Health plans: are you ready to retail?
Director, Health Plans, Sector Solution Leader for Retail Services and Health Insurance Exchanges, Deloitte Consulting LLP
It’s a challenging time for health plans as the Affordable Care Act (ACA) hits the industry full throttle. The good news in such a sea of market and regulatory changes is that when a beacon emerges on the horizon―something certain, significant, and pure―it typically drives focus and positive energy.
Health plans have entered the age of the consumer. And now the overriding question for the industry is, “Are you ready to retail?” Health plans’ business-to-business (B2B) competencies of sales and delivery to group health insurance purchasers (e.g. employers) will remain at the core because those clients control the bulk of opportunity for much of the industry. But it also seems the need for health plans to have a robust business-to-consumer (B2C) toolkit has reached a tipping point.
So, what constitutes this retail megatrend?
The industry has talked about the growth of consumer directed health plans (CDHPs), along with health savings accounts (HSA) and health reimbursement accounts to give consumers “skin in the game,” in employer-sponsored insurance (ESI) for about fifteen years. The number of firms offering high deductible health plans (HDHP) or HSA-qualified HDHPs has grown from 4 percent to 31 percent between 2005 and 2013.1 Greater consumer demand for access to information has driven health plans to invest in transparency tools related to the cost of services, as well as tools that enable consumers to better evaluate the best treatment paths and to get a sense of the quality of care that can be expected from providers and/or institutions. CDHP, in many respects, began a movement of consumerism as a fledgling, silo product―one that did not upset insurers’ B2B view of the world and one that could not alter the fundamental investment priorities of the legacy health plans business.
Simultaneous to the CDHP movement, Medicare Advantage (MA) began to drive revenue and profit for many health plans. As the commercial individual market remained relatively small, one can argue that it is in the MA arena―with no employer middle man―that the health plans began to develop B2C chops.
Now we add two more significant phenomena. The first is employers’ interest in defined contribution. The ACA defines a standard for minimum coverage and affordability (based on contributions to employees and dependent children, not spouses) ― raising the question of whether this standard will become the basis for defined contribution. As the private health insurance exchanges (HIXs) gain momentum, we could expect that many consumers will use enrollment and shopping tools to make more appropriate decisions on how to spend their employer contribution. This “new model” targets the heart of the ESI, which remains the principal driver in the health plan business. Whether proactive or defensive,every health plan should have a strategy to address burgeoning interest in the defined contribution / private HIX space.
And last but not least: public HIXs. This new market opportunity, largely comprised of previously uninsured populations, heard the starting gun on October 1 for the inaugural open enrollment season. I’ve been fascinated by the initial reports of consumer reaction to the public exchanges. Some of the discussion has focused on the design of various websites and the understanding of consumers and their preferences, behaviors, and desires when it comes to making purchasing decisions. Some websites got it; some not so much. Many consumers use websites to build an understanding and to begin the evaluation of alternatives, so a well-designed website welcomes the consumer to learn and browse while minimizing commitment or hassle. Some individuals will prefer to purchase online, while others will go in person to get advice and gain assistance with the administrative steps before they purchase. Technology glitches can and will eventually be resolved, but the focus should be on delivering the right experience to different segments of the consumer population―one size will not fit all. HIXs and health plans that understand this view of the consumer will likely be the winners.
Estimates of the enrollment for the public HIX market vary widely, but health plans, whether taking an “all in” or “toe in the water” approach, recognize the potential, despite the possible decline in ESI linked to that same potential. Many health plans recognize that this is a pure B2C strategy that demands the ability to understand, reach, enroll, and retain what will be an increasingly selective and informed health insurance customer.
So, what’s the recap? Health plans are faced with an imperative to focus on the consumer amidst continued growth of CDHP and MA, momentum gained from private HIXs, and the potential play of the individual public HIX market. Most of us can agree with that, so it begs the question, “Are you ready to retail?”
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Source: 1. Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005-2013, “Among Firms Offering Health Benefits, Percentage That Offer an HDHP/HRA and/or an HSA-Qualified HDHP, 2005-2013,” 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 more than 25 years in the insurance and health care industries. Paul is a thought leader in health plans’ go-to-market functions, and is focused on growth strategy in today’s era of health care reform. He is a leader of Deloitte’s health insurance exchange (HIX) initiative, developing solutions and tools to prepare organizations for strategic, market, and operational exchange readiness.