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Giving Out Private Data for Discount in Insurance

Giving Out Private Data for Discount in Insurance | Healthcare and Technology news |

Andrew Thomas’s life insurer knows exactly when he arrives at his local gym. The company is notified when he swipes his membership card, and 30 minutes later, it checks that he is still there, tracking his location through his smartphone.

The insurance company has a vested interest in keeping Mr. Thomas alive and well. In return for sharing his exercise habits, his cholesterol level and other medical information, Mr. Thomas, a 51-year-old medical publisher who lives in Johannesburg, earns points, which translate into premium savings and other perks. By staying in good shape, it is less likely that Discovery, his insurer, will have to pay out his life and disability policies.

“Every Saturday morning, just for playing golf, I get points,” said Mr. Thomas, who said he received about 9 percent back on his life insurance premiums for each of the last five years. “It is trying to make people live a health y lifestyle.”

Now John Hancock will become the first life insurance company to introduce a similar program for American consumers. The program, being announced Wednesday, will apply to both term and universal life insurance policies and is being operated through a partnership with Vitality, a global wellness company that already works with employers and health insurers in the United States.

The concept — which has been used in South Africa, where Vitality is based, Europe, Singapore and Australia — has the potential to transform the way life insurance is priced, at least for consumers who are willing to continually share their health data. But it also raises questions about how that information will be protected — and whether it could be used in ways that ultimately work against a consumer’s best interests.

People who sign up will receive a free Fitbit monitor, which can be set to automatically upload activity levels to the insurer. The most active customers may earn a discount of up to 15 percent on their premiums, in addition to Amazon gift cards, half-price stays at Hyatt hotels and other perks.

John Hancock, a division of Canadian insurer Manulife Financial, says it hopes the program will help reinvigorate life insurance sales, which have stagnated industrywide for decades. Just 44 percent of households in the United States own individual policies, according to Limra, a trade group, a 50-year low. Any product that reminds consumers of their mortality is hard to get excited about, but industry analysts said that financially strained households, changing demographics and increasingly complex and expensive products have led to the decline in sales.

“It has been a slow to no-growth industry for a long time,” said Michael Doughty, president of John Hancock Insurance, based in Boston. “It is crying out for innovation and for someone to try to reinvent the product to make it more relevant.”

The new program also upends the traditional approach to life insurance underwriting, which typically bases its pricing on a detailed but static snapshot of a person’s medical status. Now, John Hancock’s term and universal policies will be priced continuously, at least for consumers who choose the Vitality program.
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John Hancock and Vitality, which is owned by Discovery, said the information would not be sold and would be shared only with entities that help with the program’s administration, though the aggregate data could be used to inform the development of new insurance products.

Nonetheless, some specialists expressed privacy concerns.

“All of a sudden, everything you do and everything you eat, depending on which bits of the information they collect, is sitting in someone’s database,” said Anna Slomovic, lead research scientist at the Cyber Security Policy and Research Institute at George Washington University and a former chief privacy officer at Equifax and Revolution Health.

Of course, buying any life insurance policy requires customers to share detailed medical histories upfront. But consumers participating in the Vitality program must be comfortable providing enough information continuously to meet certain thresholds that will convert into worthwhile savings. That might include the frequency of workouts, reporting a physical exam or answering sensitive personal questions: During the last 30 days, how often did you feel so nervous that nothing could calm you down? Hopeless? Depressed?

“You do not have to send us any data you are not comfortable with,” Mr. Doughty said. “The trade-off is you won’t get points for that.”

Participants need to amass 3,500 points to achieve silver status, 7,000 to reach gold and 10,000 for platinum. Nonsmokers automatically earn 1,000 points, and people with in-range cholesterol, glucose and blood pressure will receive 1,000 points for each. A “verified” standard workout three times a week, or an advanced workout twice a week, provides another 3,120 points over the course of a year. Flu shots, 400 points. The clock is reset each year, though 10 percent of points may carry over.

All customers participating in the program will start by paying a premium priced at the gold level. That is a discount of about 9 percent for a 45-year-old man who bought a $500,000 term insurance policy that covered a 20-year period: He would pay $750 annually, compared with the $825 it would cost outside of the Vitality program.

So what if he does everything right, but breaks his leg? Or worse, gets a serious disease like cancer? While those conditions would not directly affect his rate, if he could not maintain gold status for any reason, he could see premium increases of 1.1 to 1.6 percent each year. But if he reached platinum status, his premiums would fall by about 0.30 percent each year.

The program may attract healthier people who have already engaged in these activities on their own. The strategy also tries to tap into the way humans are naturally wired: There is generally no immediate tangible benefit to life insurance, but this program is structured to try to change that.

