I’m no Carnac…but…two things you might want to keep an eye on in 2018
When I first started thinking about 2018 it was January 8, 2017 – my birthday. Whoever said, “The older you get the faster the years roll by” really knew what they were talking about. I distinctly remember sitting at my desk thinking to myself, “It’s only January but Christmas will be here before you know it.”
Now, with Christmas fast approaching, I choose not to reflect on 2017 but rather look forward to 2018 and what exciting things will come our way. Today’s world is all about lists and while I’m sure I could come up with the top 6 things you should look out for this year, two of them keep coming back to the foreground in my work. Without further delay, here are two things you might want to keep an eye on in 2018.
Expansion of the gig-economy
So many people, mostly young millennials but also those that are more experienced in the workforce, are participating in the emerging gig-economy. What is a gig-economy you ask? There are a number of definitions floating about but it is a 21st-century term that characterizes workers engaged in multiple short-term or part-time engagements (or gigs) rather than the more traditional full-time position. Some were forced into this arrangement due to a shortage of full-time job openings but an increasing number of people are choosing this lifestyle. Some say that it provides more variety, some say it offers more flexibility.
How many people fall into the category of gig-workers? It’s difficult to say. The Bureau of Labor Statistics (BLS) first started measuring these data in 2005. Even then, their data showed that between 2 and 4 percent of the labor force fit into the category of gig-workers. If we apply this to today’s workforce, that translates to between 2.5m and 5.0m gig-workers – assuming, of course, no increase since 2005.
Regardless of why this trend is continuing, the implications on the Insuretech market are huge. Gig-workers will want (or perhaps need) individual, portable products ranging from health insurance to voluntary benefits. They want to manage their insurance/benefits lives just like they manage other aspects of their lives, from a single consumer experience, likely mobile. And most importantly, they want help. The new workforce is more comfortable than ever in declaring what they’re good at and acknowledging what they’re not. In areas that they don’t feel comfortable, they turn to experts or to crowd-sourcing for help.
My prediction? The first platform to combine access to health and ancillary insurance, property and casualty insurance, billing and payment management along with a personalized consultant that helps them not only select what’s right for them but helps them maintain the right mix of products over time will be the winner.
Shake-up in the HSA and larger consumer-directed healthcare administration market
In the past 6 months, I’ve spent hours on the phone with investors, researchers and potential strategic buyers talking about the potential for the Health Savings Account (HSA) market. For those unfamiliar with HSAs – a brief overview.
HSAs are tax-advantaged reimbursement accounts that you can contribute money to if you participate in a qualified high deductible health plan (HDHP). Unlike a Flexible Spending Account the money is yours and “rolls over” every year – in other words, there’s no use-it-or-lose-it rule. For 2018 you can contribute up to $3,450 if you’re an individual or $6,900 if you’re a family – and these contribution amounts typically increase every year. Once in your HSA, you can use your money for qualified medical expenses. Contributions are done on a pre-tax basis. Some HSA accounts allow you to invest your HSA money in mutual funds or other instruments and the capital gains realized from those investments are tax-free. Interest earned on the money you have in your account is earned tax-free and in retirement, if you want to use your HSA money for non-medical expenses you can do so penalty-free. You will pay normal income tax for money used for non-medical expenses, however. If you would like to know more about HSAs please check out the HSA help center at Independent Health Agents here.
Why is everyone so interested in HSAs? Since their introduction in 2004, the number of people enrolled in HSAs has grown to more than 20m. These increases are in lock-step with the introduction of high deductible health plans and the push towards a more engaged healthcare consumer. In the past year, there has also been additional national exposure to the role HSAs could play in our lives provided by the Trump administration and Congress. While it didn’t make it into the final version of the tax reform bill this year, there has been continued pressure to increase the contribution limits for HSAs significantly, something that I think will come to pass eventually.
Companies that offer HSA administration like Alegeus, WEX Health and Health Equity make money in multiple ways. First, there is typically a per participant per month administration fee. Next, you can make money on investment account access, again typically on a per participant per month basis. Finally, there is revenue to be had from interchange on debit card transactions and, as the fed funds rate continues to rise, on float. When you combine multiple revenue streams with a growing service you bound to attract investment.
My prediction? The CDH administration market is mature and over the past 10 years has gone through some pretty intense consolidation. With the increased focus on HSAs of late and for all the reasons discussed earlier, new offerings are coming to the table. One such company is Lively. With less than one year of actual operation under their belt as an HSA administrator, they’re already starting to make some waves. They are re-envisioning the B to C individual market (retail) and revolutionizing the micro-employer group market (<10 employees) by offering their services for free. This is a classic freemium play and has the potential to be incredibly disruptive in the marketplace. Unburdened by decades of legacy code and legacy clients, Lively is free to explore new go-to-market strategies. Once they monetize their retail and micro-group lives, they will be a real powerhouse. It’s no wonder that their emergence coincides with the growing trend discussed earlier of gig-workers.
Want to know more?
If you’d like to know more about these two topics, or the other four that didn’t make the cut this post I’d love to chat with you. You can reach me anytime by going to the contact page on this site or by clicking here. And, as always, I welcome your comments (for and against) any of the views expressed.