Can health insurers shift their focus from managing risk to managing customers’ health?
Healthcare futurist Joe Flower has spent three decades as a speaker and author pushing the cause of reform in the healthcare system. Financial & Insurance Meetings editor Alison Hall spoke with him about the passage of H.R. 3590, the Patient Protection and Affordable Care Act (otherwise known as the Healthcare Reform bill), and its effect on insurance companies, their sales and marketing strategies, and their meetings.
Financial & Insurance Meetings: President Obama signed the healthcare reform bill on March 23. What does it mean for the nation’s health insurers?
Joe Flower: For health insurance providers, the new legislation undercuts their business model. Currently that model is based on risk adjustment. They want to create pools of people who will not use healthcare much, they want to exclude high-cost services, and they want to exclude high-cost customers. All of those strategies now are effectively banned. The core of their business model is being outlawed.
FIM: How will they adjust to the new environment?
Flower: They will have to come up with new products, and a new way to sell those products. Actually I believe this will be the salvation of the health insurers. As this is fully implemented, they will be given, by mandate, tens of millions of new customers. But they will no longer have the competitive advantage of cutting back basic coverage as a way to cut premiums. The healthcare reform bill gives them a stronger incentive to help people stay healthier so they use less healthcare.
FIM: In fact, you’ve been telling the story for years that health insurance providers could help solve the country’s healthcare crisis.
Flower: Health plans could be a revolutionary force in healthcare if they step forward and provide the right kind of leadership, and push the industry toward specific reforms and push consumers toward taking better care of themselves. I dream of the day that health plans focus on making people healthier, and put real programs in place—for example, where they see that I’m not managing my diabetes so they send a nurse out to engage with me about my healthcare. Getting heavily involved in people’s healthcare would end up saving money. The average diabetes patient costs the system $7,000 a year. That’s because a good percentage of them fail to manage their disease and end up in the emergency room. If you could prevent that with a little personal attention, you could save the healthcare system—and the health plan—a lot of money. And you could save the customer a lot of pain and suffering.
FIM: How will health insurers have to change their sales and distribution strategies?
Flower: What’s interesting is they will be dealing with different populations now. Insurers had been all about tailoring products to attract people who wouldn’t use healthcare much, as well as attracting employers with plans that cost as little as possible for the employer. Now, with everyone supposed to sign up, companies will need to attract them to their plans in the most competitive way. Maybe I am an optimist, but I imagine that, for health insurance providers, managing their risk by helping customers manage their health will come to the fore. I’ve been arguing this for decades! But it’s difficult. It is much easier to push around numbers and manage risk by pushing people out of plans. Still, I believe that population health management will become of great interest to health insurers because it will be the only way to differentiate themselves. This will not be an easy time for these companies. They will have to be nimble and creative.
FIM: What are the implications of healthcare reform on meetings?
Flower: Health insurers will need to redevelop their business models, to figure out how to continue to make money. This will require lots and lots of strategy meetings. Companies will need to learn about the real implications of the legislation on a legal level, sales level, and accounting level, as well as the strategic level. And when they’ve figured out what their strategies are, they will need to develop training and sales sessions to communicate them. Anytime there is such a major change you need much more communication.
FIM: What are the implications for the U.S. economy as a whole and therefore for financial institutions? Flower: The major thing that has not been addressed well enough is that, up to this point, healthcare has been a major economic uncertainty for people. You flip a switch and suddenly you’re bankrupt. You lose your job and then you’re diagnosed with pancreatic cancer. You may survive your health crisis, but it will cost you everything. That’s something new. It wasn’t that way just a couple of decades ago. Healthcare couldn’t bankrupt you. As the new rules go into effect, that financial uncertainty goes away. Yes, there are more taxes and more mandates, but there are no more annual caps or lifetime caps on coverage. This is going to remove the enormous financial uncertainty from the average American family. Because of this, we will see greater fluidity in the job market, since people will not feel that they have to stay in their jobs for the health insurance. We will see a rise in entrepreneurship. I know people who would have started their own businesses but couldn’t figure out how to get health insurance coverage for themselves and their families. This has great implications for the general insurance industry and for financial advisers. They will need to help people deal with the new rules of life. This is important. I don’t know what new products the financial services industry will come up with, but it’s a very fertile field.
FIM: Does the healthcare reform bill meet this country’s major challenges with regard to healthcare?
Flower: There is going to be a big backlash against the bill within a few years, but the cry is not going to be, ‘Give us back the good old days before reform!’ The cry is going to be, ‘Do something about these costs!’ Because the current reform bill does little that is major and substantive to fix the underlying cost of healthcare. On the one hand, what’s driving up premiums is that unemployed people are dropping their COBRA plans if they don’t feel they absolutely must have coverage, because they are too expensive, and employed people are cutting back to “skinnier” plans, with high deductibles and low premiums. So that means that, more and more, the people we are fully insuring are those who are using the most services, at the same time that the costs of those services continue to spiral upward, therefore premiums go up even faster. That pattern will continue at least until the system is fully implemented in 2014. It’s clear that when you cover something in healthcare, the use of it goes up and the cost of it goes up. I will not be surprised if we have a second healthcare reform bill in 2014 specifically to address rising costs.
For information on booking Joe Flower as a speaker, contact Diane Goodman (diane@goodmanspeakersbureau) at Goodman Speakers Bureau.