People of a certain age will recall the time consuming and often frustrating experience of cashing a paycheck. As archaic as it may sound in an era of ultra-fast online and app-powered banking, simple tasks like making deposits once involved waiting in long lines, hoping the bank teller was having a productive day.
Not surprisingly, customer satisfaction in the banking industry 10 or 15 years ago was in the cellar.
Fast-forward to today and the level of satisfaction among banking customers is near the top among all industries. Indeed, a 2013 McKinsey & Company report found that the banking industry rated number four in overall customer satisfaction. What changed? Are there any lessons health insurance agents and brokers can use to evaluate, and possibly shape, what’s happening at the health insurers?
How one industry evolved
In the banking industry, the evolution of technology provides part of the answer. The proliferation of smart phones and tablets paired with sophisticated and secure bank websites has made it so that many customers have never even met a teller face-to-face.
But give the banks some credit of their own. The banking industry as a whole did an admirable job of harnessing a wide variety of data to understand their customers better, and more importantly their customers’ preferences. For some, this means standing in line at the bank to speak to a teller face-to-face. Meanwhile other, possibly more tech savvy, customers prefer the freedom and flexibility of their mobile access to banking. This has yielded not only higher levels of customer satisfaction but also enhanced brand loyalty and boosted the lifetime value of customers.
Banks are hardly alone in tapping into the power of data. Everyone from retailers to travel companies uses data and analytics to simultaneously improve the experience of their customers as well as their own revenue and profits.
Can health insurance follow suit?
In that same McKinsey report, health care companies and facilities now occupy a low position in customer satisfaction. There are a host of reasons why health care has not embraced the use of data and analytics, but, in large part, health plans and other health care players have simply had no compelling reason historically to use broad sets of data to better understand and communicate with their entire base of customers.
For decades health insurance players have focused on the 3 percent of the population that drives 50 percent or more of their risk. In fact, it was a pretty straightforward proposition, particularly from the standpoint of data: identify the small minority of people who generate the majority of claims and focus attention on them. It’s an approach that doesn’t require collecting data from the outside world; all that is needed are the claims and eligibility information.
Until recently, there was such high turnover in health plans that there was no concept of customer lifetime value for the plans or the brokers and agents who recommend them. There was no incentive to treat patients like customers.
But as everyone is aware, the health care industry is in the midst of substantial change, due largely to the impact of the Patient Protection and Affordable Care Act (PPACA).
In the past the health care system worked more or less like this: patients would go see a doctor and incur a fee based on the type and volume of services received. By contrast, PPACA is fundamentally changing health care to a value-based performance system. Increasingly, provider reimbursements are based on delivering quality care and improving patient outcomes rather than the number of tests or procedures a doctor performs. This is a profound change.
For example, a five-star quality rating – known simply as Star Ratings, which are highly structured and based on four dozen measures of performance and outcomes – determines reimbursements in the Medicare Advantage health plan market. These ratings have real teeth and a direct impact on the revenue and profitability of health care plans. Starting in 2015, plans without a 4.0 or higher Star Rating won’t receive the 5 percent bonus the Centers for Medicare & Medicaid Services (CMS) provides as a way to incentivize overall health plan performance.
This is real money. For some plans, not reaching that 4.0 threshold means a loss of revenue in the tens of millions of dollars, maybe more. Inherent in this systemic change in health care is the need for plans to better understand all customers to improve outcomes across the total population, not just the few who generate the most claims. To do this effectively requires the use of data that lives beyond the confines of a health plan’s walls.
See also: How Medicare Advantage might change
Make no mistake though; the plans that effectively tap into the power of data both inside and outside their own walls are the future of health care in this reformed environment. The agents and brokers who identify and align with those plans will also experience success in the changing health care landscape.