|
|
Healthcare Insurance
Industry Dynamics
Private healthcare insurance today is clearly an industry in transition, facing challenges on a number of fronts. A legacy of hospitals shifting uninsured and underpaid costs to private insurers has fueled an escalation of premiums that consumers are increasingly finding unaffordable. Similarly struggling with costs, employers are moving away from their interest in engaging employees in longer term cost management strategies (e.g. wellness and prevention), and focusing instead on modifying basic coverage to reduce costs.
To this point, the bulk of insurers’ focus has been on employers as the primary customer. This has created a member retention challenge that drives a shorter term perspective to minimize risk … which couldn’t come at a worse time. The result is a competitive handicap to insurers in our reform environment, discouraging investment in the longer term interventions and consumer behavior incentives that could achieve better quality care at a lower total cost.
Recently, commercial healthcare insurers have become a convenient scapegoat for the many critics of an ailing U.S. health system. An active Administration, elected in part for its stated intent to help the uninsured, has blamed commercial insurers for the current situation. Most recently, Congress passed the Patient Protection and Affordable Care Act, imposing new mandates and constraints on the private insurance sector as a step toward improved access and affordability.
Our national drive for healthcare reform has broadened recognition of one of the keys to better health outcomes at lower cost … more consumer engagement and accountability for care decisions and personal health behaviors. This raises additional questions regarding the viability of the current third party payer business model, which has served as a surrogate decision-maker for consumers and sheltered them from the cost consequences of their behaviors. The core capabilities required by the third party model – actuarial calculation and data/claims processes – are not sufficient to address the care outcome and pricing transparency needs of a more educated, involved and responsible consumer.
In this time of transition one thing is clear. Continuing to conduct business-as-usual leaves healthcare insurers increasingly vulnerable to a reform-minded market demanding change, and to nimble upstarts with consumer marketing expertise.
Business Challenges
With the passage of The Patient Protection and Affordable Care Act, the healthcare insurance industry is now faced with an uncertain future and a need to determine its next steps. This path forward must address three formidable business challenges.
The first challenge is how to adapt to the business constraints dictated by the bill. Private insurers are now compelled to cover anyone who applies for coverage, which will increase costs and reduce margins. The bill also restricts insurers from passing on these costs through premium increases. This leaves healthcare insurers with no choice but to find new efficiencies in their operational processes.
The second challenge is how to change the widespread negative perception of the industry across healthcare stakeholders. Insurers must respond to the range of stakeholder dissatisfaction among physicians, hospitals and consumers.
The third challenge is how to seize the opportunity in an emerging new competitive landscape calling for the development of a new generation of innovative products and services
Healthcare insurers need to take the initiative now to create and implement a new business model more responsive to the reform objectives of better care at lower cost. They must become true innovators if they are to survive, much less prosper in this environment. Annual marginal adjustments to product features will not be enough. As consumers' healthcare costs have increased, they've begun to act more and more like customers, demanding more choices, value for their money, and transparency to purchase decision information. New retail sales and distribution capabilities will need to be built, as this transition to "consumer and customer" accelerates.
Individual consumers will want a much wider variety of products to choose from, reclaiming the opportunity to select coverage that best fits their health needs and budget. To meet this new product demand, insurers will need to work collaboratively with care providers to innovate new approaches to care … ones that deliver better coutcomes at lower cost. Reimbursement and pricing of these products will need to be aligned, to both insure that the right evidence-based care is provided, and that consumers manage their personal health behavior accordingly.
Our Depth of Knowledge
Over the last 20 years we’ve worked across a wide variety of industries helping clients understand changing market dynamics and influence mechanisms, and translate this knowledge into effective strategy and breakthrough results. Our work with healthcare systems, payors, physicians, pharmaceutical and device manufacturers positions us to help our clients understand the complex relationship needs of all key stakeholders, and to use this perspective to shape responsive strategy.
Our work with healthcare insurance clients reflects our dual capabilities to develop and operationalize new business models, and has encompassed a broad range of projects, including:
- Objectively assessing the current business model and key business processes, identifying vulnerabilities and the actions necessary to address them
- Conducting strategic market and trend analysis, defining positive-margin consumer segments insurers can own and sustain over time
- Guiding strategic planning to develop a new business model and strategy responsive to the market, and translating such strategy into a clear and actionable operational plan
- Guiding clients in data mining and analysis to identify cost and quality variability at the institutional and individual provider levels, using the results to systematically guide payment model change
- Building capabilities to develop strategic relationships with consumers and healthcare delivery partners, elevating dialogue from a transactional to a strategic level
- Implementing strategic process redesign to dramatically reduce cost structure and align activity with new payment models
- Defining infrastructure, roles, process mechanisms, and incentives to jump start innovation and manage a more profitable portfolio based on differentiated new growth platforms
|
|