Health insurers must become social-focused retail giants

The following is a guest post by Dr. Gary Ferguson. Gary Ferguson has a strong background in starting, leading, and turning around healthcare IT organizations.  Dr. Ferguson earned his doctorate in pharmacy and pharmacology at the Los Angeles County and University of Southern California Health Network, and gained clinical experience working in a trauma center.

Healthcare reform created the perfect storm to push Health insurers from almost exclusively wholesale (through employers) to an emerging retail market (direct to customers).  There is strong incentive for healthcare payers to build consumer-direct organizations that will rival the best retail companies in the World. Wait a minute. Do you mean Amazon, Macy’s, and Southwest Airlines? Yes, and the challenge is as daunting as the necessity for doing so.

For health plan insurers, cutting costs and keeping premiums low through business process automation will be the first initiative, but it will have finite, diminishing returns and fall well short of the ultimate goal–to expand market share.

New regulations force insurers to report percentages spent on administration versus healthcare, so cutting costs won’t go away. However, simply cutting costs will not align insurers with consumers, hospitals and caregivers nor will it create the solution necessary for capture and retention programs that are vital to market expansion and business growth.

Engaging consumers

Redeployment of savings created through operational efficiency and reductions in costs related to the traditional broker sales process will serve as a catalyst for investment into clinical collaboration and retailing. This chasm will be crossed with a maturing business model that looks like retailing at its very best using social media as an engagement vehicle.

Why the sense of urgency? Although the numbers vary widely, health insurance exchanges will create a ‘jump ball’ for as much as $600 billion as more than 30 million consumers participate in these exchanges. Health insurers must wage a strategic battle to win the hearts and minds (and premiums) of these consumers and to do so effectively, they will have to alter their business persona especially with the growing number of digital natives.

Health advocates

The new insurance company will be thought of as a healthcare advocate, rather than an intermediary. Healthcare advocacy seems like a very long traverse for insurers that have not traditionally commanded positive brand identity. Consider this, though: Their current role as intermediaries will become a low-cost, commodity market unless they can transform their business model.

Although insurers with market share and domain expertise might be in a position to best deliver consumer value, one could equally argue that large corporations outside of the healthcare ecosystem that are astute enough to look for vulnerabilities might be able to impose their brand to disintermediate traditional insurance providers. Health insurance at Amazon.com? Why not?

Insurers will have to weigh the risk and rewards of aligning with traditional adversaries including clinical providers and hospitals and transform to become one of the core components of collaborative care as an active participant. It means breaking down heavily entrenched walls of siloed information and carefully weighing the risks of sharing data with their former foes.

Social 

Most importantly, insurers will have to adopt social media to encourage discussion, collaboration and to connect with people internally and to customers externally. Currently, insurance companies stand up health portals and websites which are primarily used to facilitate locating a physician and wage battles over denied claims, hardly the makings of a world-class retailing organization.

The opposite, in fact.  Portals support a one-to-many relationship at best, while social media creates many-to-many relationship while providing rich information to create consumer digital identities. These identities may be used to help health insurers develop products and services that will appeal to their customers and prospects and create opportunities for capture and retention.

Social connectivity will have the added benefits of  monitoring digital chatter, responding to complaints in real time, communicating with co-workers around patient centered issues, providing an array of health and wellness products and engaging the consumer in real-time loyalty programs that drive optimal behaviors and measured outcomes while rewarding consumers for healthy lifestyles.

Winning health plans will be those that can create and sustain brand loyalty equivalent to some of the best retail companies in the world.

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Categories: Healthcare, Markets

Author:Chris Taylor

Reimagining the way work is done through big data, analytics, and event processing. There's no end to what we can change and improve. I wear myself out...

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7 Comments on “Health insurers must become social-focused retail giants”

  1. rwebbapqc
    March 20, 2012 at 11:11 am #

    Chris,
    I don’t even know where to start on this one! It is such a huge departure for so many organizations that haven’t traditionally looked like (or acted like) a retail or consumer based organization. We might as well expect them to build rockets! 🙂

    The first thing that came to mind for me is that those organizations that have looked to integrate a full continuum in the past (doctors, facilities, and health plan/insurer) might have a leg up. They have (you would assume) figured out how to make these types of relationships work among the often opposing views.

