If they wish to grow and expand, then they must ace the use of the several new digital avenues open to them and slowly transform the way they do business.
This is a strong and relevant message from an authority figure who knows what he is talking about and understands the massive change on the horizon of the global marketplace. Harkening to the portents, the Finances domain, the Telecommunication field and even the Brokerage market have attempted to adopt an approach that will usher in digital transformation for their industry. Unfortunately, in this age of giant strides towards better connectivity, omni-presence and improved consumer interaction, the Health Insurance industry or the health insurance payers are lagging behind. This asset by Digital Strategy Yoga is an attempt to bring the Health Insurance business up to speed and help them:
- Understand what the implications of the Affordable Care Act are for their industry in terms of the changes they must introduce in the way they perceive their role in the lives of their consumers
- Realize why transformation is a bigger challenge for them, thus preparing them with the needed ammunition to create a robust digital strategy set to tackle the probable problems
- Put in place a simple two step game plan which will help them cope with the disruptive changes in their immediate market as well as the economy as a whole
The last six months of 2014 can serve as a much needed preparation stage for the payers because 2015 will require them to put in motion their digital strategies to usher in a complete operations transformation which will be in accordance with the new healthcare tenets established by Obamacare.
2015: THE TRANSITIONAL YEAR FOR PAYERS Digital Strategy Yoga has chosen to define 2015 as a “transitional year” for the Health Insurance Industry. The implementation of the Patient Protection and Affordable Care Act in October of 2013 has added the much needed urgency to the ruminations around digital transformation – but even without Obamacare as a factor, the health insurance payers and the way they have conducted their business has been long due for a complete overhaul. Digital Strategy Yoga has envisioned a growth and capability assimilation curve for the payers – a journey that takes them from being a platform for purchasing insurance (as is the tradition or norm) to being a full fledged lifestyle management body striving to offer the best resources to ensure a health lifestyle for its customers. WHY A TRANSITIONAL YEAR?
So why is 2015 a transitional year for the Health Insurance Industry? This important question can be answered by looking into some of the provisions of the Affordable Care Act and linking the implications and repercussions back to the payer’s traditional business model.
• According to the RAND Corporation, with the Affordable Care Act, by 2016 the number of uninsured non-elderly people in the United States will decrease to a low 8.2% in comparison to the projected number of 16%. This indicates the enrolment of millions of individuals who were previously without insurance cover of any sort. As a result the Health Insurance industry as a whole must prepare to cope with a sudden surge in the number of buyers and will need to update its infrastructure and distribution channels.
• Additionally, due to the penalties levied if insurance coverage is not provided to employees, there will be an increase of up to 5 percentage points in the insurance enrolment by small group businesses with 2 to 50 employees. These businesses will be looking for a single comprehensive plan for all their workers. This gives an opportunity to startup businesses like Oscar Insurance who didn’t have the financial capability of liaising with large enterprises to enter the fray. Established Insurance businesses may see their market share declining if they do not improve the care they provide across their networks.
• The Healthcare Exchanges themselves are playing field levelers. They allow individuals to easily access health insurance choosing a plan they like from a Company they are willing to trust instead of having to associate with industry incumbents whose policies and contracts may not appeal to them or address their needs. This completely bypasses the “privileged” status of health insurance payers and brings the consumer centric almost inbound approach to the Health Insurance industry.
• Under the ACA, a number of mandates will force the Health Insurance industry to change its perspective from a profit based administrative outlook to optimized care management for the insured individuals. The Affordable Care Act makes it possible for US citizens with pre-existing conditions to get insurance immediately, it also puts a cap on out of out of pocket expenses and deductibles the insured individuals are liable to pay and lastly it forces insurance plans to bundle together several fringe benefits like vision and dental care for a more comprehensive coverage. If incumbents are to continue to hold on to their market share they need to chuck the 80-20 rule (Medical Loss Ratio tenet) and spend a larger chunk of the collected premium on services to improve quality of healthcare.
