Voices: the CMB Blog

 

In early 2012 we did some research on healthcare reform predictions. At the time, there was a pretty strong consensus that large groups, most of which were already insured, would experience little impact. The uncertainty lay around small businesses (<100 employees) offer rates: the Robert Wood Johnson Foundation predicted pretty much neutral effect, but RAND predicted an overall increase in offerings. So where do we stand now?We have found most analysts are pretty shy when it comes to forecasting new numbers. For the overall market (all sizes) the International Foundation of Employee Benefit Plans (IFEBP) reports that 94% of employers are definitely or very likely to continue employer-sponsored health care. That’s a pretty good indication of no major drop outs compared to 2012, when only 46% were certain that they would continue sponsorship.

But expanded health insurance coverage will come at a cost, and small employers particularly are vulnerable. As a result, they are implementing cost control tactics: encouraging healthy behaviors and wise usage that reduces costs, entering private health exchanges, offering self-insurance for small groups, and reducing the number of full timers.

For insurance companies, reform opens up new opportunities to serve the small business market. Small businesses today are treated as a uniform group with similar needs. As reform unfolds, the market will fragment into: those who truly believe in providing insurance to their employees and will continue to do so, those who cannot afford to pay increased premiums but are still interested, and those who simply opt to exit the market. Smart and creative insurers will look for ways to serve the middle segment with unique offerings, whether those are self-insurance, stripped down plans, voluntary products, or others. The insurers that will move first by matching deep customer knowledge with creativity and innovation will have a leg up in this rapidly evolving market.

Rachel is a Director at  South Street Strategy Group, she specializes in finding growth opportunities in new market segments, new products and businesses and innovative business models.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

 

Healthcare in the US has been a hot media topic, and the Affordable Care Act’s next key provision that goes into effect on October 1 will bring about profound change in the health insurance industry. Consumers looking to buy individual health insurance will be able to enroll in subsidized plans offered through state-based exchanges with coverage beginning in January 2014.Regardless of the politics and adoption hurdles surrounding the subject, it’s crystal clear that health insurers will need to change the way they approach the market in the coming years. Challenging as it may be, this change represents opportunity as well. Not only will this regulation open up channels to sell direct to new customer segments that have previously been underserved or never served, but the shift to a more retail-oriented business model will push customer-centricity to the forefront of health insurers’ strategy.

So, what does customer centricity actually mean for insurers? It’s not something I have hard and fast answers to yet, but we’re collaborating with our clients to help define a path forward. Here are my top-level thoughts on some of the myths that need to be put to rest in order to build a successful customer strategy in the space:

MYTH: The consumer matters more than the ecosystem.
FACT: Up to now, consumers have generally been “extended stakeholders” in the health insurance ecosystem, and they are definitely an audience that insurers should be learning about and listening to more given the change on the horizon. However, serving the consumer well means also understanding how other players—employers, brokers and providers—are preparing for change. Be careful not to develop blind spots toward traditional stakeholders.

MYTH: If you build technology, the customers will come.
FACT: No doubt today’s consumers are open to social tools, apps and other tech solutions that will help them learn about and interact with companies. But in order for a new technology to really matter to consumers, it has to solve a pain point.  Without a deep understanding of what customers need, and a willingness to address root-level issues (such as consumer trust), a new technology is just a shiny object.

MYTH: You’ve got the right data…and it’s Big.
FACT: Insurers have a lot of data. But it’s primarily based on claims and transactional data, with very little gleaned directly from healthcare consumers themselves about wants, needs, and interaction pain points. The industry’s legacy of being claim-oriented continues to drive consumer dissatisfaction and distrust, so it’s not the ideal source for data that will build customer intimacy.

What other myths need to be busted in order for insurers to be truly customer centric? We’d love to hear from you and promise to share our thinking as it evolves.

Jennifer is a Director at  South Street Strategy Group. She recently received the 2013 “Member of the Year” award by the Association for Strategic Planning (ASP), the preeminent professional association for those engaged in strategic thinking, planning and action.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

Along with millions of Americans-patients,doctors,lawyers and, politicians-health insurers also waited with bated breath for last week's Supreme Court’s ruling on health reform. Now that the Supreme Court has upheld the basic provisions of the law, health insurers face the challenge of understanding how traditional markets will be impacted by the individual mandate and implementation of health insurance exchanges.  

Even with the ruling, there is still much that remains unknown about the law’s impact, and significant uncertainty about how the law will be enforced in each state.  But there are still critical questions insurers must consider now as they adapt to a new era in health reform, including:

• How will this ruling and the establishment of exchanges impact company revenue and profitability?  Are there ways to take advantage of this ruling and increase company margins and revenues?

