DRILLING DOWN: The dentist innovating the health insurance industry
Published on 25 June 2020
POOR HEALTH SYSTEM
Indian-born dentist Dr Zacharia describes Australia’s healthy system as a share between a public system and a private system.
While the public system is geared to deal with essential hospital, dentistry and medical treatments, it is very limited to people with very low income, or those who fit multiple criteria to meet that requirement (approx. 2% of Australians).
That leaves 98% of ineligible Australians who either pay out of their own pocket directly or get private health insurance to meet their needs.
When Dr Zacharia arrived in Australia, he was advised he needed health insurance and took out a policy he committed to for more than a decade.
It was not until his daughter required braces and he was told he was not covered for the orthodontic procedure he realised how much money he had wasted over a decade paying into extras health insurance.
“When I put a dollar value to it, it was phenomenal. That first opened my eyes to the problem,” Dr Zacharia recounts.
Being a dentist, too often Dr Zachariah would see his patients with private health cover seek advice on the best procedure for an ailment, only to opt for the least desirable option which cost the least.
“I would say ‘here is what I believe is the best for you. Here is an in between solution. And here is the worst option that you could go for, but it costs the least.
“Even though these people had private health insurance for 30-40 years, when they went back to their health fund to check their entitlements, they found they could claim next to nothing, despite all those years of membership and all those dollars spent for their insurance,” Dr Zacharia laments.
Often forced to choose inferior options due to financial and other reasons, Dr Zacharia says those patients are now returning ten years later to have the problem fixed, using the preferred option he first recommended.
“Now they are paying a lot more for treatment because there's been a substantial loss of bone and other medical issues and complications.
“It made me wonder, what is insurance?” Dr Zacharia asks.
“To me, my definition of insurance is, I have a car, it costs $50,000.
“If the car is a write-off, my excess is $1,000. I pay the $1,000, the insurance company pays me out or gives me a different car. The rest of the cost is up to them. That is true insurance.
“But the way extras health insurance works in Australia is the health insurance companies pay the excess.
“There is no policy in Australia where the insurance company pays the bigger portion and you pay the lesser portion. So, how can you call it insurance?” he questions.
For Dr Zacharia, health insurance as such is a misnomer, likening it more to a budgeting tool.
“You pay money into private health insurance and you get a coupon for $150 or $200 towards a service, such as going to the dentist for two cleans and two other treatments.
“The prudential regulator of health insurance companies, APRA says the average gap people pay is 49%. This means whatever premium you are paying; you pay the same amount to get 49% cover.
“I fail to see value. The only way they can provide value is what they have done in Australia, called community rating. What it means is you cannot discriminate or have somebody else spend more because of their health condition. Everybody shares the burden equally.
“You think you're going to protect your family and pay this higher amount, so you get more for your family. That is not how it works. You're actually paying more for other people to have equitable benefit,” Dr Zacharia explains.
ON THE CUSP OF INNOVATION
Realising the problem, Dr Zacharia set about piloting a solution, establishing a health fund trust in his practise.
“We fund to a certain amount of money annually, and if you fit certain criteria, we treat you for nothing out of our trust funds.
“I created Xtras Health Plan which is the world's first or unique health plan and is a dedicated health savings account that accrues interest at low risk.
“It is a unique model in that people accumulate the money and as the membership base grows, it's a bigger member buying group with better negotiating powers,” Dr Zacharia explains.
There are many advantages of a member's buying group. It lowers cost of acquisition to Dr Zacharia as a dentist, which means his marketing investment is manageable. Members of Xtras Health Plan can get access to capped fees when they signed up to a certain service.
“The concept of Xtras Health Plan is members need to benefit from capped fees and health provider arrangements should not be disadvantaged either,” Dr Zachariah says.
The COVID-19 lockdowns further demonstrated the need for this type of health plan. Members of Xtras Health Plan did not lose their contribution; conversely, they accumulated funds in their plan despite being unable to access some medical services due to restrictions. Holders of traditional health insurance policies simply lost any premiums paid.
FILLING THE GAP
SmartHub Business Manager Elize Hattin says innovation happens when you spot something in your industry, or in your world, in your career, that could be done better, faster, cheaper.
