MedCity Influencers

The disruptive threat lurking in the large group insurance market

If companies can provide their own care, manage their own provider networks and underwrite their own health insurance, what’s to stop them from administering their own plans, cutting traditional payers out altogether?

health insurance, payers, group insurance

If companies can provide their own care, manage their own provider networks and underwrite their own health insurance, what’s to stop them from administering their own plans, cutting traditional payers out altogether?

A careful reading of industry data and recent headlines tells us the possibility isn’t that remote. Self-funded plans have been on the rise for nearly 20 years: the percentage of employers offering such plans, for instance, rose from 26.5 percent in 1999 to 40.7 percent in 2016. In recent years, the biggest increases haven’t even come from the large employers who long preferred to do their own underwriting, but from businesses with fewer than 1,000 employees.

Historically, payers have continued to generate revenue from self-insured companies by providing claims processing and other administrative services. But now a new generation of entrepreneurs and innovators – several of whom lead the world’s biggest companies – are opting out of a health care system they view as archaic, inefficient and ineffectual. The shift they’re initiating, along with the growth of self-insuring, poses an existential threat to existing payers’ position in the large-group market.

The threats come from companies like Apple, which recently announced the creation of its own network of health clinics. They come from Amazon, Chase and Berkshire Hathaway, all of whom banded together to form their own healthcare company. They come from Intel, which, by using its dominant purchasing power in the Portland market, has radically redesigned the city’s local healthcare system. And this all comes amid a broader movement among employers to contract directly with providers, cutting payers out of the decision around where employees can go for care.

Here come the disruptors
Meanwhile, technology entrepreneurs have set their disruptive sights on the self-insured market. Moving forward, we should expect to see a growing number of health insurance startups focusing on a “new type of health plan” — one that uses technology to help employers administer self-funded insurance plans on their own.

Even if you discount general dissatisfaction with the current healthcare system — the United States is still the most expensive and least accessible system among 11 of the world’s most high-income countries — the folks who lead large organizations have plenty of reasons to disrupt health insurance. They’re in a relentless war for talent, so creating a better health experience can be a powerful competitive advantage. And despite many payers’ best efforts, the health insurance experience remains frustrating for many consumers: nearly half of plan members don’t understand how their plans work, and trust in payers has fallen to an all-time low.

That helps explain why we’re seeing self-funded companies turn to fast-growing startups for more personalized member experiences – rather than relying on the concierge service that traditional payers have long offered to self-funded plans. Those companies give members more attention (i.e., they pick up the phone and get answers fast) and use technology to determine and relay the next-best actions that can steer to better care at a lower cost.

Incumbent payers have everything they need to offer that kind of service – including a depth of patient and provider data that nobody else in the health supply chain possesses. But for the most part, traditional payers have struggled to adopt the kinds of customer-friendly measures that more nimble competitors can offer.

Their shortcomings, in customer service and beyond, stem from their siloed infrastructures — a consequence of the way health-insurance companies came together. Most were built over long periods of time, through multiple acquisitions and mergers that resulted in a hodgepodge of unrelated but critical databases. As a result, demographic info, previous claim history and other contextually useful data often lives in separate, unconnected databases. Not only are payers often slow to roll out the latest innovative offerings, they’re also unable to generate insights that could help influence better care, and their customer service reps are forced to traverse various systems to answer member questions about basic things, like claims and approvals.

A Way Forward
As the ground shifts beneath their feet, it’s imperative that payers take aggressive steps to become more agile, transparent and customer-friendly.

Contrary to what many in the industry believe, that doesn’t mean ripping out and replacing legacy systems: after all, as disconnected as they may be, each of those systems remains a powerful infrastructure for managing health. Rather, payers can turn to new technology to build out centralized microservices that give all consumer applications — from member portals to mobile apps to member service systems — access to the same information, even if the original systems remain siloed.

Starting this process will enable payers to streamline service center workflows, improve customer experience and start building customer trust. And leveraging their data will provide big plans with huge advantages over the new entrants trying to disrupt the large-group market. For instance, putting the relevant data at their fingertips will free customer service reps to answer more questions in less time, while centralizing data sources will allow payers to improve customers’ self-directed digital experiences. And as technology in the health insurance space catches up with customer experiences in industries like retail and banking, payers will be in position to use their centralized data streams to provide real-time recommendation bots – similar to Amazon’s “You might also like” engine – that offer helpful insights to their members and direct them toward the actions that improve health and hold down costs.

At the end of the day it will all come down to better communication. By establishing a trusted rapport, payers and their members can work together to deliver superior customer experiences, lower costs and improved member health. But payers can’t do it on their own — to make it happen, they need to enlist new technologies and platforms.

If they can do it, they’ll not only fend off threats from upstarts and self-funding, but will forge new opportunities for growth as well.

Photo: AndreyPopov, Getty Images

 

 

 

 

 

 

 

 

 

 


Avatar photo
Avatar photo

Mark Nathan

Mark Nathan is the founder and CEO of Zipari, Inc. and has been featured in Forbes, The New York Times, The Wall Street Journal, TechRepublic, Crains, and other well-known health, business, and technology publications. Mark began his 25+ year career as a robotics engineer at NASA and spent half of his career leading the modernization of customer experience at Guardian, one of the largest insurance companies in the nation. The other half of Mark’s career has been dedicated to developing enterprise-level, consumer-oriented technology for large consumer brands, like Apple, Disney, and ABCNews.com.

This post appears through the MedCity Influencers program. Anyone can publish their perspective on business and innovation in healthcare on MedCity News through MedCity Influencers. Click here to find out how.

Shares1
Shares1