Consumers and employers have made it clear they want flexibility with health benefits. While health insurance options traditionally have been limited to a few packages each year, employers and their workers are flexing their power to demand more choices – and more value.
According to a report from the Deloitte Center for Health Solutions, health plans are expected to become much more personalized in response to these consumer and employer demands. “Products will balance traditional population-level risk with being hyperpersonal and easy-to-understand, based on consumer need,” the report states.
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Add to this the continuing rise in healthcare costs – forcing premiums and out-of-pocket costs higher each year for consumers – and it’s clear that health plans have a different and challenging future ahead.
Traditional insurers understand these headwinds and are looking at ways to evolve. It’s a tall order – but not an impossible task. Remaining at or near the top of employers’ and consumers’ choices when it comes to health coverage will require insurers to make large investments in infrastructure, processes and people to overcome the status quo.
The first step for insurers on this journey is to recognize three key trends in health coverage:
- The shift to self-funded coverage. Costs for traditional financial risk (fully insured) products are becoming so expensive that employers no longer see them as viable. Until recently, only large employers chose to self-insure, paying an insurer or third-party administrator just to operate the plan, while smaller and midsize employers continued to pay for fully insured coverage. Now even small businesses are choosing to self-insure or join multiple employer arrangements that are self-funded.
- Benefits that cater to employees’ specific interests. The benefits market has seen an explosion of plans designed to better attract and retain employees in a tight labor market. These include benefits that cover things such as mental health, reproductive rights, LGBTQ health and condition-specific coverage such as cancer care.
- More consumer choices. The decision to sign up for the best plan during open enrollment is no longer near-automatic for a growing number of employees. Some are opting for individual coverage, some are choosing self-pay options such as a monthly primary care plan with catastrophic coverage, and others are choosing to forgo health insurance altogether.
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These recent developments run counter to the one-size-fits-all ways insurers traditionally have thought about health plan design. But the status quo is simply not equipped for a world of personalization and consumer choice.
To fully embrace personalization, health plans must consider where to place their bets. For example, many insurers have begun moving toward a “supermarket” of various offerings, most likely amassing many segment-centric assets. This strategy certainly leans in the direction of being able to offer more personalized products. However, this portfolio-driven approach requires deep pockets and risks clunky integrations, with the risk of leaving members, employers and providers confused.
Another example is an effort to tailor health plan offerings reactively to consumer demand. This is achieved by adding hybrid products that address specific customer needs or by stitching together a marketplace of add-on point solutions. But this approach can easily compromise working capital and operational efficiency while merely presenting lackluster solutions to the market.
Yet another approach health plans are weighing is the launch of new startups focused on specific consumer segments. To meet consumers’ evolving demands along their health journeys, some insurers are using the startup approach to design new care models and coverage plans. The risk is that it requires scale to succeed. If few consumers are attracted to what’s offered, the health plan is looking at years of getting to profitability.
These and other approaches are likely to emerge and evolve as health plans seek greater personalization. Incumbent insurers have the capital and know-how to move forward on these fronts. The challenge then lies in the urgency to make the investments to succeed in personalized healthcare. Overcoming the status quo is never easy, but a brighter future is ahead for those health plans that are willing to make the investment.
Richard Fu is Chief Growth Officer at Flume Health, a healthcare technology, and services company that eliminates the complexity of designing and managing health plans. He has 15 years of enterprise growth and corporate strategy leadership in the health insurance and health consulting industries. Fu is responsible for Flume’s expansion into new strategic growth areas including the commercial self-funded market and beyond. Previously, he served as Chief Strategy Officer at Blue Cross Blue Shield of Kansas City, where he was responsible for establishing the company’s five-year strategic direction focused on personalization strategies to drive outcomes and value. Prior, Fu was a leader in Accenture’s Health Strategy practice, where he advised clients across the healthcare ecosystem on growth strategies, innovation, and digital transformation.