“Essentially, we call that a problem. In innovation language, if you spot a problem and you're an expert in that problem, you can really see how that problem affects customers, or users, or members, and you provide the solution to make it easier, better, faster, cheaper for your customers.
“That is what we call innovation,” she explains.
This is precisely what Dr Abraham did when he realised traditional extras health insurance was not working efficiently for its members.
He developed a software platform (now awarded an innovation patent) that allows people to be able to cover health costs for their extras.
“We have three fundamental values we base the company on. One is transparency. The second is integrity. Every transaction can be audited at any time. The third thing is finding ways to add value,” Dr Zacharia explains.
The platform he developed incorporates a dashboard displaying a members’ financial data, transaction history and any appointments they have, in the one place.
All contributions made by a patient to the Xtras Health Plan is captured; rather than paying a health insurance premium to your health insurer, the same premiums are investing to your Xtras Health Plan.
Unlike traditional health insurance funds that reset each financial year, all contributions accrue and gain interest.
“You get to save that money. That money remains in your account and it is always available to you. It's your money as opposed to a health insurance company taking that money and using it for their own purposes such shareholders' wages,” Dr Zacharia clarifies.
Xtras Health Plan funds can be used for any health-related service such as optical, dental, medical, physio and even remedial massage and other treatments. Dr Zacharia is quick to point out this is not hospital insurance.
“If you’ve been in hospital and you've got a hospital gap to pay, you can use this money to cover that but you're not going to build up enough money to cover yourself for hospitalisation for a heart attack in one year,” he cautions.
ROCKY ROAD TO SUCCESS
When he first noticed the problem with the existing health insurance system, Dr Zacharia consulted the Dental Association as to whether they were aware of the issue.
“What they told me was very clear. They said, "only a madman would try to tackle this problem."
“I started doing it in my own practice for my own patients and soon people were accumulating $3000 - $4,000.
“It twigged when somebody said, "Doc, I have just been to the chiropractor. Do you think I can pay the chiropractor from that fund?" And I said, Why not? It is your money. The chiropractor is registered in Australia. It is an Australian business. Their bank details are Australian. Ticks all boxes.
“I then ended up with a tax issue with the ATO because I had to hold our funds in a certain way, and I ended up having to pay tax on money that was not mine.
“My accountant advised me to wind it up and so I did, but I kept receiving positive reinforcement it was a market niche, so I started the next version of it.
“The moment I launched, I was taken to the ACCC who alleged I was pretending to be health insurance company. I challenged them to show me where I have said that I am a health insurance company, because I had used the wording "It's like a bank where you can bank your money.”
“The ACCC then accused me of pretending to be a bank … so I had to reword the whole thing,” Dr Zacharia recounts.
When the ACCC suddenly advised they were dropping all legal proceedings against Dr Zacharia, he asked himself what next?
It turns out ACCC perceived his business to be a managed investment scheme, referring him to ASIC who took 24 months to make a decision on the matter.
“Even today, ASIC claim it may be a managed investment scheme. They wanted me to go through licensing for a full financial services license, which I did,” he confirms.
Not long after the 2018 launch of Xtras Health Plan, the Royal Commission into financial services commenced, bringing with it a raft of new checks and balances for all financial services providers, which further complicated the small start-up; forced to find specific talent to add to his team.
“Through COVID we got a lot of requests from our existing members about their funds which are split between what is available right now and what's available to hold.
“Two of my patients ended up with mental health issues and anxiety from COVID and were trying to use their health insurance for treatment. Their health insurance would cover three visits and then they were 100% out of pocket.
“One of them had to be admitted to hospital and their health insurance would not cover them for that, so they wanted to use money out of Xtras Health Plan, which we were very happy about,” he says.
So, what is next for the good doctor?
He has applied to ASIC to waive their holding requirements so clients can access 100% of their money. About to launch his new website, Dr Zachariah is adding calculators and a service bot to the site.
“I've added another new team member in New South Wales, who is a financial expert. Marketing will be more of a social media gig at this stage,” he admits.
When asked if he had any word of advice for people thinking about solving problems in their industry and finding innovative ways of doing things differently, he urges that if people have an idea, to pursue it.
“Let it be right or let it be wrong. Only time will tell you whether you have been right or wrong. And worst-case scenario, you get an education. Best case scenario, you lift mankind.
“What have you got to lose?
“Either way, you win,” he inspires.
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