In order to take these changes into their stride, the Health Insurance companies have 2015 as the bridge between the past and the future. Most importantly, 2015 will play a pivotal role in helping payers understand that healthy customers will auger well for their own business. In order to bring about this paradigm shift they must:
• Transition from a health insurance plan to a health management plan: Go from being a health insurance plans looking to accrue profits from the premiums paid by insured individuals to health care management plans that discreetly oversee all spheres of the buyer’s healthcare regime and requirements, ultimately to ensure that they need to spend less.
• Transition from being back office administrators to health coordinators: Go from being isolated, unsympathetic claims processing back end offices to active players who must provide easy access to quality healthcare facilities in a coordinated manner across networks (general physicians, speciality physicians, hospices) and business models (Insurance Exchanges, Medicaid, Medicare)
• Transition from health education to health advocates: Start considering consumer education as a primary responsibility and dispense the knowledge required to help the buyer’s journey across various social platforms. This approach can also be extended to other stakeholders like providers, brokers, groups and employers.
• Transition from customer service to customer engagement: Shift their focus from doing the bare minimum to investing heavily in a fleet of optimized healthcare services which can go a long way in improving the quality of care received by the ailing, the expediency of dispensing treatment and the proper preventive information needed by those who aren’t afflicted. Thus businesses must go from a “Medical Loss Ratio (MLR)” centric model to one that cares about optimized healthcare management. If payers can successfully affect these changes and shifts then they can emerge from 2015 fully equipped to handle and cope with the ripple effect of the 2013 Affordable Care Act implementation.
WHY TRANSITIONING MAY BE DIFFICULT FOR PAYERS?
There is a reason behind the fact that the Health Insurance industry has largely been reluctant to transition into the realm of digital transformation. For the average US citizen, health insurance is evocative of unpleasant experiences. Dropped insurances, maxed out coverages and rejected claims have soured the relationship between the industry and its patrons. Digital Strategy Yoga takes an unbiased look at some of the possible hurdles in the path to complete digital transformation and Affordable Care Act adoption.
• Lack of trust: There is definitely a lack of trust and understanding between the insurance buyers and the incumbent companies. Because of this undercurrent of wariness the insurance businesses have not made a significant effort to reach out to their market. Often there is a middleman like an enterprise or a firm purchasing insurance on behalf of its employees and thus the direct individual to insurance payer line of communication has been tenuous. The insured individuals have not yet tipped over the Trust Inflection Point© because of insufficient Communication, Interaction, Engagement, Collaboration and Innovation on part of the payers. If transformation is to happen, the very first issue that must be tackled is this lack of trust. Simply going social will not be of any use if “indoctrination” of the masses is not an agenda on the list.
• Healthcare is confidential: Healthcare is something that is both personal and important to individuals. This is the reason why a more relatable approach replete with healthcare tips and suggestions is not an option for payers. The HIPAA (Health Insurance Portability and Accountability Act) is a rather binding and intrusive set of mandates because of which insurance payers can’t really leverage information and buyer trends in proactive ways for a more engaged and intimate experience. They must follow the restrictive social and interaction protocol of Reciprocation-Respect-Reliability even if they do create a game plan that attempts to educate and influence insurance buyers to lead a healthy lifestyle.
• Industry consolidations: The landscape of the Health industry on the whole is drastically changing. Another far reaching consequence of the Affordable Care Act has been to create a “merger frenzy” in the healthcare industry and its different channels and networks. In 2012 alone, 150 mergers were reported and this is a staggering number. There is both vertical and horizontal consolidation in progress. Payers are acquiring hospitals and wellness organizations while the hospitals are vying to acquire rivals in order to become the top destination to cater to the spike in insured individuals who will start seeking healthcare facilities. As a result there may be an overall increase in the cost of healthcare services across the nation (as happened in the 1990s) and Health Insurance companies need to be aware of and armed with strategies to deal with this rise while providing better care. Factoring in digital transformation together with this bump in expenses may deter payers from embracing much needed changes.
