The "Consumerization" of US Healthcare

Can you answer these questions?

• How much did your last pharmacy prescription actually cost?
• How about the cost of your last doctor visit, all in?
• What is the total annual premium for your healthcare insurance?

Until recently, these questions were of little interest to most people who were covered by insurance. The cost of it just wasn’t their problem. But this is all changing now.

In about two weeks I’ll be participating in a panel discussion at the 12th Annual World Health Congress in Washington, DC. The subject of our discussion will be “Engagement Strategies that Support the Move from B2B to B2C,” and the other three panel participants all specialize in the healthcare category. I think I’m on the panel because although I’m not a healthcare specialist, I do have credibility when it comes to managing the customer experience – and this is precisely the challenge that all healthcare payers and providers now face.

The Affordable Care Act has made consumer healthcare choice the law of the land. Even though the system is still enormously complex, and the ACA has a few ugly warts, we are all one step closer to having some economic discipline in a category that hasn’t seen much of it since World War II. That's when the War Production Board ruled that fringe benefits such as health insurance were not to be considered wages, so they wouldn’t be subject to wage controls, and they wouldn't be taxed.

Unfortunately that ruling, designed originally just to allow companies to compete for increasingly scarce labor during wartime without driving up inflation, has had terribly negative unintended consequences over the last 70 years. After the war, imposing taxes on health insurance would have been seen as onerous, so the rules stayed in place. But the result was that over time, the US created for itself a rigid and ossified healthcare payments system that completely insulated employees from bearing the cost of their own healthcare, or even knowing what that cost was.

Another unintended consequence of this distorted economic system was that it had the effect of locking employees in to the plans their employers offered. You had the healthcare policy offered by the company you worked for. Period. In effect, whatever healthcare insurance company was chosen by an employer, that company had a monopoly entitling it to all the employer’s workers.

But the ACA means that consumers can vote with their feet now; they’re no longer locked in to whatever plan they happen to have been subscribed to on account of their employer or union or professional association.

So moving from B2B to B2C is exactly what all healthcare companies have to do now, whether they’re payers or providers or some combination of both. They can no longer rely on “selling in” to corporate clients and large organizations. The healthcare category is being "consumer-ized," so healthcare firms have to do what most consumer-based businesses have to do: they have to deliver a good experience to their consumer customers, or risk losing them.

And one of the most important elements in delivering a good customer experience, especially in the healthcare category, has to do with the humanity of a company's service delivery. What I'm talking about here is the empathy shown, the judgment used, and the flexibility and resilience of a company's customer-facing policies. No longer will payers be able to treat the handling of consumer inquiries and problems, for instance, simply as a regrettable but necessary cost of doing business with the employers or organizations that these consumers belong to. They will have to think more carefully about providing a truly frictionless customer experience, in the same way every other competitive business must do.

So I’m going to suggest, during my time on this healthcare panel, that to compete effectively in the consumer space, payers and providers alike must concentrate first, not on how to acquire them and keep them, but on how to serve them. They have to focus on eliminating all the little points of bureaucratic and organizational friction from their customer experience, which means delivering an experience not the way a monopoly would, but the way Amazon does, or Apple, or USAA, or JetBlue, or Ally Bank.

In short, for a healthcare company to be successful in a consumer-ized category, it will have to humanize its customer experience.