Cash-Pay Healthcare: A Revolutionary Alternative to Insurance - Andy Schoonover

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Andy Schoonover, CEO of CrowdHealth, exposes the flaws in the current health insurance system and introduces a groundbreaking alternative.

Jack Heald: Hey thanks for joining us again. It is the Predictive Health Podcast and today I am joined by somebody who I think sits in a strategic place in the alternative healthcare or the parallel healthcare system. Andy Schoonover the CEO of CrowdHealth. Andy thanks for joining us. 

Andy Schoonover: Thanks for having me. Appreciate it. Good chatting with you.

Jack Heald: Let's just get into it as you know on every episode of Predictive Health, I ask the same nine questions of our guests. The first question is what one specific health issue are you going to address today? 

Andy Schoonover: Man I'm I know you probably want it physiological but I'm going to talk about the health issue that is United States health insurance. Which I think puts more people in the physiological health issues and financial health issues than pretty much anything else in our country. So the the health insurance space is something that I think needs to be burned down and it will benefit a lot of people as a result of that. 

Jack Heald: I am in violent agreement with you Okay So real quick, 

Andy Schoonover: I hope the ATF doesn't call me. ATF If you're out there I'm using this 

Jack Heald: metaphorically. So what got you interested in the health insurance side of this equation? 

Andy Schoonover: Sure. Yeah, it's my second healthcare company actually. I sold my first one a while back I swore that I was never going to do this again because it's such a brutal space though to operate a business with just regulations and such, and God has plans of his own.

I believe in His sovereignty and so I am here again. I came off my other company and I didn't have health insurance so I went to the Affordable Care Act and got a plan and it's 1200 bucks for me my wife my two girls, and I joke it worked until I had to use it.

My little one, who was one at the time, was having recurring ear infections. ENT said she needed to get tubes in her ears and went and did that. Followed all the rules, got it pre-approved, and got the bill as $8,000 for a 15-minute procedure. I was just blown away by that. But then I got something in the mail a few weeks later that says it was medically unnecessary so they weren't going to pay for it.

So after a number of rounds of fighting with the health plan, I wrote an $8,000 check to the local hospital and I was pissed. And so I quit health insurance and said I'm not doing this anymore.

So I'm you know now, over the last four years figured out an alternative way to pay for my health care bills that you know we can talk more about, but that was my kind of entree into health insurance and my hatred for it. 

Jack Heald: I'm going to go a little bit off-script because I think those who are not already familiar with your story will benefit from it. What is the biggest popular misconception about how health insurance actually works today? 

Andy Schoonover: Yeah I call it a Principal Agent Problem, where people think that the health insurance plans are out of them getting really good rates. They are our agent. They're supposed to be out there working and fighting for us.

But in reality, what they're doing is they're fighting against us. Health insurance plans actually have an incentive for prices to go up, not for prices to go down. So that's the biggest misconception. And just really quick it's a quick math problem, I know I don't want to hurt anybody's head, but health insurance plans can only make 15% of premiums. So if you have a $1,000 premium, they can only make $150. So how do they make +10%? $165 your premium has actually got to go up.

That means healthcare costs have to go up for health insurance plans to make more money. There's massive perverse incentives that screw up this whole system so in fact the buyer of healthcare, health insurance plans, the seller of healthcare hospital systems, both want the price to go up. Oh I'm I'm blown up with stars, even Zoom thinks it's a good idea. Yeah so the buyer and the seller of health care both want the price to go up and so therefore the price goes up. 

Jack Heald: So just to make sure we're clear. the people who are selling you the insurance don't really have any incentive for you to get the kind of treatment that allows you to not need them next year? 

Andy Schoonover: Exactly. That's the biggest misconception. Do they care about prices in the year? They do right. So they want to make as max, the max of that 15% as possible, so if it goes down to their max they're making 13. They got to push back on the hospitals a little bit. They max out of their 15% so in the short term they want prices low but in the long term, they want prices to go up. So it's just a total cluster the way that this you know currently works. There are no free markets involved here. 

Jack Heald: In other words, there's no there's nothing that is there are no competing interests fighting to deliver the best services at the best price 

Andy Schoonover: Exactly. 

Net promoter score. Net promoter score which is like a way for companies to assess whether their customers like them, you know Chick-fil-A, I'm not a massive Chick-fil-A fan, I'm just giving you an example is in the 70s. You know meaning like 70% of the people would say that it was an eight, a nine, or a 10 out of 10. My understanding is oftentimes or most insurance plans are in the teens like 13, 14, 15, or something like that. So healthy customers hate health insurance plans because they all do the exact same thing. They are not out for the customer they are out for internal profits and that's just a bad incentive system.

