by Paul Lambdin, Director, Health Plans, Sector Solution Leader for Retail Services and Health Insurance Exchanges, Deloitte Consulting LLP and Susan Novak, Senior Manager, Health Plans Retail Initiatives Leader, Deloitte Consulting LLP
As health insurance exchange marketplaces hit a key milestone – the “official” end of open enrollment, the work is not yet over, and, in some ways, is just beginning. Current headlines are filled with stories of the work the federal and state exchanges need to do, as well as the efforts health plans are making to unravel membership records and subsidy eligibility. But less is being publicized on the much larger, and longer-term efforts of health plans to transform their business models from employer-centric to individual consumer-centric, or “retail” organizations.
Consumerism has long been a trend and buzzword among health plans, but what’s changed? Why “retail”? Why now? With the anticipated growth in the commercial individual market, the continued growth in the Medicare and Medicaid lines of business, and the growing trend of private exchanges among employer-sponsored businesses, there is little denying that consumer-choice is trending upward. As a result, health plans are paying more attention than ever to improving their capabilities that serve to attract, acquire, and retain the individual consumer.
An increasing number of plans are asking how they can educate and align executives around retail trends in both the retail and health care industries, develop strategies to drive growth specifically in their “retail” (individual) lines of business, improve their understanding of and ability to serve the individual consumer, redesign their distribution channels, and craft retail IT strategies. And there is much work to be done. The health insurance industry ranks 14 out of 14 industries in Forrester’s Customer Experience Index.1 That’s dead last.
In this context, we launched the Deloitte Health Plan Retail Capability Survey to expand our understanding of the health insurance industry’s current capabilities to serve, and future investment priorities for the most dramatically changing segment of the market – the commercial individual market. We asked health plans leaders about their plans for growth in the commercial individual market, what capability investments they believe are critical for commercial individual market success, and their organization’s current capabilities and future investment plans. We explored 100 business and technology capabilities across five larger areas: 1) product and pricing, 2) branding and marketing, 3) distribution, enrollment and renewal, 4) consumer experience and 5) health and wealth management. We received an overwhelming response. Forty-six health plans representing 60% of the commercial individual marketplace2 and spanning national, regional, Blue Cross and Blue Shield, provider-sponsored, established, and new-entrant plans participated in the online survey at the end of 2013.
An analysis of the results revealed that health plans intend to acquire a significant number of retail capabilities by 2017 that will likely set the stage for a “new normal” in the way plans address the commercial individual market. This will be characterized by a deeper understanding of the consumer, more savvy use of consumer analytics to drive marketing, product, pricing, distribution, service, and engagement models, more sophisticated health system navigation tools, and more robust use of CRM and digital technologies to automate consumer interactions.
Other key takeaways include:
- Product, pricing, and consumer experience are health plans most critical investment priorities over the next three years. The most popular product and pricing capability investments relate to improving an understanding of consumers, including their lifetime value, and applying more sophisticated analytics to inform product design and pricing decisions. Within consumer experience, consumer insight and analytics were also key themes, with the integration of customer data and the operational application of more advanced, predictive customer analytics included as priorities. More tactical consumer experience priorities included web chat and automated bill payment reminders.
- Distribution, enrollment, and renewal capabilities are also common areas of investment. The single most frequently cited investment over the next three years was in this set of capabilites – to “use a thorough understanding of the consumer’s purchase process and preferences to inform channel strategy and design,” in which 63% of respondents are planning new investments, bringing the market prevalence to 91% of the market by 2017. Other popular capability investments in this category include retention strategies, systematic touch points to reinforce the relationship, guided selling tools, and CRM integration.
- Branding and marketing capabilities and health and wealth management capabilities were lesser priorities. However, by 2017 branding and marketing for retail plans will likely be analytics-driven, personalized, and digital, as more than 90% of health plans aspire to possess these less common capabilities today. In health and wealth management we are likely to see more sophisticated cost transparency tools, predictive analytics to identify and engage members in health programs, and increased integration between clinical and customer service functions to improve targeting and intervention.
- Technology investments aren’t an option; they’re an imperative. A key to achieving the most common business capability investments is making investments in the right technologies to support. The five most popular technology investment categories out of the 19 technologies surveyed are related to: 1) transparency, 2) mobile, 3) CRM, 4) data and analytics, and 5) consumer engagement technologies (i.e., quantified-self, gamification).
Taking a step back from the survey results, health plans have a lot on their plates. Most have ambitious plans for the number of capabilities they will add over the next three years – adding 38 capabilities on average out of the 100 capabilities surveyed. Will they get it all done and be able to deliver the basic “blocking and tackling” of enrolling new members, answering calls, and paying claims? Place your bets. However, one message is clear from both the survey response rate and the detailed responses shared by participating health plans: health plans are getting “ready to retail.”
For more on this survey, check out the paper “Survey Says…health plans advance retail capabilities. Highlights from Deloitte’s 2013 Health plan retail capability survey.”
Sources: 1Forrester. The Customer Experience Index, 2014. January 21, 2014.
2Deloitte analysis of 2012 year end and 2013 Q2 NAIC state filing data via SNL database, December, 2013.
Paul Lambdin joined Deloitte’s Life Sciences & Health Care industry practice and the Health Plans sector as a Strategy & Operations director in 2010, after 25 years in the insurance and health care industries. Paul is a thought leader in health plans go-to-market functions, and focuses on growth strategy in today’s era of health care reform. A leader of Deloitte’s health insurance exchange (HIX) initiative, Paul develops solutions to prepare organizations for strategic, market, and operational exchange readiness.
Susan Novak is the Health Plans Retail Initiatives Leader for Deloitte Consulting, LLP. She is a Senior Manager in Deloitte’s Life Sciences and Health Care practice with more than a dozen years of Health Plan strategy and operations consulting experience in strategic planning, business model transformation, distribution strategy, product & pricing strategy and readying clients for Health Insurance Exchanges and the growing retail market. Her clients include large national health plans, Blue Cross Blue Shield plans, and regional health plans. Susan was the engine behind Deloitte’s 2013 Retail Capability Survey and has contributed to publications on consumerism and retail topics such as exchanges, healthcare consumers, segmentation, rewards programs and more.