Last week Fidelity Investments announced the launch of Fidelity Health Marketplace to offer one-stop access to health and wellness benefits to small and midsized businesses and their employees. The platform offers employers the ability to choose from an extensive network of national and regional medical, dental, vision, and life benefits in addition to tax-savings options and access to wellness tools and programs. The launch comes on the heels of Fidelity reportedly leading a funding round for health insurance startup Oscar Health. Oliver Wyman Partner Sam Glick explains why Fidelity’s moves indicate the market is recognizing that experience and integration matter in winning mainstream employers:
1) Private exchanges are evolving
- Round 1 of private exchange growth was about securing carrier participation and simply getting something to market.
- Exchange growth then slowed last year as exchanges penetrated “early adopter” employers.
- They’re now realizing that experience and integration matters to win mainstream employers, and Fidelity’s move is a great example of that – integrating health, retirement, and payroll, with consumer-friendly decision support – all behind a brand that both consumers and employers trust.
- Fidelity just led a $150M funding round for Oscar – they’re clearly making bets on consumer-friendly healthcare. And it wouldn’t be surprising to see Oscar on this platform. Other carriers will need to have consumer-centric plans in order to compete.
2) Traditional channel boundaries are blurring
- Fidelity is calling its new product Fidelity Health Marketplace – nowhere on the site does it use the term “exchange,” although this is squarely positioned as an exchange competitor for the small-mid group market. Or is it a web-based software competitor to Zenefits? Or a small business private employer organization solution competitor to TriNet? Or a next-generation, technology-enabled competitor to traditional brokers? It’s really some of each. The emphasis on new technology tracks with the findings from our Benefits Selling/Oliver Wyman 2015 health insurance broker survey in which a solid majority of brokers said they believe that technology—in the form of enrollment/benefits administration technology or an online solution—is a critical component of their value proposition going forward.
- Health plans must embrace this evolution – no longer can they have channel management organizations that are siloed based on traditional group size dimensions. They must take the view of the customer and think about all of the different intermediaries competing for their groups.
- Currently, Fidelity is only offering one carrier to each employer – they clearly don’t want to deal with risk-adjustment. Does this create an opportunity for carriers to go direct with something even better?
3) Consumers make holistic decisions about their lives – healthcare incumbents think healthcare is different only because we’ve structured the industry that way
- People want to be able to get the services they need, where they need them, at a price they can afford. Whether this is funded through insurance, an HSA, Medicare, or retirement savings doesn’t really matter to consumers – and services like Fidelity Health Marketplace can help to eliminate that complexity.
- That said, smart employers will look closely at how players like Fidelity are being compensated. Is it mostly through insurance commissions? And what kind (especially given that ancillary insurance commissions are higher than health insurance commissions)? HSA fees? Investment management fees? Directing funds toward their own mutual funds? Just like we saw in the early days of 401k plans, this is a market that’s evolving rapidly, and how vendors are compensated will affect the kinds of solutions they propose to consumers.
4) Portability is the next frontier
- In an economy where the average millennial can expect to have 15-20 jobs in his or her lifetime, and the gig economy continues to grow, having benefits linked to a single employer is on the verge of becoming an archaic concept. According to the second annual “Freelancing in America” survey, more than one in three U.S. workers — 53.7 million Americans — are now freelancing.
- Who is competing to be the next benefits hub for individuals? Fidelity does this well in the retirement world, rolling over employer-sponsored 401k balances into personal IRAs when people leave their jobs. Will they try and do this for health benefits as well?
- This isn’t easy – banks have seen this kind of lifetime relationship as the holy grail for some time but are now facing their own major changes. Just as digital technology has destroyed established business models in music and publishing, such a transformation may now be on the horizon for financial services, with digital distribution platforms, new product providers, alternative sources of capital, and a growth in outsourcing fundamentally reshaping the industry.
- Healthcare can learn lessons in this regard from industry leaders like USAA. Oliver Wyman had the opportunity to discuss with General Josue (Joe) Robles, retired CEO of USAA, his perspective on successfully leading the financial services firm through a period of momentous change in an era that redefined the customer experience in the digital marketplace.