• Transforming business models: Hand in hand with consolidation, there is also transitioning. Existing business models are changing because of the introduction of ensemble care providers like ACOs (Accountable Care Organizations where doctors, hospitals and other care providers join forces voluntarily to extend end to end healthcare services to patients) and PCMH (Patient Centered Medical Homes where an expert team led by a physician work in a coordinated manner to bring to patients continuous attention in a bid to change the state of medical services to an Utopian “what it should be”). These models are driving down costs but at the same time agitating doctors are opting out of such networks. This has created a deficit of competent physicians who can collaborate with payers to ensure buyer health at lower rates. Consumer engagement models are also shifting and changing. Even if trust can be built to initiate social contact, buyers are expecting relevant information to find them irrespective of the digital channel they use. Thus payers must not only dip their toes into the ocean of digital transformation, they must take a full committed plunge with resources dedicated to maintaining several platforms.
• Technology Diffusion: Branching off from the mandate of changing consumer expectations and engagement models, digital capability development is also an important aspect of embracing transformation. For example the Fitbit suite of trackers is considered to be a veritable gold mine of stats and information. Payers must be ready to leverage this information to provide better care and customized education to individual buyers. Thus not only is a paradigm shift needed, infrastructure re-haul is also essential to assimilate the portfolio of changes the payer business will undergo and this can be expensive, complicated and daunting, even for established names.
• Organizational culture: Payers also face a somewhat isolated problem of new entry disorientation. Health Insurance companies tend to be sales centric and thus have high employee churn rate. In order to foster a culture of innovation, these businesses bring in experienced resources from other industries where digital transformation has progressed considerably. These individuals end up getting frustrated by the obsolete processes and capabilities of insurance industry and can’t contribute significantly to the betterment of the company. On the other hand existing seasoned employees do not want to accept the new platforms and business practices because of their rigidity. This is ironic because for a complete transformation innovation and collaboration between internal resources is of utmost importance.
TWO STEP PAYER GAME PLAN FOR 2015
The two step model that Health Insurance businesses need to implement is heavily dependent upon the fact that strengthening existing (or core business) models should progress simultaneously with and serve as a backbone for contained experimentation and innovation in order to launch reliable, foolproof new models.
STEP 1: OPTIMIZATION AND TRANSFORMATION OF CORE BUSINESS MODELS AND PROCESSES
The Health Insurance industry is no different than any other B2B or B2C industry. Sales, marketing, administrative processes all form the backbone of the business. Digital Strategy Yoga doesn’t recommend a blinkered sequestered model. It advocates first optimizing the existing departments and processes to the utmost capability of the company in order to free up revenue, generate profits and give the innovative new models a solid foundation to thrive upon. This includes:
• Sales Transformation – With the Affordable Care Act and the digital advancements, buyers can now purchase an insurance plan that suits their needs from a large number of platforms and channels with Private Exchanges, Online Exchanges, Medicare, Medicaid and retail brokers being just some of the options. The payers must first up ensure that the sales team understands the motivations and the buyer’s journey of individuals using different platforms to purchase insurance because these factors will significantly vary. Next there should be enough team members giving the sales effort the reach needed to provide individuals (from different walks of life) easy access to quality healthcare and insurance. This can lead to a win-win situation of greater profits for the payers and better coverage for the buyers.
• Customer interaction transformation – The health insurance payers need to collaborate and interact with a large number of new stakeholders as well as buyers. Not only do those purchasing the policies matter, the brokers, the doctors, hospitals, urgent care, the employers, gyms, governments, health advocates and pharmacy benefit managers (PBM)all play an important part in the business model. Currently paperwork and forms are the preferred means of communication and interaction. This is not only time consuming and tedious it also results in a poor experience for everyone involved and generates redundant data. Payers must create a robust strategy leveraging web, mobile technology, social media and other digital platforms so that information can be easily disseminated and consumed especially during the turbulent transitioning period for the business.
