Provider organizations interested in launching their own insurance products need to develop a product strategy customized to their market, potential partners, and own capabilities. That may be easier said than done. Here, Oliver Wyman Partners Dr. Aaron Gerber and Tom Robinson, with Principal Tomas Mikuckis, list six questions every provider organization should consider before jumping into the provider-as-carrier arena. Knowing the answers will help providers determine which insurance product (if any) is most appropriate, and what blend of build/buy/partner will allow them to execute successfully:
Many providers, particularly those committed to transitioning to the world of population health, are exploring launching their own provider-branded insurance products – and with good reason. Narrow network products present provider organizations an opportunity to lock in lives that they are responsible for managing, accrue a larger share of the value that they create, and better align member incentives (via benefit designs) to improve their ability to deliver total cost of care and quality outcomes.
However, such products also pose unique challenges and require capabilities that extend beyond the scope of most provider organizations. While launching a provider-branded narrow network health plan is right for some organizations, it definitely is not the right product strategy for all organizations, as they may not have the capabilities to execute on their own. Likewise, many organizations know they want to pursue direct-to-employer contracting – either on their own or in partnership; but we see some provider organizations jumping in without first gaining a deep understanding of the relative preferences of differing employer and consumer segments.
Jumping into insurance products prematurely or ill-prepared in this way is risky and potentially debilitating. Taking time to understand the organization’s readiness, as well as the buying habits, preferences, and pain points of consumers, employers, and potential partners will help providers hone in on the most effective product strategy. And that will help them lock in volume and get paid more for value created.
1) What do you know about employers?
While direct-to-employer contracting is often viewed as the entry point to provider-branded products, the path is not as simple as it might first seem. There is wide variation in employer sophistication and purchasing behaviors.
- Are your employer targets motivated by traditional factors like price, brand, and network, or are new features like value, financial stability, insightful reporting, and member experience the differentiators?
- How much is each feature worth in premium dollars?
- How many new lives will each employer provide, and with what spend-profile/medical needs? Which lives are you seeing already and, therefore, will be cannibalizing?
- How much will the proportion of care that you provide to each employer increase?
2) What do you know about consumers?
We live in an environment where the average commercially insured American is on a high deductible plan, and consumer decision-making is becoming ever more important. The opportunity is to design a product with a value proposition that compels consumers to not just select the product at annual enrollment but utilize it in a beneficial manner.
- What do specific consumer sub-segments value – convenience, network, brand, quality, experience?
- How does their behavior change as they take on a greater share of financial responsibility?
- Where does your organization best differentiate? How can you differentiate beyond cost only?
- How big is the opportunity (or need) to appeal directly to “empowered” consumers?
3) What do you know about channel partners?
New channels are emerging, offering new ways to reach the end consumer. However, understanding the capabilities and hesitations of these partners is critical.
- How supportive are insurance-distribution partners of provider-developed products? This means traditional channels like brokers and benefits consultants, as well as emerging channels like professional employer organizations, private exchanges, and next-generation human resource information system (HRIS) platforms.
- How can channel partners best be leveraged in the distribution and marketing of the product?
- What incentives and channel strategy (positioning, coverage/sales) are needed to drive critical adoption? How does it vary by segment?
4) What do you know about strategic partners?
Launching a product requires a full suite of capabilities. Partnering with other provider organizations and/or payers may be required to deliver some of the needed capabilities and/or to be “attractive” in customers’ eyes. Partners may also allow a provider to command a significant premium over a go-alone product.
- Different products have different demands and may require different partnerships. How do various partners align with an MA product? Direct-to-employer contracting? Exchange? Medicaid?
- Given customer biases and attitudes, your own capabilities, and proposed partnerships, what combination of competencies/joint venture makes the most sense? And how will you share the value created?
- With which partner can collective experience be leveraged to improve overall contract negotiations?
5) What do you know about your network?
Evaluating existing assets will both inform the network design and connect the product strategy with the system’s broader strategy.
- What might the network look like from a quality, cost, capacity, referral-patterns, and customer-reputation standpoint?
- What are the “must-have” elements in employers’ eyes? How do you line up?
- Is the network sufficient and attractive? Are their geographic gaps to address to align with, e.g., key employer target populations?
6) What's your view of the long game?
Any product strategy should be viewed within the context of an organization’s larger shift-to-value strategy.
- How will the product strategy strengthen the organization’s ability to deliver on its overall strategy, e.g., population health and value-based care?
- Does the product strategy contradict other strategy/operational efforts?
- How might payers and competitors react?
Once provider organizations gain an understanding of these preliminary questions, they can determine which product and service-model attributes will drive the most gain. And from there, they can optimize product offerings based on unique market dynamics and their own capabilities.