Health insurers must change their business models to address a fast growing wave of consumerism, according to healthcare investment firm Psilos Group’s 2014 Healthcare Outlook.
“The health insurance industry’s 50-year legacy as a business-to-business model is on the edge of irrelevance,” said Steve Krupa, Managing Member of Psilos Group. “The health insurance market is rapidly shifting to 40% individual policies from just 10% prior to the Affordable Care Act.”
This shift requires that insurers reinvent their entire businesses to embrace consumer demands and expectations, according to Psilos, which argues that the transformation will require an overhaul of the entire value chain, including:
- Research: Insurers must understand their new individual consumer base.
- Product development: Differentiation will come from value-added products and services beyond mandated baseline care, extending the “one-size-fits-all” model.
- Outsourcing and Supply Chain Management: Plans will need to shift service focus to meet individual consumers’ demands, requiring modern technology and automation among insurers and their business process outsourcing partners.
- Provider Network Management: Price transparency, quality measures and other trends toward consumerism in healthcare will change the relationship between insurers and providers.
- Customer Relations/Operations: To meet consumer expectations, customer service and business transactions must become real‐time, 24/7 and accessible via multiple platforms, including online and mobile.
- Marketing and Sales: Insurers must articulate their new value propositions to various consumer segments and leverage exchanges as a primary distribution channel; in stark contrast to their experience selling group plans direct to employers.
The new healthcare reality requires that insurers reinvent their entire businesses to embrace consumer demands and expectations.Insurer’s changes will need to be deep, strategic, and focused on new value propositions for the individual market. If successful, they have the potential to significantly improve the wellbeing of the U.S. healthcare system.
“We’ve come to a point where insurers will have to make major changes to their business models in order to remain competitive in a post-ACA world,” said Al Waxman, CEO and Senior Managing Member of Psilos. “The good news is that technological innovations are addressing the full spectrum of needs – from cloud-based core administration platforms to clinical workflow and decision support tools to mobile and telehealth applications – all aimed at better aligning insurers, providers, and patients in the reshaping of America’s healthcare system. If approached correctly, we’re predicting the result will be a more outcomes-focused healthcare system in which the patient is the most important aspect of the business.”