Posted: 15 Jun. 2021 10 min. read

To thrive in a post-pandemic world, mid-market health plans should focus on digital transformation

By Bill Preston, principal, and Vishal Iyengar, senior manager, Deloitte Consulting LLP

Digital transformation has become a necessity for health plans. It paves the way for superior member experience, human-centered product and service offerings, and financial outcomes that could help them successfully compete in the Future of HealthTM

The Deloitte Center for Health Solutions recently interviewed technology executives from a wide range of health plans—from regional not-for-profits to large publicly traded companies—to find out how they were modernizing their legacy platforms. A technology executive at one mid-market health plan told us that she is in a difficult predicament. Her organization has undertaken a large platform-modernization project that will likely take longer, and cost more, than originally planned. Her organization doesn’t have the same economies of scale as a national health plan, which can make it difficult to keep operation costs neutral or invest in technology. In addition, she and her staff are already stretched thin.

Strategies for navigating the mid-market dilemma

The health insurance market is demanding that health plans become more consumer-focused, and the COVID-19 pandemic has only amplified the need for change. However, some of our mid-market clients are taking a wait-and-see approach and have decided to let large, national health plans figure out the solutions so that they can replicate or buy them. But there are some challenges with that approach. These larger industry leaders could become direct competitors. We urge our mid-market clients to be shrewd with their investments, aim for quick wins, and leverage proven commercial off-the-shelf solutions where feasible—all while strategically keeping an eye on the big picture.

Here’s a look at some of the strategies that emerged from our interviews. Some of their advice is telling and could help mid-market health plans navigate an increasingly digital world: 

  • Focus on the big picture: Health plan executives should try to coalesce around a common strategic vision for their enterprise and then mobilize around that strategy. Having too many projects can be distracting. With thin margins and ever-rising administrative costs, many health plans cannot afford to lose focus. Some IT executives said they never anticipated playing a role in company strategy. We expect this could be particularly true for mid-market health plans. “Leading the business through the change might be the biggest thing I have to do that I didn't know I was signing up for,” one chief technology officer told us. Technology executives should have a seat at the table when business strategy is defined so they can help shape the enterprise’s future.
  • Include systems thinking in digital transformation: Digital transformation is as much about changing the business as it is about adapting new technologies. This often requires taking apart business models and reassembling them in a way that is easier to understand, more flexible to operate, forward-compatible and champions new business values. That’s where systems thinking comes in. Systems thinking requires an understanding of the whole system (e.g., goals, various subsystems, and the recurring patterns in the relationships between these subsystems). By focusing on the entire system, health plan executives should be able to find comprehensive solutions for many problems and remove friction. One executive told us how his technology team applied systems thinking to develop architecture principles and a business model for achieving the organization’s long-term vision. Systems thinking augments the strategy discussion and could help avert potentially expensive tactical mistakes early on.
  • Break large undertakings into smaller projects: Letting projects become large and unwieldly is a common pitfall among mid-market health plans. Some of our interviewees suggested breaking daunting initiatives (such as digitizing administrative systems) into smaller, more digestible projects. Incremental gains should be celebrated. A health plan, for example, might launch a 3-5-year digital-transformation. Such a project could be broken into three-month increments that create minimum viable products (MVPs) for the business. While some of these MVPs might miss their mark, breaking them up into smaller pieces means failures are likely to be on a smaller scale, and course corrections should be cheaper. The team can then step back and assess what didn’t work and determine how to correct it.
  • Learn from other industries: When it comes to technology innovation, several respondents noted that health care generally lags other industries. Many health plans, for example, still operate in batch interactions, even as the rest of the world has moved to real-time experiences. There are clear parallels between health insurance and other consumer products and services (e.g., retail and finance) that have already transitioned to digital platforms and become more member-centric. In banking and retail, some of the companies that created a superior digital experience now dominate their industries. Some incumbents fought and lost some ground to newcomers, and some regional banks found it difficult to compete with larger national players. The health care industry hasn’t yet entered a period of digital competition. There are still opportunities to extract scale premiums from mergers and acquisitions. But when digital competition reaches its peak, health plans will likely need to be great at everything they do. 
  • Don’t place cyber-security on the backburner: Our technology experts warned that it can be extremely expensive and brand-eroding to correct cyber-related breach incidents. Several respondents said cloud architectures still have significant cyber-security challenges, especially when organizations operate in, or integrate with, multi-cloud platforms. Health plans could lose the trust of consumers if security-related issues are exploited. This has become increasingly apparent in the wake of recent ransomware attacks. Trust can be difficult—and in some cases impossible—to restore, they said.
  • Strengthen relationships with local customers: Mid-market health plans should consider raising their game at connecting with everyone in the communities they serve. This should include members, employers, brokers, providers, caregivers, and even non-members. This strategy could help health plans strengthen existing relationships and preempt possible competition from national health plans. For instance, interoperable solutions around automatic claim submissions, prior authorizations, appeals, and care gaps can be valuable to hospitals and health systems. These organizations might be more likely to adopt such solutions from health plans that have a large local presence.

While many health plans intend to modernize their legacy IT platforms, they are all at different stages in the process. There doesn’t seem to be a clear wrong or right approach, according to our research, and strategies and investments vary widely. Midmarket health plans are typically less able to make large IT investments—or mistakes—leaving less room for error.

Deloitte’s view is that digital transformation is about future-proofing the business. Companies might choose different paths, set a different pace, and even choose different destinations for the future of their business. Standing still isn’t an option, and neither is the belief that what made a company successful in the past will ensure success in the future.

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