What does the future hold for Health Plans?

Health Plans here in the USA have traditionally functioned as financial aggregators, compiling and parsing large swathes of data about the individuals they provide a service to.

This might be a crude way of describing what is, of course, a deeply complex process. But it’s the way that Health Plans newest competitors see the business, and that makes the definition relevant – not least because these new competitors present an existential threat to existing health insurers.

The arrival of Big Tech

Loosened government regulations have allowed dominant tech companies like Amazon, Apple, and Google to start applying their customer service expertise (and digital credentials) to healthcare.

With new rules from the Centers for Medicare & Medicaid Services (CMS) improving transparency and interoperability, the traditional means of selling Health Plans – which is still mostly done by brokers, selling to organisations acting on behalf of their employees – has been completely upended.

It’s now much easier for consumers to survey what’s available, and pick what best suits their needs. The likes of Amazon and Google are already experts at this kind of consumer-first operation, so it’s not surprising that they would sense an opportunity.

?At the same time, big tech players have been instrumental in advancing more flexible approaches to continuous personal healthcare – in particular through the use of wearables and health tracking apps.

Apple, for instance, has pushed personal healthcare as a key selling point of its flagship Watch product. Meanwhile, Amazon is making a multi-pronged approach: going after big business customers, providing cloud services to hospitals, and developing online pharmacy and telehealth offerings.

Big tech companies make bets on new markets all the time, applying their expertise and efficient operations to new fields. It doesn’t always work out – anyone remember Amazon Restaurants? – but the data-heavy, customer-centric world of healthcare would appear to be a neat fit for the likes of Apple, Google, and Microsoft.

So the question stands: is it easier for existing Health Plans to develop the skills and tools that tech companies have honed to dominate other markets, or is it easier for the tech players to acquire the knowledge, experience, and contacts that have set healthcare players apart until now?

The answer, to my mind, is an obvious one. And it should have Health Plans concerned.

This isn’t something that’s on the horizon. It’s already happening.

?The end of episodic care

?The headway already made by tech players like Apple has contributed to a more fundamental shift that impacts the entire healthcare ecosystem. This is the move away from episodic treatment and towards continuous care.

Episodic care is the status quo on which Health Plans have built their businesses. It is also the backbone on which the multi-billion-dollar industry of hospitals and other points-of-service are built.

But continuous care – as represented by the high-tech health monitors so many of us wear on our wrists these days, as well as remote consultations and other digital healthcare applications – fundamentally disrupts this status quo.

Not so long ago, it would have cost hundreds of thousands of dollars to run an ECG machine in a hospital setting. Now people can do it themselves, at home, with a wristwatch.

The expense of maintaining hospitals and other treatment centres could be justified with episodic care. Around 90% of revenue was provided by this episodic approach. But with the increasing uptake of continuous and predictive care solutions – with wearables, telehealth, remote patient monitoring, at-home care, and so on – episodic instances are falling, and revenue is going down with it.

Episodic treatments won’t ever disappear completely – accidents will, unfortunately, still happen. But revenue streams are only going in one direction, and it’s away from episodic care. Healthcare providers will remain exposed to the huge costs associated with maintaining their bricks and mortar. In short: what Amazon did to shopping malls, will soon be done to hospitals.

?How can Health Plans respond?

Health Plans need to stop acting as financial aggregators, and focus on their consumers as individuals, as patients, as people.

There’s a lot that Health Plans can learn from their tech-based competitors about digitisation and improving customer experience. But at this stage, they’re not going to overtake them in those lanes.

Instead, those incumbent in the healthcare space need to lean on their own experience and expertise. The future of healthcare will revolve around more accurately personalized treatment, which means understanding the needs of patients rather than seeing them as data points.

The predictive, continuous approach will continue to win out, because it’s better both for people’s health (you’re not waiting until something breaks to fix it) and their wallets (it’s better to spend a few dollars a month on staying healthy than a few hundred thousand when something you’ve ignored goes badly wrong).

Opportunity arising from the pandemic

Most Health Plans will emerge from the COVID-19 pandemic in a stronger position than they entered it. Generous government subsidies have underwritten COVID treatments, while consumers have carried on paying premiums to their plans. This has meant that insurers are in an unusually strong financial position as they head out into the ‘new normal’.

But despite the unusual circumstances which have led to such striking profit gains for health insurers – some as big as 25% – shareholders and other investors will now be expecting similar returns in the coming quarters.

Keeping those shareholders happy with similar wins in the years to come will require investment.

Health Plans should use the reserves built up during the pandemic to invest in their digital futures, and strike out ahead of the competition.

They should survey what is clearly already working, including for the big tech companies – customer experience, wearables, and the rest – and then execute based on the decades of healthcare experience unique to their operations.

Failure to do so will carry an existential cost: either from upset shareholders, or customers poached by the big tech beasts.