Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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There are usually two opinions about using a “credit score” model for the pricing of loans and insurance.

Those with good credit tend to like it, while those with less-than-perfect credit seem to hate it. Hmm…we wonder why.

At the end of the day, there are millions of pages of data and facts from FICO (used for credit cards and loans) and ChoicePoint (insurance score, NOT used for extending credit) that show an absolute positive correlation between the score and a particular behavior…say, not repaying your loan or filing insurance claims.

These models are implemented to ensure everyone is treated “fairly” by paying “what they deserve” based on past behavior…although FICO denies any impact on healthcare availability and/or associated costs based on our “scores” at this point in time.

Currently, all of the money spent on this research and development is solely to help big healthcare remind us to take our meds.

But, what about the idea of a health insurance FICO score?

Health insurance FICO score? What You Talkin’ ‘Bout Willis?

That’s right. The guys and gals down at FICO have produced a new model, referred to officially as the “Medication Adherence Score.” The product is expected to roll out within the next year or so and about 10 million Americans will be “scored.”

The main idea here (as it’s currently pitched) is simply to identify those who don’t take their medication as prescribed and “help” these people be more successful in doing so by sending mailers or even providing “educational” tools to stress the importance of taking medication as prescribed.

Get ready to read a lot about this. It’s big news and it is certainly going to (already has) make a lot of individuals very angry…and a few health care providers very happy.

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Critics of the FICO Health Insurance Program

Critics of the FICO Medication Adherence score say this is just the beginning of a slippery slope of people being denied health care, charged more for services, or denied employment based on their score in the future.

After all, “credit modeling” is certainly being used now to determine an insured’s final insurance premium, and as you might have guessed, those who score on the lower end of the spectrum certainly pay more for the same coverage as those on the higher end.

[Credit scores and car insurance rates.]

We at TTAI didn’t do any research into the history of the FICO score’s use for lending and credit practices, but cynically expect that our original FICO score may have been used to “remind” us to make our payments on mortgages and credit cards…again, purely speculation on our part.

Very similar to the critics of credit scoring models used for lending, credit and insurance, it is believed that this type of information may inherently discriminate against poorer and unemployed segments of America.

For example, a person who cannot afford a prescription (or refill) due to being unemployed (or broke) would wind up with a lower overall score. Not a problem if the scoring model is simply used as a “reminder” and “education” service.

But, if this goes the way many critics believe it will, those same people may end up being denied health care, charged more for coverage or deemed unfit for employment, as they would be considered a “riskier” venture, from a financial standpoint, than those with a higher score.

[Why do I need health insurance?]

What Is Actually Scored?

The scoring model serves to predict whether we will take our prescription drugs or not. We suppose many Americans aren’t taking their prescription drugs exactly as prescribed (or at all).

Basically, FICO performed a huge, random study (based on millions of people) to see who has filled, properly re-filled, or did nothing after receiving their original prescription.

Armed with the raw data, FICO then dissected the information to discover patterns about who did what (if anything) and when, based on a few key variables.

What are the Variables?

The variables studied include things like age, gender, family size and asset information, i.e. ownership of a home or car.

Using just a name and address, FICO can then access a whole bunch of other information about us using the Internet and other publicly accessible information sources.

The goal here is to use the variables to determine which of us is more likely to fill and properly use our medication to “fix” whatever is ailing us.

[Affordable health insurance: how to find it.]

The usual potentially “discriminatory” factors are not used in the scoring model due to current laws prohibiting such information being collected for these sorts of purposes.

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The “Guilty” Party?

The data shows that the older we get, to a point, the better we are at taking our medication. But around 80-90 years old, we fall back into our younger ways of not using medication as prescribed.

It’s not rocket science to expect younger folks, who historically believe they will be healthy and live forever, aren’t up to snuff on taking meds as they are instructed.

Oddly though, the study shows that men are generally better at taking their meds properly than women. FICO believes this may be due to women generally being more focused on the health of others than themselves.

Why Is This Necessary?

Insurance companies spend billions of dollars per year on “extra” healthcare expenses due to individuals not effectively taking their prescriptions.

Perhaps you never fill a prescription because you “feel better” and become more ill as a result. Maybe you don’t re-fill a certain prescription for the same reason…then become ill again and force the health insurer to incur costs that could have been avoided had the medication been taken properly.

The goal, as it currently stands, is simply to reduce costs for healthcare insurers by targeting these individuals and helping them get on track.

The Future?

Without a crystal ball, our best guess is that the program is being developed with the “bottom line” in mind.

It may be very likely that the bottom line will remain the focus and these types of scoring models will eventually end up affecting healthcare in ways that don’t necessarily benefit the individual, but the insurer.

Exercise, take your vitamins, reduce stress…and for goodness sake…take your medication as prescribed. Doing so may save you a good deal of money in the near future.

Read more: Top 10 health insurance companies.