Jack Heald: Question four is always what's the truth about this issue? And I think you just answered it. The truth is that the health insurance companies are not there for the patient period.

Andy Schoonover: No they're not.

Jack Heald: That's not why they exist. 

Andy Schoonover: I'd like to tell you just a quick story. I sold into health plans in my previous job funny enough, and so I was at a very large plan. I was with the Chief Medical Officer of this large plan and I was trying to show them a way that they could take better care of their patients with diabetes who are having organ failure, who are losing limbs as a result of you know, really bad diabetes. I said, Hey here's a way that you can help these people and you can reduce costs. Literally said to me, F 'em. They don't lose limbs until they're in Medicare. This is a commercial plan. That was the response from the Chief Medical Officer of a very well-known very large health plan. 

Jack Heald: They don't care how sick you are. They're gonna make their 15%, is that right?

Andy Schoonover:  Look, I can't. I've met people who work at health insurance plans who are incredibly great human beings. A lot of people out there, so I don't want to say everybody who works at health insurance plans are awful human beings because they're not. But the incentive system behind the C-suite of especially for-profit health plans- they are to make their 15%. That is our key goal. They are to maximize profit. And it is at the expense of you and me. 

Jack Heald: Question five is what is the likely outcome of people who don't take action? We haven't actually talked about the action, but let's table that. What is the likely outcome for people who trust the medical insurance system as it exists if they keep trusting it What's the likely outcome? 

Andy Schoonover:  There are a couple of things here that come to mind, and one out of five chances if you have an Affordable Care Act plan, that your plan is going to deny your claim.

You have a one out of five chance your claim is going to be approved, sorry denied.

Which you know, if it's a $100 bill, it's not that big of a deal. Mine was $8,000. Not a lot of Americans have $8,000 in liquidity, that they can just you know fork over to a hospital in the event that their you know daughter has a perforated eardrum, which happens to lots of kids. This is a recurring thing like, it happens all the time so it could end up in bankruptcy and 200,000 families went bankrupt last year, even though they had health insurance due to a health event. 200,000 families.

That can't go on forever and so ultimately what's going to happen here is people are going to put up such a fuss that I think what we're going to have most likely, unless people really, you know grab on to an alternative is we're going to have something that looks like a Canadian health care system unfortunately, you know or it's government-run, government operated, you're gonna have to wait 6 months for a knee surgery if you need it.

It's just a total absolute mess.

Our system is expensive but you'll be able to get service quickly. Canadian is less expensive. The outcomes are really poor and you have to wait forever, so what do you want?

I want a United States system where it is Inexpensive, it is really fast and you get really good outcomes. And people looking at it are like there's no way that you can do that. I'm telling you with CrowdHealth, we have got 8,000 people who have signed up that have inexpensive healthcare. They get it really quick, and they go to the best doctors. So 8,000 is a small sample it's a small sample. 

Jack Heald: Yeah let's run this again. So in the United States, it's incredibly expensive and there's very little guarantee, but there's a pretty good chance that whatever it is, it's not going to be paid for. And in that case, there's a lot of people are going to go bankrupt. Although the care might be pretty good, we could go the Canadian route, which is cheaper and worse care, and then there's your solution. So let's talk about CrowdHealth. What makes it different? How does it work? 

Andy Schoonover: One quick point on that previous one. I think people might hear this and be like, Oh United States has terrible outcomes. That's actually not true.

The problem with the data, that those people look at is they forget to adjust for obesity. So given that the United States has about 50% higher obesity rates than many of the comparison countries that they're looking at, those people are going to have worse outcomes. That has nothing to do with the doctors.

It has everything to do with the lifestyle and just give you one quick example, if you get a knee replacement and you're 500 pounds, guess what? The probability of that knee replacement working versus being 180 pounds, is vastly lower, right? Like you're going to have another one. So you're going to have a bad outcome as a result of that, right? So just wanted to quickly, you know, just mention that real quick because doctors in the United States, if you have a bad problem, they are the best in the world, so you know we can talk about the caveat to that, but if you have cancer you want to be in the United States, if you have a disease that is rare, you want to be in the United States. So just wanted to make sure I don't throw on doctors cause we got great doctors in this country.

Jack Heald: Agreed. Good stuff. All right so let's talk about CrowdHealth. What's your solution to this problem and how does it work?

Andy Schoonover: We pay everything in our lives in cash. At the point of care for the most part, we go and you know get our car done and it's you know we pay in cash. And in fact we go and do our eyes or dental or you know we get LASIK surgery, we get cosmetic surgery, all those things are paid in cash.

