For small to medium payers—insurers with under 150,000 members and less than $1 billion in revenue—communication & engagement are major differentiators in a value-based system.
In 2016, Mercy Health announced that it was exiting the health insurance market after sustaining $117 million in losses in a single year. According to Moody’s, which downgraded Mercy Health’s A2 rating, high costs associated with the transition to a new IT platform and a ballooning labor force contributed to the decision. With the withdrawal, Mercy Health’s provider-sponsored health plan became one of many casualties in today’s high stakes health insurance market.
Following the passage of the Affordable Care Act (ACA), smaller health payers have struggled to maintain financial viability in the era of value-based reimbursement. As CMS implements a stick and carrot incentive system to move providers toward the new payment model, these small to medium health payers have had mixed results lowering costs while providing quality coverage. Meanwhile, larger healthcare payers have been busy acquiring smaller, financially insolvent competitors and staging multi-billion dollar mergers that have further consolidated the market.
Today, smaller healthcare payers must also contend with changing expectations from consumers who want an “Amazon-like” experience when it comes to healthcare. Employers are also calling for change. Many business owners say the current system is unsustainable and some may go directly to providers to make alternate arrangements.
A Competitive Landscape
Although small to medium healthcare payers still constitute a sizable share of the healthcare market, their position has become increasingly volatile. From 2013-2018, small to medium healthcare payers introduced 92 net new plans. During this same period, 104 payers either closed up shop or were acquired by larger companies.
Moreover, while large healthcare providers comprise only 17% of the 493 payers in the healthcare market, they command the lion’s share of consumers, with 290 million plan members compared to 36.4 million for small to medium payers
Despite market volatility, there are some notable success stories. Provider-sponsored health plans experienced double-digit growth in the last five years and government lines of business comprise an important revenue stream for 87% of small to medium healthcare providers, accounting for 23 million consumers. However, even government lines of business aren’t immune to the vicissitudes of an unpredictable market. While the majority of small to medium healthcare payers offer Medicare Advantage plans, these plans have hemorrhaged 40% of their members since 2013.
Carving Out Their Niche
Many experts are giving small to medium healthcare payers a grim prognosis, but reports of their ultimate demise may be exaggerated. With growing concern over the lack of competition among health insurers, smaller healthcare payers can differentiate themselves by serving specialty markets and harder-to-serve populations like seniors and low-income families. To do so, these smaller healthcare payers will need to promote better collaboration with providers and address consumer demand for electronic shopping options, a seamless enrollment process, and benefits that emphasize wellness, preventive care, and social determinants of health like socio-economic status, level of education, and physical environment.
For smaller payers, engaging with prospects and members through personalized, omnichannel communications is the key to increasing awareness about plan benefits and engaging consumers throughout the customer journey. Effective member communications empower members to make apples and oranges comparisons of plans during selection, streamline the on-boarding process, and help members access benefits while lowering out-of-pocket expenses following enrollment.
A well-crafted communication strategy can also help healthcare payers better understand the members they serve and inform product development. By leveraging conversational, omnichannel communications, payers can build better plans and offer more targeted provider networks to meet the needs of niche populations.
Digital Transformation Levels the Playing Field
Historically, healthcare payers have relied on manual processes and legacy solutions that silo data to generate member communications. All too often, delivering member materials is a time-consuming ordeal that incurs penalties for missed deadlines and errata. To meet consumer expectations for personalized, on demand communications, payers must invest in digital transformation to automate workflows and approval cycles, eliminate data silos, and empower business users through user-friendly interfaces with point-and-click functionality. These solutions must also facilitate compliance with regulations to avoid penalties that have a disproportionate effect on SMB bottom lines compared to large healthcare payers.
Until recently, most communication solutions have catered to enterprise clients who can afford large-scale, costly implementations. However, the emergence of digital ecosystems, SaaS, and hosted/cloud services is leveling the playing field, providing small to medium healthcare payers with affordable, scalable communication solutions that can be rapidly implemented and tailored to address the unique needs of their business.
In today’s competitive market, small to medium businesses face mounting pressure to provide value through quality care. By leveraging member communications, smaller healthcare payers can deliver superior experience at every stage of the customer journey. Payers that make smart investments in innovative communication solutions have a prescription for success that can thrive in any market.