“People respond far more to immediate gratification than delayed gratification,” said Dr. Kevin Volpp, director of the Center for Health Incentives and Behavioral Economics at the Leonard Davis Institute. (He has performed research sponsored by Vitality.)

The number of points assigned to a particular activity is determined by how it will influence a person’s longevity, based on Vitality’s internal findings — and its level of difficulty. “Stopping smoking is more valuable than one session of activity,” explained Alan Pollard, chief executive of Vitality. “If something is a complex behavioral change, it will attract more points.”

Vitality’s research has found that Americans are generally five years older than their actual age, after taking into account various health and wellness factors. All participating policyholders will be given a “Vitality age,” which will help the program set personal guideposts.

“The people who have the time to devote to jumping through all the hoops are likely to be better off than average, and those healthy enough to do wellness activities may be unrepresentative of the chronically ill,” said Frank Pasquale, a professor at University of Maryland Carey School of Law. “I believe that is one reason why there is empirical research severely questioning the value of wellness programs.”

John Hancock, which operates in all 50 states, said the universal life program had been approved by insurance regulators in 30 states, while the term program is available in 20 states; more states are expected to be announced throughout the year. It said no regulators had declined to approve it yet.

“It changes the paradigm of life insurance,” Dr. Volpp said. “In some sense, it tries to change your insurance into less of a passive vehicle that pays the bills if something happens, into a more active vehicle to get people to lower their risk.”

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What Do Women Know About Obamacare That Men Don’t?

What Do Women Know About Obamacare That Men Don’t? | Healthcare and Technology news |

For the second year running, more women than men have signed up for coverage in health insurance marketplaces during open enrollment under the Affordable Care Act. According to the Department of Health and Human Services, enrollment ran 56 percent female, 44 percent male, during last year’s open enrollment season; preliminary data from this year shows enrollment at 55 percent female, 45 percent male – a 10 percentage point difference.

What gives? An HHS spokeswoman says the department can’t explain most of the differential. Females make up about 51 percent of the U.S. population, but there is no real evidence that, prior to ACA implementation, they were disproportionately more likely to be uninsured than men – and in fact, some evidence indicates that they were less likely to be uninsured than males .

What is clear that many women were highly motivated to obtain coverage under the health reform law – most likely because they want it, and need it.

It’s widely accepted that women tend to be highly concerned about health and health care; they use more of it than men, in part due to reproductive services, and make 80 percent of health care decisions for their families . The early evidence also suggests that women who obtained coverage during open enrollment season last year actively used it.  According to Inovalon, a company that tracks and analyzes data for health plans and providers, people who used the coverage they bought through the marketplaces last year tended to be older, sicker, and more female than the general commercially insured population. As of June 2014, 41 percent of females who purchased coverage through exchanges had face-to-face visits with health care professionals, versus 32 percent of males.

Those numbers are consistent with the notion that many women who signed up for coverage under the ACA had preexisting conditions or other health issues that led them to seek treatment.  In some cases, their pre-ACA insurance may have excluded those conditions, or the preexisting conditions may have prevented them from obtaining coverage at all.

What’s more, as HHS points out in a recent report, there are plenty of benefits in the ACA’s qualified health plans that are especially attractive to women. These include coverage at no out of pocket cost for many preventive measures, such as mammograms or screening for gestational diabetes.  An estimated 48.5 million are benefitting from that provision of the law alone.

Other data support the notion that many U.S. women are in disproportionately higher medical need, relative to men – even adjusting for the fact that they typically live longer.  According to an analysis of Medical Expenditure Panel Survey data from the Agency for Healthcare Research and Quality, women constitute nearly 60 percent of people in the top tenth of medical expenditures in 2011 and 2012.  Most of those in the top tenth of spending are either ages 45 to 64, or 65 and older.

One obvious conclusion is that many, and perhaps most, of those who’ve benefited from coverage under the Affordable Care Act are female – and especially women in middle age and beyond. Another is that, if the Supreme Court rules in King v. Burwell that subsidized coverage can’t be obtained through the federal marketplace, women will be disproportionately harmed.

A case in point: Rosemary Forrest, 63, who lives in Augusta, Georgia.  Laid off from her job at a university science lab at age 55, she spent five years unemployed and without health insurance.   She now works as a contractor to a small nonprofit agency; battling painful osteoporosis, she sometimes earns less than $400 a month.  Last year, when the federal health insurance marketplace went live, she signed up for coverage.  This year, she re-enrolled, and after federal tax credits, pays $86 per month in premiums.

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