• Optimization of Medical Management Solution – CRMs or Customer Relationship Management tools are an integral part of almost every industry in the market. The payers need to play catch up where this trend is concerned. Optimization of the central system that stores, archives, processes, cleanses and shares sensitive member information integrated with health management technology options like HIX (Health Information Exchange) and EMR (Electronic Medical Record) and revolutionary innovative platforms like tele-medicine, wellness coaching systems, and PHR (Personal Health Record) can lead to better decisions and projections.
• Leverage your partner’s capabilities – It is important to recognize and synchronize the digital capabilities provided by the partners in the healthcare ecosystem. With so many digital technologies permeating healthcare and myriad core stakeholders (providers, hospitals, laboratories, clinical management, pharmacy benefit management (PBM’s) and other ancillary health management companies) jostling to present their information that there needs to be a single master digital strategy for connecting with the consumers. The consumers are going to be overwhelmed and frustrated if they are constantly shuttled from one system to another.
• Creation of an adoption plan – Last but not the least, this optimized core business model must be used both by the buyers and the other stakeholders. If “activation” (which refers to the action that qualifies a particular individual as an active user of a platform or model) is low, an optimized sales or interaction process is of little use. Hence payers must stop relying on the “Create it and they will use it” maxim and craft an adoption plan for every individual in their network. If adoption is not successful, new models will also falter.
STEP 2: LAUNCH MODULAR PILOT PROJECTS TO TEST NEW BUSINESS MODELS AND THEIR GOAL ACHIEVEMENT CAPABILITY
Risk management is an intrinsic part of encouraging innovation and launching new business models. Of the many mandates of risk management, one is containment and the other is capability maturity or development. Step 2 of the game plan concentrates on these mandates.
• As a payer who wants to grow and expand, it is important to remain focused. It is tempting to try and all possible technological advancements once the initial friction is eliminated. However the whole executive team must stay focused on long term vision for the business and then set up a series of milestones or objectives in order to bring the vision to fruition.
• With the enterprise vision secured, small pilot or test projects can be run in well-defined, contained areas of the business. Pilot projects are important because they allow the payers to experiment in a particular area, on a small scale in order to cut down on risks and possible losses. The data from these projects can be analyzed to understand whether the proposed change is in alignment with the ultimate vision and capable of achieving the defined milestones.
• These pilots are run in well contained areas eschewing the “broad stroke” philosophy where several stakeholders within the business are affected simultaneously by a proposed change. The “broad stroke” approach rarely ever generates the needed traction and as a result promising ideas are abandoned because of poor execution. For example if a particular payer company is looking to expand its market and make inroads into some of the newer distribution channels, then it can choose one area like say Medicaid and commission a small test project where the sales, marketing and administration teams can collaborate and test the waters. If this attempt is successful, then more distribution channels can be tackled with the insights gleaned from the small scale successful implementation.
• Organizational capability assessment is extremely important. Since payers are embracing transformation relatively late in their journey, it is not unreasonable to expect that some of the buyers may be more familiar with the new technologies implemented. In order to ensure that these savvy customers get a superior level of service payers should have both the digital foundation to absorb the impending infrastructural changes and the human resources to expertly leverage the new platforms and add value to the buyer’s life.
Thus pilot projects are the key to acing the second step of the game plan and focus is imperative throughout the process of testing and then implementing a new model. Digital Strategy Yoga research has identified the following areas as ripe for experimentation for health management transformation in the important transitional year of 2015:
Medicaid – With the Affordable Care Act, the states now have the option of expanding their Medicaid programs to cover those who are considered “below” the eligibility threshold for a more robust insurance coverage strategy. This means that the national expenditure of the US on healthcare can rise dramatically, by over 14% in 2014 if this option is availed by the states. Payers must experiment in this potential domain to create new digitally enabled programs to allow Medicaid users to access insurance and other wellness programs which can keep the community healthy thus affecting possible healthcare costs in a positive way.