And guess what? They're not that expensive. If you pay in cash, you are getting something that is of high value at a really good price. What we're trying to do is enable people to pay all of their health care bills in cash, and as a result of that hospitals, and doctors, are willing to give our members significantly lower prices than if they have to go through the bureaucratic system of billing health insurance plans.

Maybe getting it approved, maybe not getting it approved. Waiting for three or four months to get paid. If you could rip all of that out, what we're seeing is that the system is willing to take about 50% or 50 cents on the dollar versus what health insurance plans pay. Just by paying cash at the point of care.

I'll give you an example we had a woman in Austin, who tore her ACL playing pickleball. She went to her orthopedic surgeon said it was going to be I think it was $22,000 or $24,000.

We called the orthopedic surgeon. We said, hey listen if this member can pay cash at the point of care, what would you do? He's you know, I would take a significant reduction and he said you know what, why don't we move it from the hospital to the surgery center and if we can do that all-in, we'll do it for $11,000.

So it went from $24,000 to $11,000 just by engaging the doctor in a patient-doctor relationship. And dropped it by more than 50%. If that person was on a health insurance plan they would have paid more than $24,000 for that same exact procedure. Just one example.

Jack Heald: All right 

Andy Schoonover: And by the way that doctor is the one for the UT University of Texas football team. Like this is the doctor. This is the doctor you want working on your you know MSK, knees, elbows, shoulders things. This is not your, like a cheap doctor, who's yeah sure I'll take anybody who wants to come in. This is like a wickedly good doc. 

Jack Heald: So how does this differ from standard health insurance from the health insurance model that we're all familiar with?

Andy Schoonover: I'll walk through the mechanics but I'm gonna give you the conclusion first.

I think it's just super cool in essence what we're doing is, we're going to a community of people and we're saying Hey Andy has a problem. Will you help him?

Let's say I broke my arm. It's $5,000 and he's gonna pay the first $500. We're gonna submit the remaining $4,500 to the community. So we're gonna ask 45 people for $100. We're gonna send them a note and say Andy needs help. Will you send a hundred dollars to Andy? Yes or no.

If they say yes, $100 goes from their account to Andy's account.

If they say no we just move on to the next person. Then after 45 people say yes, Andy now has the $500 he put into his account and then the $4,500 that Community put in the account.

I have $5,000 so when I show up at the doctor I can pay him directly. As a result of that, he's like, Wow this is amazing I get cash now. I get it with a credit card.

A doctor on average has about three billing people per doctor and spends about 25% of their time fighting with health insurance companies around preauthorizations and getting paid and all these kinds of stuff. So if they can rip all that out of the system then they love it, They're like please let's do this! Send me more people! Send me more people! So in essence what I'm doing is I'm just enabling people to pay in cash at the point of care, and we've done this now 10,000 times over the last two and a half years.

$7 million of bills. I think we're like of the $7 million of bills that got committed, submitted to The Community for funding, 6,000 went unfunded and the remaining $6,994,000 or whatever was funded. So why was that 6,000 not funded? Remember I told you that we sent the bill to people they could say yes or no? If they say no, people know that when they ask for something.

So let's just say that Andy had asked you know had said no the last 10 times that I was asked and I submitted a bill to The Community. The Community is like, look dude you said no to everybody else, why would I give you money? I'm a taker and not a giver. And so the takers typically aren't getting their bills paid. The givers, a hundred percent of the time, if you're a giver that bill has gotten funded by the community and it takes about a week to get that done. It's pretty quick 

Jack Heald: So what do you do with your current health insurance policy that we're constantly bombarded with? I think there's a common belief that you have to have health insurance. What do you do? 

Andy Schoonover: If you were to give me two lies in your previous question. Like two lies that people believe, the second one is that you have to have health insurance.

I truly believe that health insurance is riskier than what we do. They are battling against you. We're an ally for you to work. We're on your team what happens if you have something big health event what is the first thing people say? Now I have to go fight my health insurance plan.

With us, they're like, Oh man I get to call CrowdHealth and they're going to help me. They're going to be my ally. And so we're really trying to just be people's allies on this journey. It's just it's actually you know three years ago when I started the company, I had a vision for how this would look you know and then it's actually worked out better you know it's worked the bills are lower than what I thought they were going to be. We were able to get bigger discounts than we thought.

Every kind of forecast that we had in terms of health care bills was actually doing better because there is a yearning in the health care community to get away from health insurance and have a cash-pay direct relationship with the patient.

If you're not paying for the product or the service, guess what? You are the product. You're not paying for your health care bill. And so guess who guess who the doctor has to appease? Not you the person who needs health care.

