How should companies respond to the disruptive forces buffeting the health insurance industry? This remains a valid question considering the scores of industries that have been shaken by disruptive innovation in the past. It comes from outside with radically different approaches and the majority of established incumbents struggle to respond. They are underpinned by cost-benefit and risk-return calculations that subsequently prove to be flawed. According to a study, core risks in the health insurance business include, ” underwriting, credit, market, operational, liquidity risks, etc.” Customer services come to the forefront of a risk assessment and firms must have a way to categorize, prioritize, and escalate incidents across teams. They should centralize and identify trends the customer feedback and implement controls to address those trends. In this article, we present approaches that companies in the health insurance industry can adopt to respond to these changes.
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Ways to Address Disruptions in the US Health Insurance Industry
The fundamental approach
Instead of positioning insurance as a traditional one-year contractual relationship, companies should consider building a long-term collaborative relationship with customers. They should provide economic incentives to customers to stay with the program for multiple years in the form of rebate checks or a multi-year contract with an early termination policy. Premiums should be raised steadily to sustain customers in the program for the long haul. However, this model will require companies to assemble a consortium of partners with complementary assets and skills, numerous device and app manufacturers who can work on technologies for monitoring patients, tracking outcomes and influencing behaviors. But this would also enable companies to create a state-of-the-art database with information and capabilities that simply don’t exist in today’s health systems and develop strategies for robust security and privacy.
Adopt the right metrics to tap the market in the US
Metrics matter. Companies in the health insurance industry should make comparisons based on the right contrafactual. They must develop forecasts using what-if scenarios rather than assuming that revenue streams from existing approaches will continue indefinitely in the face of market disruption. Creating and delivering value for customers in new ways will allow the profits to flow typically.
Organizations should build models that can expand access and create new insurance exchanges for individuals to buy coverage. Because of the restrictions imposed by the ACA’s risk adjustment provisions, the product shouldn’t be targeted to younger demographic and marketed broadly to all age groups. Data monetization will still remain unaffected by the ACA medical loss ratio and risk adjustment provisions.
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Create a learning map
Companies in the health insurance industry often feel reluctant while considering investments in disruptive new approaches. They consider it inherently risky as disrupting one’s business models is a significant change. Adopting a pilot-based approach can be a critical tool for companies. They can list capability gaps that need to be filled. Companies can even develop a sequence of pilots that serve as demonstration projects to develop key skills and answer mandatory questions. Also, they can focus on a local patient population and then expand demonstration projects in other geographies.