    I personally can’t wait to buy my health insurance from Amazon. Maybe get a discount on some running shoes.

    • March 21, 2012 at 1:30 pm #

      @Ron, I hear you, but who thought we’d be buying anything but books from Amazon not so long ago?

  2. Jon Garfunkel
    March 21, 2012 at 1:06 pm #

    “Currently, insurance companies stand up health portals and websites which are primarily used to facilitate locating a physician and wage battles over denied claims, hardly the makings of a world-class retailing organization.”

    This sentence is a bit difficult to parse.
    What do you mean by “stand up” in the above?
    Who is it that wages battles — the websites or the insurance companies?

    And overall, do you have any solid data here?

    • March 21, 2012 at 1:15 pm #

      I think Gary is on the road today, so I’ll take a stab at what he meant…

      Insurance companies have been standing up (implementing) portals (defined spaces, like SharePoint) and websites which give customers the chance to find doctors and see what claims have been processed and either paid, pended, or denied. If you played that back to Amazon or Macys in their retail business, they would say that this isn’t nearly the infrastructure necessary to attract, sell and service in a retail environment.

      As far as data, I know from my personal experience that this is what I’ve used on CIGNA, United Healthcare and others.

  3. Jon Garfrunkel
    March 21, 2012 at 10:01 pm #

    Internet mega-fortunes have been made upon realizing that “entrenched businesses will find challenges adapting.” And mini-fortunes have been made making that pitch to entrenched businesses. 🙂

    So I applaud your (and Gary’s) efforts in making this pitch. And, surveying some recent literature/PR/blog posts on this, I do see that healthcare insurers have taken some steps to me more social. But your analysis misses a few points:

    The Amazon/Macy’s analogy doesn’t make sense. They sell goods — not services. I don’t see why Amazon *in particular* would jump in here.

    There may well be a precedent amongst insurers for traditionally retail productions (home / auto / life) State Farm and GEICO have hundreds of thousands of Facebook fans. I don’t see any major healthcare provider with more than a thousand. I suspect that branding plays a part here, and there’s *huge* inertia that is difficult to overcome here. (In short, home/auto/life insurance generally has been associated with “happy” life events. Health insurance is associated with claims fights.)

  4. March 23, 2012 at 11:31 am #

    Jon, I enjoyed your comments and agree with some. However, I think a long range vision is needed as well. Our healthcare system has become quite complex. Consider all that is new over the past five years including RFID, RTLS, continuous remote monitoring and doubling the number of EMR/EHR implementations in just the last two years alone.
    Did anyone anticipate Apple replacing three ecosystems (music, wireless telcom and publishing). How about Netflix replacing video retailers? Does anyone doubt that Apple will take a bite out of the TV industry and Netflix will continue its assault on cable TV?
    The point is that our ecosystem is very complex. Large companies always look at vulnerable ecosystems as a way to grow with non-legacy products and services. If not Amazon (just by way of example) how about AMEX? The opportunity is vast with perhaps $600 billion in premiums at stake with retirees, members with high deductibles and the uninsured. As payers align with providers, they can differentiate their offerings and no longer be the intermediaries to the process.
    Healthcare always learns and adapts, but sometimes we learn from tough lessons and transform late. This one I think we can all anticipate. Dr. G.

  5. Armin Resch
    March 29, 2012 at 9:25 pm #

    Because – or although – I’m a technologist myself, I don’t find the technology-enabled transformation of the health care industry all that interesting. What I find rather compelling is the vast potential for cost reduction that the consumer will demand as the industry shifts focus towards him. Germany has had competition between public and private insurers for decades, and albeit the system’s not perfect, virtually everyone is insured, life expectancy is higher than in the US, and yet, health care cost as a percentage of GDP is half of what it costs in the US. All that has been accomplished without radical technological advances in Amazon-style retail operations. Elimination of medically unnecessary procedures and focus on preventative care is what comes to mind. [Btw, the plural of premium is premia.]

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