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Who Will Decide Health Insurance Winners and Losers? PART II

AcxiomMarch 23, 2016

Winners will truly innovate, while Losers iterate on the status quo.

The first in a three part call-to-action, my last post laid out the fundamental rationale for urging health insurers to begin investing in truly meaningful foundational shifts that would transform their business focus toward the needs and desires of the individual consumer. The passing of the supra-inflationary cost healthcare buck is about to turned back on “the system”. “Beneficiaries” of most large group employer sponsored high deductible health plans, i.e. employees, who have recently endured a catastrophic episode of sickness or injury, are starting to openly share their tales of woe to co-workers, and the world for that matter. A significant amount folks have figured out that their family’s financial exposure can be as much ~$10,000/year; which, by the way, if were halved and continually invested for retirement over 20 years would conservatively become ~$225,000 in additional retirement savings.1

Several large employers have begun, independent of insurers and brokers, to address excessive health cost growth, others are sure to rapidly follow toward innovators who deliver true value. Given the unabated shift toward ASO plans, hence less margin to be made on risk, when the music begins to wane, there will be several carriers left without a seat. The zero sum game being played for decades will turn to a positive sum one for sponsors, members/consumers and the winning payers that gain market share through innovative services which add value to the former two; and a negative sum one for the losers.

What will these innovations be? I tend to believe, when eventually viewed retrospectively, they will seem to be rather simple shifts on the surface, and quite sophisticated on the innards; this is healthcare after all. Perhaps the first questions insurers should be clear on are: just what is innovation, what is it not, and how is it executed? As for answer to the first two, frequent contributor to HBR and Forbes, Ron Ashkenas, does an excellent job boiling it down in: It’s Time To Simplify Innovation. Here’s his pertinent line of reasoning:

“One of the ways that we’ve bollixed up innovation is by letting almost any kind of change fall under the innovation umbrella, whether it is a new wrinkle in packaging, a small process improvement, or an add-on service. These are all good things, but they should be part of the normal course of business and the drive for continuous improvement. Innovation on the other hand, needs to be truly new, discontinuous, disruptive, and value creating. So let’s stop putting small ‘operational,’ ‘incremental,’ and ‘adjacent’ improvements under the innovation umbrella.”

Execution is considered by most experts a multiplier to the innovate ideas being developed. The trouble for most organizations is that a pragmatic plan typically confounds management. Ashkenas goes on to offer some demystification of a four-point innovation process exemplified by companies such as Intuit, 3M, and Google, saying:

  • “They continuously generate a lot of ideas based on input from internal and external sources (ideation).
  • They develop the few ideas that have the potential to solve problems for customers and be commercially viable (selection and design).
  • They quickly develop prototypes and models that can be tested both in the laboratories and with customers (rapid experimentation).
  • They iteratively refine the innovations, and make decisions about whether to fail or scale, based on pilots and additional tests (incubation).”

Back to what those innovations will be which will fulfill the needs and desires of the individual consumer that will separate the winners form the losers? I believe they will be digitally enabled amenities that appeal to common sense; from relevant, cadenced communication, to easy to use pricing transparency tools, to plain language EOBs, etc… all seamlessly recognizing the individual while reelecting personal preferences stated to the payer.

While iteration is vital component of innovation, payers who simply move the status quo a step or two forward are fundamentally on the wrong track; one that ends up on the negative sum side of the future. How can true innovation be objectively observed then? Again, most experts agree, it simply has to be adopted and regularly used by a significant number of customers. Ready to start? First there are some fundamental enterprise capabilities health insurers must master… which I’ll address in my next blog installment.

1 – Approximate future value of principle invested annually and compounded yearly at 8%