Kristine Harjes: So, first thing we want to
talk about for this episode, maybe the obvious overlap between healthcare and tech, it’s
something we’ve talked about on the healthcare edition before, but I thought it would be
awesome to get some more of the tech insight into it. This topic is, of course, wearables.
So, what do you need to know to understand this space? Dylan Lewis: A name that we talk about a ton
on the tech show is consumer tech company, Fitbit. They’re one of the leaders in the
wearables space. By shipments, they are the market leader at the moment, just over 20%
market share, and they have those fitness bands that you’ve probably seen people all
over the office walking around with. Some of them are very minimalist, rubber bands
with trackers inside. Some of them resemble more of a smartwatch, some of their higher-functionality
products. And for some of the healthcare listeners who
may not be as familiar with them, their products range from $60 with the Zip, which tracks
steps, distance, calories, active minutes, very basic stuff, up to around $250 for their
Surge, which is all of the above plus GPS tracking, splits on runs, things like that,
elevation, heart rate, some really advanced metrics there. And I think that general spectrum
is pretty representative of what you would expect for the wearables space. Harjes: So, looking at this from a healthcare
perspective, the thing that comes to my mind as the huge opportunity is the data behind
that, and how you could use that, kind of in the same way as, for example, some car
insurers will give you a little device that tracks whether or not you’re a good driver.
Like, could you take a wearable device, use it to track whether you work out or say how
much sleep you’re getting, all these variables that you know play a big role in your general
health, and then look at that from an insurer standpoint and get discounts or be able to
better match up products? Are there companies that are working on this? Lewis: Right now, a lot of data interaction
we’re seeing is with individuals. You’re a Fitbit user, right?
Harjes: I was. Lewis: (laughs) Was. So, you’re part of the
people who are having it collect dust in a drawer somewhere?
Harjes: Yeah, I’m one of the sheep. Lewis: (laughs) Yeah, that’s one of the problems
with Fitbit. But, a lot of the data in direction right now is individuals. So, they’re tracking
what they’re doing on a daily basis, maybe how they stack up against their friends, things
like that. But, we’re not really seeing large institutions make use of that data. And obviously,
the immediate connection we have when we talk about people’s health habits, things like
that, is health insurance. And the lead-in to this show was this quote
from an interview that Fitbit CEO James Park did with Jim Cramer in December. Cramer had
asked about the potential for health insurers to integrate these fitness trackers into their
plans in some way or another. And Park said, “That is the holy grail of this category,”
meaning fitness wearables, “and it’s going to happen. When it happens, that is going
to be a huge inflection points for the business.” So, this is obviously something that he’s
very interested in. We can get into this a little bit on the show, but I think insurers
are particularly interested in having some more advanced health metrics on their planned
participants. So, it could be one of those awesome cases where it’s a win-win for consumers
and businesses. Harjes: Yeah. This, to me, screams opportunity,
particularly as insurers have struggled under Obamacare to find profitability. When UnitedHealth
Group reported that they took a huge loss on Obamacare plans, and mind you, this is
the biggest health insurer out there. They estimated a $420 million loss on the Obamacare
exchanges in 2015, mostly just because their actuaries must have messed up, where the pricing
wasn’t quite reflective of the actual needs of the population they were serving. So, you
have to wonder, if you have better data, and a better understanding of the people that
you’re trying to serve, can you get a better price point, and this be able to meet those
really tight margins that a lot of insurers are facing? Lewis: And even if it’s a minor behavioral
tweak, these kind of programs can get people thinking a little bit more about running once
a week or something like that, or just being a little bit more health-minded, and that
will obviously trickle up to some of the insurers. So, first, talking about this, I thought it
would be interesting to talk first about John Hancock and what they did on the life insurance
side of things. Obviously a little bit different, a little more of a financials take. But in
searching around and getting some background on this, they’re one of the immediate insurers
that popped up. Harjes: It is remix week, after all. Lewis: Yeah, so why not? You want to bring
in oil, too? We can talk about them. (laughs) Harjes: Ooh, (laughs) we can try. Lewis: So, John Hancock has their Vitality
program, which is an employee health performance type business. They’re based out of South
Africa, I believe, and they work in promoting healthy initiative for employees and consumers.
And so, basically, the way John Hancock’s program works is, you sign up, you take this
health review, they issue these goals based on your current level of activity and the
various levels that they aspire for people to reach, and then they send you a free Fitbit.