They have to appease the health insurance company. That to me is BS if I'm paying the doctor. I can tell you from being a patient on a cash pay, it changes the game. The doctor I had to get some imaging done and the doctor's look, If you're with health insurance I'd have you come back and we talk about the results, can I just call you on the phone? And I'm like hell yeah you can just call me on the phone. Like are you going to charge me for that? He's like no, I'm just going to call you and we're just going to go over it.

But if you were at health insurance, I'd have you come in. This is crazy. The first the last thing I need to do is spend two hours of my day sitting in a doctor's office. It's the worst thing ever. So that relationship, I mean it's crazy what people do when you say, I'm a cash pay. They like light-up. They're like, what? Yeah. You know it's now it's between me and you let's do it. Let's go. 

Jack Heald: Suddenly it's different. It's a different relationship. What's the biggest compliment or at least, the most common big compliment you get? 

Andy Schoonover: You know it's great because we've got I think 250 reviews now on trust pilot. So if anybody wants to go and see it's pretty cool.

I was talking to an investor the other day and he was walking through all these reviews and he's invested in probably I don't know 500 to 1000 direct-to-consumer companies. And he's like I have never seen reviews this good for any direct-to-consumer company and you're in healthcare. Like I can't believe it.

You know, it's like healthcare companies are always the lowest in terms of customer reviews, and these people are putting paragraphs and paragraphs of like why CrowdHealth is amazing.

We had one woman, it's going to bring me to tears. She lost her baby with CrowdHealth, just with one of those things, it was just one of those crazy things that happened. She lost her baby and we just loved her, like LOVED Her. Loved that family. And she's like I can't believe this healthcare company loved me so well. I'm like, man that's the best compliment you can ever get, ever have. I'm told I've been brought up to be, to love your neighbour. Let's actually build. I've told my team this all the time. Whether you're Christian, Jewish, or Muslim, we have all of them on our team, we have to love our neighbour. You have a lot of our people really well and it's like, we have a big heart. That's our logo. It's because we want to love our people really well. I think if you go to this trust pilot reviews you'll see more times than not, you know we love our people really, not perfect, but we try really hard to love our members. 

Jack Heald: All right let's go to the other side. Most common or biggest complaint. 

Andy Schoonover: It takes one extra step. Most people want to go in and they want to have a card and they flap down a card and they don't want to deal with it anymore.

They don't think they're going to deal with it anymore, but when the explanation of benefits comes in, they have to deal with it.

What we're saying is, look you just call us beforehand so we can help you find a really great doc, who will take cash because if you do that, then we can CrowdFund this beforehand. You can have the cash and then you're done. You're done with the payment at the point of care as opposed to having to worry about it later.

It's one more step that you have to call us. You don't have to, but we just say please call us. People say I prefer not to have that one step. It's just something that we'd have to do to get you a really good service, really good price, really good doc. So that's the one complaint. I get it. These explanations of benefits that you get, I don't know if you've gotten one.

I went to Stanford the number one or number two guy in our class was my roommate, he said there's nothing in this world that makes me more confused than an explanation of benefits.

This is the number two student in the MBA school at Stanford. This guy is wicked smart, and he's like I just don't get it. I can't even make the math work. Like this is addition and subtraction and it doesn't even still work. What the hell is going on here? It's like you deal with it upfront or you deal with it at the end. Which one would you prefer to do? We ask our people to deal with it upfront so you don't have to deal with it in the end. And that saves just massive amounts of money. We think we've saved our members about $10 million over the last 12 months in healthcare costs.

Jack Heald: All right so let's get to the one that I love the most. If you could deliver just one message about health and you only had eight words to deliver it in, what would those eight words be? 

Andy Schoonover: Eight eight words. eight words. I'm only going to take three.

Ditch health insurance. 

Jack Heald: Ooh I love it. Ditch health insurance. 

Andy Schoonover: Exit the system. I'll maybe add six. Six.

Ditch health insurance. Exit the system 

Jack Heald: Depends on which market we're talking to I guess. 

Andy Schoonover, CEO of CrowdHealth. I know that we will have provoked an awful lot of questions, which I'm sure you've answered in other places and probably many of which are answered online, where should folks go to get more information to get their questions answered specifically about CrowdHealth? 

Andy Schoonover: Yeah I mean I think that the most fun place is on X. We have lots of fun commentary over there. Today was a fun one and we Crowdfunded a testicular torsion so we asked nine women, or nine men and two women. It was just random, and you know it was a plea to the two women, we know you don't know how this feels, but trust us this is not good but help this man out.

We have some fun commentary over there just about the healthcare space in general and specific examples like that. So X is the best place and it's at JoinCrowdHealth.com is our website, so you can check us out over there as well.

Jack Heald: All right we'll make sure that information is in the show notes. Andy Schoonover thanks for joining us on Predictive Health and we will see you all next time.

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