• How do we compete effectively in an open exchange?  If price is the key criteria to consumer decision making, is there a way to minimize its influence and yet be successful?

• Is there a need to re-examine the existing client base beyond the traditional demographics? Will an alternate classification help create a competitive advantage?

• How do we move beyond the traditional employer sponsored channel?  How can we take advantage of technological shifts?

• How relevant is the present communication strategy? Is there an opportunity to approach the future in a new, cohesive way that complements the product and distribution strategy?

Addressing these questions and mitigating the coming challenges will not be easy; surviving and flourishing in a changing market requires a truly new and innovative approach. We believe insurers must:

• Reconsider how they approach product development – the insurers who will be successful in this new reality will be those who are able and willing to stretch boundaries of what insurance products look like to meet the needs of the customers, including offering supplemental insurance, wellness programs, incentives and monetary gains for meeting health goals, etc.

• Go beyond traditional ways of looking at the market – motivations, attitudes, goals, and behaviors will become as, if not more, important to understanding and effectively messaging to insurance customers. Alternate classification of consumers could help insurance companies underwrite consumers in a more effective and efficient manner.  This could be especially advantageous for smaller insurance companies that cannot compete solely on price; perhaps it is time to start looking at a niche strategy. For a more detailed look at alternative market segmentation for health insurance, read our white paper: A New Approach to Segmentation for the Changing Insurance Industry.

• Embrace the leaps in technology – insurers must explore the possibility of reaching consumers directly (internet, smartphone, etc.), and simplifying the purchasing process.  A simple product lineup with an easy buying process can go a long way in increasing an insurer’s favorability rating.

• Consider a new messaging strategy – the health industry’s transition is a great time to consider resetting the existing image. Great products and great service need great messaging.  What are the goals people are trying to achieve? What is it that truly motivates them? What is it that truly sets us apart and does it add value to our customers’ lives? Is there a need to have specific messages to specific groups of consumers? Think about the answers to these questions. Insurers in the end must be able to convince consumers that they are partners in this journey and are mutually dependent on each other’s success.

Amidst all the uncertainty insurers are facing, we believe that to mitigate the uncertainties of the reform landscape, insurers will have to go back to the drawing board, rethink how they look at the market, engage in product development and address the fundamental goals of their customers. Insurers must recognize and leverage core capabilities that others cannot replicate. Competitive advantages stem from not one but from a series of strategic decisions. The correct mix of product, distribution, message and market coupled with inherent operational strengths (e.g., knowledge of a local market, ability to underwrite at low costs,  relationships with existing customers) can set insurers apart from competition and pave the way to long term success.

Posted by Amy Modini. Amy is an Account Director for CMB’s Healthcare Practice, when she gets the time she loves going to the beach with her two kids.

The 2014 implementation of many of the Affordable Care Act’s (ACA) key provisions has sparked a great deal of speculation about the future of the healthcare market; there seems to be no end to the models predicting how the law will impact the insurance industry. There is no question that reform will shift the health insurance industry to a more retail based model, and in the process challenge traditional insurers to develop new consumer oriented capabilities.  A vital piece of planning for this shift will require understanding changes in consumer decision-making. The traditional approach of health insurers to segmenting the market is unlikely to provide the kind of insight necessary to win in an industry facing such fundamental regulatory, economic, and cultural change.

Traditional segmentation approaches cut the consumer market by demographics (e.g. age, gender) or funding source (e.g. who pays).  This approach was appropriate in years past when there was relatively little competition, differentiation, and when choice was limited. However, the insurance industry’s move to a more complex and competitive model requires a more nuanced understanding of customer needs and differentiators. The newly minted college grad indeed has different needs from their parents moving toward retirement or the young professional starting a family. This is proven out in some recent research we conducted.

To get a better sense of insurance consumers and their preferences, CMB and the South Street Strategy Group analyzed the responses of nearly 1,500 Americans over the age of 18, surveyed as part of CMB’s Consumer Pulse Program.  We then segmented the market by plan features and found five distinct segments that illustrate the needs and goals people have for their insurance coverage.

The segments we found are defined not solely by age or insurance source but by the needs and goals people have for their insurance coverage, and provide far more insight than traditional methods. For example one large segment, who we’ve termed “e-Patients” are the most interested in managing their healthcare or “visiting” their doctor online.  They’re price sensitive, want out-of-network coverage and are willing to switch primary care providers to get the benefits they want. Knowing the attributes of this and other significant segments of the insured population is invaluable to insurance providers who are facing an increasingly customer-centric industry.

To learn more about our approach and see more detailed profiles of the other segments click here.

Posted by J. Mark Carr, Mark is co-founder and managing partner of South Street Strategy Group.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies.