Health Plans Must Prep for Consumer-Oriented Business Model

By 2020, the retail health insurance market will include more than 100 million health shoppers wielding a whopping $500 billion in purchasing power, according to a new study from the management consulting firm Oliver Wyman. These shoppers will include millions of uninsured consumers as well as millions of employees whose employers have opted out of conventional insurance and shifted to vouchers or defined-contribution programs.

The search for health insurance coverage will take most of these millions of buyers straight to health insurance exchanges, where health plans will compete to sign them on the dotted line. But here’s the rub: The competing health plans will be similar in price because they will each cover a predetermined package of essential benefits. Thus health plans must identify other ways to differentiate their products to individual consumers.

In the new healthcare market, the consumer will be king and health plans will need to transform themselves into “true customer-facing retail organizations,” according to the report, “Winning in the World of Retail 2.0.” Underwriting and risk management—the traditional competencies of health plans—won’t be nearly as important as consumer-oriented product design, segmentation, and branding. Today, though, “health plans have little expertise in those areas,” says Howard Lapsley, a partner at Oliver Wyman and co-author of the report.

Lapsley told HealthLeaders Media that making the shift from a B2B business model to a consumer-oriented retail model will require that health plans rethink much of what they do today, from how they market their products to who they partner with. The good news is that health plans don’t need to reinvent the wheel; they just need to begin to adopt the practices of successful retailers.

Lapsley says a health plan’s successful transition to the retail world should involve these steps:

• Adopt the consumer’s point of view. Demographics of your existing customers and target groups are certainly important, but the goal here is understand customers’ healthcare needs and attitudes, what they really want from their healthcare products, and what they value. Lapsley says analytics are key to identifying market segments and buying groups.
• Exceed consumer expectations. Healthcare consumers have to be a resilient lot to deal with what the report refers to as the “extraordinary degree of inefficiency and inconvenience in accessing healthcare.” Lapsley believes these problems could be converted to an opportunity for a health plan to integrate its healthcare products with additional services. For example, in another Oliver Wyman survey, potential retail healthcare customers said they would be willing to pay extra for increased access to their providers.
• Think long-term. Retailers look at the lifetime value of a customer. Health insurers should adopt that long view because “it will enable health plans to cross-sell and upsell products around a broader notion of health and wellness,” Lapsley says
• Look for partners. Healthcare reform will attract new players, which may provide opportunities for health plans to partner on products or services with successful retail brands in consumer goods, over-the-counter health products, and pharmaceuticals. Humana and Walmart have already partnered on Medicare Part D drugs. Health plans also might want to look beyond the traditional partnerships and think about partnering with a company like Nike to bundle healthcare with a wellness and fitness program.

The transition to retail comes down to “creating stickiness” with the consumer, Lapsley says. The bottom line is that in the new world of healthcare, health plans need to think about all the ways they can engage their customers to expand the relationship beyond the simple transaction of buying health insurance.