The Health Care Insurance Model: Flipped

Written April 19, 2016 by Tashfeen Ekram, MD

The traditional model for healthcare insurance is based on a system that reimburses based on production regardless of the actual quality of production. This type of system inherently drives all players involved, from the health insurance company to the provider to the hospital, to the financial bottom line. 

This type of system is optimized for focus on profit over the quality of care provided to the patient.

healthcare insurance

As of recent, however, the Centers for Medicare & Medicaid Services (CMS) has taken significant efforts to revamp this model. They’re changing the reimbursement model to be based on the quality of care and performance rather than mere production. The first step towards this paradigm shift is to get more physicians to use electronic documentation for their interactions. Once everything is electronic and mineable, physicians providing better quality of healthcare can be more easily identified and rewarded. In theory, this seems like a great idea. However, the burden of providing quality of care has been shifted onto the shoulders of physicians who are overworked, technology-averse, and overwhelmed with paperwork. Despite the very few doctor bandits out there looking to game the system, the majority of doctors are trying to provide the best care possible.

This issue sounds like the perfect storm for the startup world to solve. And it is. There are a few folks who are attacking this problem head on.

Clover Health

Clover Health is a health insurance company that is using claims data in addition to other sources of data, such as labs and radiology, to provide health recommendations to their constituents. Clover has taken the burden of providing quality of care onto themselves by utilizing software. Rather than relying on humans, why not use computers to solve the problem?! This is certainly a novel idea for some insurance companies, though the tides are changing even amongst them.

Several years ago, I developed a software to use a patient’s diagnoses to see if the patient was taking the appropriate medications based on scientifically proven measures. For example, taking Aspirin after a heart attack. You would be amazed how many patients with a history of heart disease were not on Aspirin. I took the concept to insurance companies, but they didn’t get it. Why? Despite changes being pushed by CMS, most insurance companies still operate in the old paradigm. Although they realize better health can impact the bottom line, they are overall still driven by immediate financial incentives. You can’t blame them as it has worked so far.

Collective Health

Collective Health is a software platform that allows companies to become self-insured. Small and mid-sized companies have no other option than becoming subscribers to a large insurance company. Otherwise, they have no platform to handle the headache that comes with becoming self-insured, such as tracking claims. Collective Health is moving the burden of improving quality of care into the hands of small and mid-sized businesses. These businesses will now be paying for insurance out of their own pockets and will be driven to ensure that their employees get the best of care and stay healthy. This equates to lower bills and more productivity overall. These companies will eventually tie incentives to healthy behaviors, as other large self-insured companies have already done.


Lumity serves as an insurance broker, similar to Zenefits. However, at the time of making the decision of which insurance policy to purchase, Lumity predicts, based on prescription history and claim data, what one’s out-of-pocket cost will be and thus suggests the most financially sound option. Lumity shifts the burden onto the end user, the patient. The patient is now better able to get a handle on what their health outcomes looks like and how that translates to out-of-pocket cost.

There are two common themes you notice in all of these companies. First, they are trying to take value-added-care and make it more apparent to the end user (i.e., the patient). In the old paradigm, patients were of course interested in better health care, but the financial incentives were not aligned. Therefore, it was unclear how to get that for each patient. The second trend is that all of these companies are taking advantage of consumerization of healthcare and they’re putting more of the decisions back into the hands of the patients.

As start-ups continue to innovate to solve the issues of the traditional model for healthcare insurance, we’re going to see the current health insurance model evolve as the focus flips, from production and profit, to patient and quality of care.


Tashfeen Ekram, MD, is a radiologist, self-taught coder, healthcare innovator and Co-Founder of Luma Health. Contact him on Twitter at @tashfeenekramMD.

Picture of Tashfeen Ekram, MD

Tashfeen Ekram, MD, is a radiologist, self-taught coder, healthcare innovator and Co-Founder of Luma Health. Contact him at or on Twitter at @tashfeenekramMD.