So, they track your fitness activity, you earn points for doing certain things, like
going for a run. Actually, getting a health checkup is another
thing you can get points for. Then, those points can be redeemed for travel rewards,
gift cards, discounts, things like that. And based on the levels you achieve, you can be
eligible for premium discounts in future policy years, which is kind of cool. And by participating,
you start out paying premiums at roughly a 9% discount, which is pretty cool. That will
shift down, I think, by about 30 basis points for every year that you’re active. So, it’s
a pretty awesome, I think, deal, for people who are in the life insurance game. Harjes: Yeah, 9%, that’s huge. Lewis: Yeah, and I know Hancock was using
it to stoke interest in life insurance. I think a lot of people are not participating
as actively as they have in the past. So, that was the impetus there. But, looking a
little more on the healthcare side, Humana, one of the health insurers — this is something
you can speak a little bit more to — has rolled out something similar, although it
doesn’t have all the rewards for participants that John Hancock’s offering does. Harjes: Yes, but they’re also working with
Vitality for something called Humana Vitality. Shocking name, I know. So, this is something
that Humana is using in a lot of their different plans. Interestingly, not any of the government
plans, so not the Humana Medicare members. But, it’s included as a program with all of
the commercial members’ medical plans. So, if you sign up for the plan, then all of the
sudden, so businesses can save up to 10% for having their staff reach a certain level of
achievement with their different metrics that they’re tracking. And it’s kind of speculation
whether or not that actually trickles down to employees savings, but you’d have to think
that if you’re an employer that wants to have their employees actively targeting, say, 10,000
steps a day, or whatever the different numbers are that they’re looking at, you would probably
incentivize them so that you then can receive that 10% discount. So, it kind of seems like
a win-win. Lewis: Yeah, that trickle down might manifest
itself in a couple different ways. Like we were talking about before the show, it could
be that there are employer programs in place where getting certain levels gets you gift
cards, and the handle it that way. It could be that they choose to lower premiums or find
better rates for people, and pass that subsidy down. So, a couple different ways to approach
it. I think, one of the beauties of this, and something we alluded to earlier, is that
it is a win-win. It seems like it’s something that benefits both sides, aligns incentives.
So, obviously, some of the pros here, if you’re a user, you’re saving money and you’re encouraged
to live a healthier life, which is pretty awesome. And for the insurers, you’re getting
way better data, your incentives for people being healthier, making better choices, perhaps
not smoking or going to the gym more often, those incentives are aligned with what benefits
the plan. So, theoretically, it should be good for the business. Harjes: I feel like there’s a “but,” coming. Lewis: (laughs) There’s definitely some buts.
One last pro though, for insurers, it probably makes insurance, given that it can reduce
costs, a little bit more appealing for people that are younger and healthier. It kind of
gets rid of that attitude of “Oh man, I’m totally subsidizing the older, possibly out
of shape or ill people that are also participating in this plan.”
That said, some cons to deal with. For users, you’re not really saving that much money if
you’re looking at John Hancock’s side of things. So, it’s not a perfect parallel, looking at
life insurance and health insurance. Or, like we talked about before, auto insurance and
the black boxes that look at the diagnostics on a dash. I think most life insurance premiums
will probably wind up saving you somewhere around $80-90. You get a free Fitbit, which
is pretty cool. So, figure, run that over the 2-3 years, maybe they issue a new one,
the total value of this isn’t overwhelming, and there’s definitely a tradeoff there where
you’re providing pretty detailed behavioral data about yourself to a major company. I’m
sure there’s agreements in place that they’re not going to sell that data or do anything
like that. But you’re exposing yourself to more digital issues. And, I guess, on the con side for some of
the insurers, similarly, major cyber security issues. These insurers already have very robust
personal information, Social Security numbers, residence, you probably know more than I do,
but birthdays, things like that. And that’s something that people are very accustomed
to giving already, but this is kind of a different level of data. It’s much more behavioral,
pattern. It will know that you go to the gym every Tuesday from 6 to 8 and every Thursday
from 7 to 10. You know? Harjes: That’s a long gym sesh. Lewis: It’s a very long gym sesh, but if you’re
only going twice a week … Harjes: Yeah, okay. (laughs) Lewis: (laughs) So, it’s just a different
type of comfort that consumers would have to have which providing information. Harjes: Yeah, exactly. And right now, it is
pretty voluntary whether you want to be a part of these programs and save a little bit
of money. But then, the question becomes, if you do sign up for it, how exactly is your
data going to be protected?