Innovation in a Rapidly Changing Healthcare Marketplace

by Vincent Volpe

 

Whether the healthcare industry is ready or not, it’s headed for an identity makeover.  The introduction of the ACA has been the catalyst for a dramatic acceleration in the pace of change for healthcare businesses.  Product development cycles are more compressed than ever before, and many industry players are challenged to keep up, innovate and stand out in an increasingly competitive environment.

Preparation for the 2016 enrollment season started well before the “official end” of 2015 and 2016 rate requests have already been submitted to regulators.  While we are months away from final rates being published, it is safe to assume the ultimate outcome will be a highly competitive marketplace.  For insurers, the real challenge, and opportunity, will be finding a way to differentiate and offer the consumer a product with a truly compelling value proposition.

The Challenge of Commoditization

In the post-ACA landscape, insurers are being pressured more than ever to deliver both quality and affordability.  Public exchanges disrupted the existing sales channels and opened up new opportunities for both industry upstarts, such as newly created CO-OPs, as well as established players, to market directly to consumers.  The increased transparency offered by these exchanges creates additional pressure, as consumers can compare health plans side-by-side the same way they might compare flights on Travelocity.  Not surprisingly, shoppers are opting for the lowest priced plans. 

Compounding the increased transparency is the push toward standardization.   Federal and state exchanges have mandated a standard set of benefits, limiting the ability of insurers to leverage their product and benefit designs as a primary differentiator.   While this certainly makes comparison-shopping much easier for consumers, it has the side effect of commoditizing the core product.  Just like a flight from New York to Los Angeles, a silver tier product on the exchange looks almost identical regardless of the carrier.  To be successful in this environment, insurers need a multi-faceted approach to product development focused on addressing the complex and evolving needs of healthcare consumers.

Developing a Consumer-Focused Strategy

The starting point in this journey is a clear vision of the insurer’s unique brand identity that distinguishes it from competitors.  For example, a Blues plan may emphasize its trusted brand reputation and broad network, whereas a newer player, like Oscar, might emphasize its technology, simplicity, and ease of use.  Second, the insurer needs to develop a deep understanding of its target markets and the diverse needs of its consumer segments.   Going beyond demographics, a more sophisticated approach would incorporate micro-segments and affinity groups whose values and interests are aligned to the brand value proposition.

Once market and target segments have been identified, the next step is to tailor the product to meet the needs of these groups.  Given the price sensitivity of consumers, it is an imperative to prioritize product features that either limit additional costs or have the potential to reduce costs over time.  Examples include telemedicine or access to concierge-like, direct primary care services.  Emphasizing and enhancing existing benefits that have particular appeal to certain segments, such as acupuncture or fitness reimbursement, is another opportunity to improve the product value.   However, it is not enough to simply improve the product’s value.  Equally important is your ability to influence the buying decision and demonstrate value to the consumer at the right moment. 

Research shows that most consumers struggle to understand the basics of health insurance, so the onus is truly on the insurer to educate them and promote the unique value of its products.  A good example of such a promotional campaign is provided by Oscar, a rapidly growing startup currently in New York and New Jersey.  Through the use of a non-traditional (at least in the health insurance world) marketing campaign that featured a blitz of subway ads, Oscar promoted its ease of use and 24/7 telehealth benefit.  As founder Mario Schlosser told the Wall Street Journal, “When you’re selling a novel product in an established market, you have to own the narrative of what your product does.”

As important as the promotional campaign is the sales channel itself.   Direct sales channels, both online and offline, thoughtfully designed to promote and clearly articulate product features, are crucial to supporting overall brand positioning.  Driving consumers to preferred sales channels allows the insurer to help the consumer navigate and select the most appropriate products to fit their needs, which ultimately results in greater value for both the consumer and the insurer.   This provides an additional opportunity for the insurer to broaden the relationship, serving as a gateway for consumers to access an array of ancillary health products and services.  Finally, establishing a direct relationship at the point of purchase is an excellent opportunity to begin engaging the member and supporting them with what truly matters – providing the right care at the right time. 

 

 

Vincent Volpe is a Senior Associate at Optimity Advisors.