When the state health insurance exchanges (HIX) come online in 2014, the insurance industry will begin to shift from a B2B market to one that includes B2C. The Affordable Care Act will allow individuals and small businesses to buy coverage through these online insurance marketplaces at the state level. As such, participants likely will buy on value, and health plans will need to stand out from the many options available to members, while also remaining price competitive.
Industry studies confirm the strong connection between healthcare costs and the ingrained behavior of consumers, providers and payers. Although people have access to more health information, tools, programs and support than ever before, healthcare costs continue to increase at an alarming rate, and chronic diseases continue to affect a larger portion of the population.
Payers and consumers must be directly involved in efforts to manage the cost of care and improve health outcomes. One way to do this is by introducing incentives into wellness programs. To drive engagement in these programs, organizations have applied both incentives and disincentives with varying degrees of success. And as more organizations are applying incentives in their organizations, we have learned some valuable lessons: incentives can drive behavior change as well as help establish a new baseline for consumer expectations, consumption patterns and health awareness.
Health plans should be well-positioned to benefit from this trend and the HIX, based largely on three underlying characteristics of incentives:
• Incentives possess a "built-in" return on investment. Unlike many other tools in healthcare, no one pays for an incentive until an action is taken.
• Incentives are simple and easily understood. In a healthcare world full of confusing jargon and complex formulas, people understand simple messages such as "be healthy and be rewarded."
• Incentives are viewed positively. In a world of cost-shifting and reduced benefits, incentives positively engage members.
For health plans looking to use incentives as a differentiator, this can be the kick-start that drives better health choices. As a member moves up the spectrum of healthier behaviors by doing more exercise, taking required medications or watching his diet, for example, he will be rewarded. This also becomes a self-fulfilling incentive cycle. As a result, the patient will be more inclined to stay with that plan.
A well-designed incentive structure will be able to attract members, increase loyalty, and ultimately lower costs through improved outcomes. When applying this to an HIX, incentives can serve as a pivotal loyalty play for health insurers by helping them acquire and retain members, and providing them with maximum value.
A fitting analogy is that of credit cards, where such tactics as points and cash back play an important role in the value proposition and a way to differentiate from competition. Health plans will not want to be left on the sidelines without an incentives strategy. Whereas the incentive for credit card holders is to spend more to get more, for health incentives, the key to wellness lies in doing more healthy activities and adopting a healthier behavior.
The emergence of incentive-driven healthcare has the potential to engage payers and members through intelligently designed incentive strategies that are based on population health issues, organizational culture, change readiness and behavioral theory.
Success in in this area will focus on how incentives can be designed, applied and monitored in order to achieve measurable results and desired outcomes. The important point is that it delivers the insight that can help health plans accurately gauge the underlying value of incentive strategies, reduce the cost of healthcare and understand how to approach members directly who are selecting a plan. Lowering costs will go a long way toward allowing them to manage premiums, which will trickle down to their members in terms of premium reductions and other incentives, such as rewards and cash back for meeting goals. This will be a competitive differentiator for those plans who want to stand out in an HIX.
In the era of incentive-driven healthcare, health plans can prepare themselves for the HIX trend. They can now obtain reliable data and the analytic tools to develop a rational, integrated approach to the design, implementation and evaluation of incentives, which can increase member engagement, change behavior, improve outcomes and ultimately reduce the cost of healthcare. The resulting health- and cost-related benefits for members are a significant game changer.