As the industry continues to digest the Affordable Care Act and the implications of market reform, health plans need to understand how to weave in more consumer-focused entrepreneurialism, innovation and diversification into the core business.
No matter what product or service, health plans will always need someone or some way to sell business. With the government as a market maker stimulating market revolution, dominant plans can no longer fall back into "fast follower" strategy – the organizational euphemism for doing nothing, essentially. And status quo will not work since 2014 will be the year of distribution innovation, in which health plan activities will be defined by accelerated market development and learning, starting in the first quarter.
Let's walk through each market segment briefly to highlight the 2014 innovation imperative:
Small Group Has a Retail Future
For the small group, a strategy centered on protecting the traditional group insured block of companies with 2-50 employees is like saving deck chairs on the Titanic. Small group up to 100 likely has a pure retail future, so transition planning is essential. Upwards of 20 to 25 percent of the small group market will be gone by year-end 2014, and politics seem to suggest that recent moves to delay mandates for the 51-100 block only encourages the removal of mandates in the longer term for the 2-100 segment.
The Retail World – Stop Selling One Banana at a Time
Ironically, the consumer-retail world should end up looking a lot more like the traditional small group market, because the diminished economics of the individual business is not conducive to selling "one banana at time."
The old phrase about economists knowing the price of everything and the value of nothing certainly applies here. Ultimately, the employer is and always will be a powerful focal point for the provision of health benefits. Why? Because it is where the economic vitality of the business (and our national GDP) aligns with the health and productivity of their workers. Consequently, savvy health plans understand the power of employers as a distribution gateway for selling a diverse range of individual products. That means creating secure, organized marketplaces (or exchanges) that are differentiated, employer-endorsed and integrated with payroll and spending account processes. These next generation benefit marketplaces will drive self-service, promote lifecycle engagement from the start of member enrollment and dramatically reduce the cost to service and the cost to acquire individual business.
Small & Mid-Market (SMID) Employers – The Delta Point for Group Benefit Innovation
Historically, the source of benefit innovation from wedge HMOs in the 80's to Point of Service (POS) Plans and tiered networks – all started with the large group sector.
Times have changed. What we are seeing is an influx of revolutionary employers in the "SMID Market" (small and mid-market employers, 510-500 employees). These employers tend to fit a particular profile that seeks a transformational solution to health benefits that:
- Dramatically reduce the hassle factor of providing health benefits
- Helps them easily manage a budget and the fiscal realities of their business
- Create real compelling consumer value through the personalization of benefits – medical and beyond
A few progressive brokers and health plans have seen this opportunity and have gone stealth mode in 2013 to create a sizeable block of 1-1-2014 private exchange business, leaving others to scramble to create market credibility. And success breeds adoption. These new, organized group defined contribution marketplaces will increasingly attract the attention of this relatively underserved employer segment by presenting something truly different: a platform that encourages consumer choice, customization and focus, while serving a diverse employee population – group eligible and ineligible workers alike.
Health plans playing catch-up will do well to balance a formal, private exchange Request for Proposal (RFP) process with in-the-market experimentation – teaming up with the right broker partners and employers seeking something different for their off-cycle renewals.
Health plans that adopt this kind of assertive experimentation strategy will create the stories and enrollment experience to better manage and position in the large group sector as well -- a sector that is getting increasingly defined by benefit consultants service offerings fueled by large-scale private exchange acquisitions and national employer adoption.
It is also important to remember that distribution innovation extends beyond just an enrollment transaction. True success hinges on using enrollment as the gateway for consumer engagement through the entire customer lifecycle.
Leading health plans will need to quickly figure out how to define and manage all this change. If they wait too long, the new market it will be defined for them. Embrace the change and dive in.