Medicare – The senior population has increased by 35% over the last 5 years. This means that Medicare is now an active niche with steady growth projected for the future. Even though seniors are gradually becoming “tech-savvy”, it is important for payers to re-imagine “friendly” channels and processes catering specifically to their needs where insurance is concerned. Coordinated care models and healthy lifestyle options for senior citizens like active retirement can be managed with the help of mobile and web based solutions which build upon the technical prowess already developed by them.
Integration with Partners – With the changes Obamacare has enforced, a large number of healthcare partners are bound to come up expanding the current way in which payers interact with their network. This is another important domain that warrants experimentation as Health Insurance industry must be able to identify the partners who directly influence the buyers and integrate with them seamlessly on a social level. Partnerships with PBMs, hospitals, provider networks and wellness companies will broaden the vision of the healthcare payers. This confluence of expertise will allow them to develop interesting pilot projects which can bring about changes all across the healthcare landscape instead of concentrating upon a particular narrow segment.
Proactive customer service – With the ACA in place, the Health Insurance industry will lose its forbidding authoritative façade and people will perceive it as just another investment. With so many options available, buyers will demand proactive customer service in a playing field leveled by the entry of startups. What is proactive customer service? It is not merely a projected interest in how well buyers are faring and answering their doubts and queries. Payers should go one step forward and include reminders for health checkups, medicines and information about healthy lifestyle choices. Have you accounted for this trend? If not you could end up losing your competitive advantage
Customer Education – A facet of proactive customer service is customer education. Payers will need to provide buyers with answers to all their questions. They need to graduate from being the “gatekeepers” of information to being advocates of dissemination. According to Kathleen O Brien, who writes for nj.com the Blue Cross Blue Shield of New Jersey has hired dozens of new employees to answer questions and reach out to potential customers because education in a sense starts even before a purchase is made. Payers must experiment with new channels to deliver this information and new formats for its consumption.
Customer Lifestyle Incentive Programs – According to standard data, each smoker costs an organization $3,856 in medical costs and lost annual productivity! The scenario is similar to the dilemma of payers. Lifestyle incentive programs can help reduce the outlay or expenditure of the insurance companies and also promote holistic, self-driven healthy living. In order to grow post ACA, payers must invest in lifestyle incentive programs.
Proactive care management – With inspired education programs and proactive customer service, care management is also important. Payers must drive a sample population of their buyer database to a healthier life with acute/critical condition assessment, creation of self-management lifestyle routines and access to helpful information like the contact numbers of one-on-one nurses and trainers.
ACO and PCMH pilots – The number of ACOs in the US especially after the Medicare Shared Savings Program (MSSP) wave has risen to 606. As discussed ACOs and PCMHs being end to end comprehensive healthcare solutions driven by networks of specialists and their care providing partners, will prove instrumental in transforming the healthcare landscape. Payers must consciously increase the number of pilot projects they run in this niche.
In closing we would like to reiterate that 2015 payer game plan plays a pivotal for their existence in the Health Insurance industry. The economy and the citizens will recover gradually from the well intended, yet disruptive changes brought on by the Affordable Care Act and the buyers empowered by its provisions will start clamoring for better service, more information and flawless execution.
The businesses that are incapable of meeting their demands, however established will gradually have to give way to more motivated and technologically superior startups. Only a blend of technological capability development and pertinent paradigm shifts can help payers make the most of Obamacare and the future.
• Optimize your core business models to ensure that Year on Year advancement and simultaneous alignment with enterprise vision is achieved and sustained.
• Have a strong, well delineated enterprise vision and an accompanying roadmap of capabilities to reach your year end objectives while striving towards the ultimate long term goals
• 2015 should see you continuously launch pilot projects in different contained areas of your business in order to transition from being just a Health Insurance company to a complete health management system with the connections and resources needed to extend superior care to your buyers. If you are in need of guidance to ensure that 2015 emerges as a landmark year in your business’s history, connect with Digital Strategy Yoga for a consultation session.
More specifically our 2015 strategy workshop can help you formulate a 2015 game plan for your specific needs: Talk to us today at 609- 542-0715! Or email us at [email protected]