Virgin making health insurance more like car insurance

One key to real health reform is linking incentives for wellness to costs.

We do it in car insurance. If your record is loaded with accidents and tickets you pay more. Many carriers offer "good driver" discounts.

Why can't we do that with health insurance? Now we can, and one way to make that work is with an application created by a unit of Richard Branson's Virgin Group.

Called Virgin Healthmiles, the system combines tamper-proof exercise measurement devices, regular screenings for blood sugar, body mass index (BMI) and cholesterol, and an online service that delivers results to employers who commit to the program. (Image from Virgin Healthmiles.)

The initial cost is super-cheap, said Virgin Healthmiles CEO Sean Forbes (no relation to the publisher). The software service costs as little as $27 per participating employee, per year. The client devices can be replaced for just $25 each.

The key is the business model put in place by employers, a sliding scale of discounts for participants, based on measured results, said Forbes.

This delivers serious savings.

For employees, it costs $12,500 to insure the average family. Discounts can now go as high as 30% under the health reform law, although the old law's 25% limit was also serious cash.

For employers, some participating companies have seen cost increases of zero after seeing 19% rises the previous year.

Just as important, the program can change a corporate culture. "It changes the kind of people that join or stay at a company." No surprise, since increased costs are borne entirely by those not participating in the program.

"Giving everyone health insurance doesn't make the population healthier," Forbes continued. "I may make a poor decision because someone else is making the right decision. We have to link decisions to outcomes.

"Wellness has failed because it wasn't measured or was self-entered."

It's also important to note the social dynamics at work, Forbes noted. His company did a survey of employers and employees, asking under what circumstances they would participate in such a program. The overwhelming response, 80%, was they would if others did.

There is also a strong self-reinforcing dynamic among participants. When the program first began, for instance, some people tried to cheat the machines, by tapping their feet during meetings with the pedometer on the foot. Viral videos and nastygrams on social messaging sites helped put a stop to it.

"We renew over 90%" of companies that sign-up, said Forbes. "The reason they keep paying is we can show a linear correlation between group improvements in things like blood pressure and BMI, measured monthly, which lets us report to employers linear correlations with claims on chronic diseases."

Forbes said he was an engineer before going into finance. He believes in data. And data can make believers out of both employers and employees. It's real health reform, completely private, taking advantage of incentives that existed before the present health reform law was enacted.

"There's a growing population of employers who need to manage wellness like you manage a supply chain or a sales pipeline." As more employers self-insure their risks, expect more to take advantage of programs like this.

This post was originally published on Smartplanet.com