The Patient Protection and Affordable Care Act (PPACA) as modified by the Health Care and Education Reconciliation Act of 2010 and collectively known as the Affordable Care Act makes sweeping changes to the regulation of U.S. health insurance markets. There is no question that it has unleashed a wave of disruption in the healthcare industry, and what we see now is only the tip of the iceberg.
Since the law focuses primarily on increasing access to insurance coverage and establishing a minimum value for insurance benefits, it has perhaps had the most impact on the healthcare payer industry. As a result, the most important implications for payers are the imperative to scale operations and the need to evolve toward member-centric models.
Scale matters more than ever before
The Congressional Budget Office (CBO) estimates that the act will lead to a 58 percent reduction in the uninsured population by 2019. A substantial portion of the population will enroll in Medicaid. The remaining newly insured will receive coverage via health insurance marketplaces or health insurance exchanges. Under the PPACA, regulated public marketplaces will be operated by individual states, the federal government or by a partnership between both. These marketplaces will enroll millions of previously un-insured Americans. This change will be accompanied by a widening of Medicaid, where enrollment has tripled during the last decade. The market therefore represents an extremely attractive growth opportunity for payers, assuming they can scale operations to proactively position themselves for growth.
Consumerism is the new healthcare paradigm
There is no question that healthcare has lagged behind other industries in adopting a consumer-centric approach. This is true of healthcare payers as well. Historically, retail buyers have been insignificant – less than 5 to 10 percent of overall payer revenues, so it’s no surprise that individual enrollments or experience were never high-priority areas. Payers have long focused on institutional sales processes, with systems and processes designed for large groups moving to personalized, member-centric models is no small challenge. This requires new capabilities, new ways of working and new mind-sets.
Top-down models must now pivot to ones that engage consumers on their own terms. In this shift from B2B to B2C models that address the individual’s wants and needs, payers will need to focus simultaneously on two goals. The first is the immediate need to improve customer acquisition, management and retention, customize health plans and provide wider product choices. The second is the ultimate goal of helping consumers to make the best healthcare choices so that ill consumers can be set on the path to wellness and healthy consumers can stay that way.
New models for a new world
The more challenging environment that payers now face will demand innovation in their operating models. In fact, they would be well advised to take cues from online retail, with its increasingly sophisticated routes for displaying a wide selection of choices and helping consumers navigate them easily.
Price sensitivity
Consumers will make educated decisions and select health plans based on cost and value. The awareness is increasing that expensive medical treatment does not equal better quality. Flexible and outcome-based pricing will need to be a key offering of the new models.
Health managers, not just exchanges
It will be in the long-term interest of all players, including payers, to ensure that consumers make the best choices for themselves. Health insurance marketplaces will be forced to don the role of health and wellness managers to ensure overall well-being, and not just complete operational transactions.
Focus on preventive care
It is likely that a significant percentage of the new entrants to Medicaid would have a greater incidence of poor health and chronic conditions. To avoid the cost burden of frequent hospitalization, it makes sense for the payer to ensure that consumers understand self-care options and are encouraged to avail of preventive care, when needed.
Expecting and navigating choices
Given that the choice of plans lies directly in the hands of the consumer, it is natural that they will expect a wide gamut of options and customizable healthcare plans, specific to individual demographics. At the same time, consumers are unlikely to be well-equipped to navigate health insurance exchanges and make decisions about multiple options. In addition to the widespread adoption of technology, payers will have to invest in significant consumer outreach and education.
Rise of micro networks
Micro networks or employer-sponsored health plans with small networks have evolved so that employers can both comply with new regulations and curb costs without sacrificing employee healthcare benefits. Employer-sponsored health plans will continue to rise in importance. As employers explore new options via healthcare exchanges, the demand for these micro networks is sure to accelerate.
Reward programs
The ultimate goal for payers should be to create a community of engaged, brand-loyal consumers. This will require, much like successful retail strategies, reward programs that drive health plan members toward specific providers to build brand loyalty.
The role of technology
The current climate demands an integrated healthcare ecosystem that connects patients, physicians, payers and providers, and the best technique for connecting these parties is to embrace the technology available. Creative and innovative deployment of high-tech platforms can make the difference in securing a competitive advantage.
Member enrollment, management and retention
Member-centric engagement models will not succeed until payers adopt a technology-driven, integrated and holistic approach toward members. High-tech approaches offer the opportunity to understand and anticipate member requirements through data. This, in turn, allows payers to provide members with the seamless experience they seek and drive life-time value by tracking their needs.
Member identification and segmentation
With technology, payers can identify different consumer segments and make proactive interventions when needed. This includes promoting self-care and preventive care, eliminating redundancies in patient treatments and improving adherence.
Streamlining operations
It will be necessary for payers to scale, and only high-tech approaches can maintain the downward pressure on costs. A robust technical backbone will become critical for sustainable growth as the number and complexity of transactions increases across enrollment, eligibility, reconciliation, submissions and appeals and grievances.
Guiding choice
Navigating healthcare exchanges and making informed decisions may not be as easy as it sounds for consumers. Payers will have to step up and take the responsibility for understanding member needs via retail-like solutions and advanced analytics to guide the choices they make.
Compliance
Payers must bear the burden of stringent compliance regulations in the new healthcare regime. The ACA has made quality reporting an important part of the mix. Payers will need to adopt high-tech solutions that help them stay compliant.
Social, mobile, analytics and cloud as new drivers
There is no doubt that social, analytics, mobile and cloud will be the new technology drivers of member-centric engagement models.
Payers follow the consumers, and therefore social and mobile platforms are critical for member engagement. Payers will need to develop listening, monitoring and outreach programs to find and engage with consumers in their own worlds.
Sophisticated analytics are required to bridge the delta between the big data that will be generated by these new models and the insights needed to drive consumer loyalty.
Utilizing the cloud is fast emerging as a best practice for containing costs and creating collaboration between the different players in the ecosystem. As payers manage complexity and risk in the dynamic healthcare environment, with constantly evolving plans, they will need access to standardized, comparative and transparent information.
Summary
The ACA brings both challenges and opportunities for payers. On one hand, enrollment will skyrocket. On the other hand, the act burdens many payers with additional requirements. The solution lies in member-centric engagement models, and the inexorable shift toward a consumer-centric reality is now firmly in play.
As the watershed year for ACA implementation, 2014 is certain to continue seeing a significant level of disruption in the healthcare industry. Payers need to create a new relationship based on trust and ease of use with their consumers. In this situation, the effective use of technology is a payer’s biggest asset. Only health plans that embrace technology creatively to create unprecedented levels of consumer engagement will thrive.
