-in-one technology model. Or will the winners be the elite in the start-up growth economy who are off to bumpy starts and plan on continuing to raise money and outpace the inevitable financial downturn? Seemingly many of these very growth companies are decades away from profitability…..and many argue a downturn will come in the neighborhood of 18-24 months after Trump’s inauguration this past January.

I’m gonna gamble and go with older and wiser Mr. Hill, and assume the graveyard is going to fill up again. A few will get very rich when they’re acquired, go public, or find a way to make money – the venture-funded growth companies are who I mean.

The ACA/Obama got it wrong, and the new Trump White House is on a very similar path. They’re all so focused on the demand for insurance delivered by the same broken insurance carrier models offering networks filled with the same broken hospitals – I’ll pick on them in another blog…that’ll take lots of words. Until the government and the constituents in this space agree to take on the supply side conundrum, I feel like we’ll chase our tails on this health insurance fiasco for another decade.

My last comment is on consumerism, which is happening painfully slowly. Without the right pricing of the products we buy forcing us to shop (deductibles before any benefits) most smart folks in this space agree we’ll bankrupt the U.S. because of healthcare costs. So anything we can do to augment consumerism – shopping and comparing services and prices – is a great, great start to the head wind we have in our country.