Where’s the buzz going to come from in 2007? What hot trends will Wall Street and industry insiders be watching? How are top health plans positioning themselves for the future?
As strategies are developed and action plans implemented, here’s a look at 10 watchwords that are going to shape the world of health insurance this coming year.
1. Technology. From cybercondriacs to genomics, health care technology will be a force to be reckoned with. Last year, 120 million people were online searching for health information. The customer has embraced technology. Advances in disease detection will continue to fuel the stem cell research debate. Innovations in treatment such as implantables, polypills and amazing bionics will continue to boggle the mind. And cutting-edge remote wireless technology will make monitoring care and compliance just a click away. For health plans, payment/benefit card technology promises a new era in administrative efficiency with full integration of member transactions–eligibility, account tracking, personal health record and member line of credit.
2. Differentiation. Going head-to-head with tough competitors will mean rising above the “sea of sameness.” Health insurance products have become indistinguishable, and the overused customer service promise is getting tiresome. The ability to influence the marketplace through a unique selling proposition will separate winners from losers. It will take distinctive messaging that breaks through the clutter and becomes a rallying point for dominating a market. In an environment of product parity and commoditization, differentiation will come from a unique brand position that’s both important to the customer and has competitive strength.
3. Boomers. With over 78 million baby boomers-8,000 turning 60 every day–there’s a new customer base in town. This population segment is expected to live longer than any generation this country has ever seen. Boomers are educated, tech savvy, convenience-driven, and as consumers, smart cynics. And they control more than $8.5 trillion in investable assets. As a result, boomers represent an extraordinary opportunity for new health insurance products and services. Their health is their most important asset, with financial security a close second. Boomers retiring at 65 need enough money to support themselves for 20-25 years (as much as $2 million).
4. Consumerism. With health care cost containment still pinned on a meteoric rise of consumer directed health care, these plans will enter 2007 with less than 5% market share. “Proof-of-concept” will take center stage this coming year as health plans look to justify investments in product development and technology. Furthermore, the financial services sector will look to carve out their piece of the action. At the same time, employers expect to reap the premium savings being promised to them. To hold up their end, employers will be working to change the behavior of an employee population suffering HDHP deductible shock and benefit intimidation as they take on new roles of health care budget manager and benefit decision-maker.
5. Distribution. Availability of detailed customer information is making single-source distribution obsolete. Traditional profiling (i.e., age, sex, income, education, geography) is now enhanced with psycho-demographic data and predictive modeling that not only identifies potential buyers/nonbuyers, but also assesses financial and health risk. The opportunity to act on these informational gems takes multiple sales channels. Agent-driven outlets such as captive, career or MGAs are limited. They need to be complemented with direct-to-consumer selling that encourages immediate consumer interaction. Using a multimedia toolkit, this approach can accelerate product awareness and establish a one-on-one customer relationship that you control. When done correctly, business acquisition costs are lowered, retention is higher and profitability escalates.
6. Lifestyle. The statistics are alarming: 64% of the population is overweight or obese; 22% of adults smoke; and 72% of adults don’t exercise enough. The billions in extra cost associated with these and other lifestyle factors are staggering. Recent polls show half of Americans believe it is fair for people with unhealthy lifestyles to pay higher premiums, deductibles and co-pays. Forward-thinking health plans are introducing new wellness and prevention programs. In combination with health risk assessments, weight loss and anti-smoking initiatives, innovative lifestyle reward programs can provide members incentives for getting (and staying) healthy. At the other end of the care continuum, health plans have begun using disease-specific criteria to redefine care management approaches around select conditions and chronic cases.
7. Individuals. As employer-based health insurance shrinks, the uninsured (and underinsured) population grows, Medicare options expand, and the annual cost of a nursing home climbs past $75,000, opportunity in the individual market is booming. There is a wide array of products available to serve every customer segment: individual medical, short-term, critical illness, Medicare and long term care. This niche is where customer segmentation trumps a one-size-fits-all approach. Products and services need to be tailored to unique purchaser needs, striking the right balance between benefits, affordability and insurability. Selling to individuals means establishing a customer connection so they know who you are, what you offer, why it’s right for them and why you are the only answer.
8. Convergence. Health insurance companies own banks, and banks have health care business units. Financial planners are integrating health benefits into long-term asset protection, and health brokers are weighing tax implications of stacking HSA-HRA-FSA plans. Today’s health care consumers will be tomorrow’s payers. But are health insurance customers ready to have skin in the game? Are they prepared to start spending their health care dollar like it’s theirs instead of someone else’s? Are they ready to have their health plan hold and draw funds from their accounts? Are health insurance agents and brokers ready to compete with financial advisors that serve as a one-stop shopping source for estate planning, IRAs, HSAs and LTC insurance? Big questions ahead…big answers to follow.
9. Communication. With iPods, BlackBerrys, blogs and mobisodes cultural mainstays, communication is smaller, faster and easier. It’s a world of instant gratification, multitasking and keep-it-simple-stupid. Customers will demand information in user-friendly, readily accessible formats. In other words where, when and how they want it. They want the power to make confident decisions. For health insurers this means accessible, easy-to-read plan guides, real-time account tracking, provider price and quality comparisons, and vast libraries of reliable clinical content. It will take a new mix of communication resources to ensure that companies are effectively reaching the right people, at the right time, and in the right place.
10. Health care. Here’s where the proverbial “rubber meets the road.” Health care delivery is changing. More and more physicians don’t take insurance. (“You deal with it.”) Others are moving to concierge medicine. Retail clinics in chain department stores, supermarkets and pharmacies are selling $39 office visits. Purveyors of medical tourism are offering open-heart surgery and hip replacements cheaper in India and Indonesia. And, in the next 10 years U.S. spending on prescription drugs will surge from $190 billion to $446 billion. Over the last 5 years there’s been a consistent trend for employers to stop offering health benefits, contributing to the fact that 47 million Americans are uninsured. Last but not least, consider the impact of America’s health care bill–$1,930,000,000,000-and that was last year!
These 10 trends only scratch the surface. This coming year promises to be as challenging as any the health insurance industry has seen. Tracking, analyzing and interpreting trends enables smart executives to anticipate market change, clarify strategic vision and capture new opportunity. It puts today’s decisions in tomorrow’s context. And, as uncertain and volatile as the future may be, an actionable plan built on informed decisions can keep you one step ahead of your toughest competitors.