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Who Will Decide Health Insurance Winners and Losers?

AcxiomNovember 23, 2015

Broad-brush binaries and stark predictions about the future of healthcare are something I don’t often indulge. They are the prime ingredients of hype, which remains rather difficult to deliver on, especially in the most complex of domains. Yet when credible frontline practitioners begin to countenance larger truths, enterprise level leaders must be ready to adapt to a new reality.

In plain language please… Instead of burning more philosophical wax, here’s a quote (transcribed from this program on the evolution of doctor visits) from Dr. Curtis Lowery, a local, high-risk pregnancy OB/GYN and distance health pioneer, that does an excellent job summing up this reality:

“60% of Healthcare today is paid by companies… 60% is paid by Walmart, JB Hunt, Southwest Airlines, Home Depot, and thousands of other companies… that’s who pays for your health insurance. The premiums have gone up, gone up, and gone up and they say: ‘We’re not paying anymore… you guys do something about it!’”

Translation: The largest health insurance market segment is actively spec’ing future winners and losers.

Leading Indicators & Market Drivers. By sheer proportion this is a broader trend, which has been obscured by the noise in the wake of the ACA. Perhaps the most illustrative leading indicator is the marked shift of the majority of private employers opting for self-funded ASO (Administrative Service Only) health plans. Additionally, nascent yet growing disintermediation models such and private exchanges and group captives are also clear signs on the horizon that the commercial market can and will find viable alternatives.

Cost sharing with employees vis-à-vis high deductible ‘Consumer Directed Health Plans’ can only satiate the corporate appetite for cost cutting for so long; and despite the cost-cutting goals of healthcare reform legislation, according to PwC’s most recent long-term analysis, health insurance costs will continue to outstrip inflation again next year. Yet cost efficiency is not the only imperative. It’s no secret business leaders are motivated to ensure employees remain happy and productive. Hence, employers are concurrently seeking value enhancements in the next-generation health plans such as convenience, transparency, warranty, and personalized options.

Most conventional wisdom has made the assumption that the mandates spawn by the ACA for public exchange plans would drive most innovations across healthcare. Yet, given the prior rumblings of publicly traded payers, and the seismic jolt just levied by UnitedHealthcare, the individual market is shaping up to be a less savory segment for investment. In fact, most of the start-ups participating at this year’s Rock Health Summit are publicly pivoting toward ‘enterprise’ (i.e. large group employers)  B2B2C strategies to fuel takeoff down the long runway inherent to healthcare.

Distinguishing Winners from Losers. Paul Levy, former CEO of BIDMC, on his excellent blog, Not Running a Hospital, from time to time refers to a description of hospitals by a name forgotten Harvard Business Professor as: “business cost structures in search of revenue streams.” That pretty much sums up all incumbents in healthcare, especially insurers. Ultimately, neither payer nor provider, nor employer for that matter, will be exempt from fundamentally transforming their structures in the march from volume to value!

The good news is even if the pace of change is double that typical in healthcare, it means time remains for incumbents to adapt. Nevertheless, the hunt for winners and losers for every segment of healthcare is already underway and the pursuit will be led and driven by its most deep-pocketed benefactors. For when the dust settles, my high-level predictions are:

  • Winners will truly innovate, while Losers iterate on the status quo.
  • Winners will pursue enterprise level goals matching a consumer-centered purpose, while Losers continue to respond to the future with pilots.
  • Winners will close the gaps by leveraging strengths and addressing weaknesses, while Losers will confront them by attempts to control opportunities and deal in threats.

This the first in a series installments will explore these predictions more in-depth, and as pointed out in my inaugural blog post, marketing will have a significant cross-functional role; because in the future of healthcare, the message will be customer centricity, and medium digital, and marketing professionals will be needed to execute their integration.

*For a great alternate perspective, I encourage you to download the Forrester report: Health Insurers: Prepare For Survival Of The Fittest compliments of Acxiom.