2014 Health Plans Outlook

Interview with Bill Copeland

Despite the significant level of change the health care industry faces in 2014, many health plans are prepared, and the outlook is positive, according to Bill Copeland, U.S. Health Plans leader and vice chairman of Deloitte LLP’s U.S. Life Sciences & Health Care practice. Read on for his perspective on disruptive trends to watch as plans respond to consumers’ increased purchasing power and access to information.

What is the biggest challenge facing the health plan sector in the coming year?

The biggest challenge for health plans in 2014 is adapting to all of the changes effective January 1 around health insurance exchanges (HIX) and Medicaid expansion in states where that is happening.
As the regulatory framework for HIX solidifies, it will provide health plans with an opportunity to test their assumptions about operating in the individual market. What does it mean to be a qualified health plan? How will plans be rated? What are acceptable practices? How well will the federal hub work in processing subsidies? Health plans will be operating in a very complicated environment, with Medicaid and Medicare rules, HIX rules, and commercial rules.
Managing employer and consumer expectations is part of this challenge. Health plans will be having lots of conversations with employers—particularly with mid-market and small companies—about the new exchange environment and its resulting implications. Health plans also have an opportunity to work with employers on strategies to manage the increasing cost of care, specifically in areas such as product design, wellness program implementation and innovative care delivery models. There will be conversations with individual consumers as well, helping consumers to understand the value of the product they are buying and how to use it effectively.

Predictability is not a word that health plans will be using in 2014. Most of them took their existing business models and tweaked them for this new world. As reality sets in, some companies may need to come to grips with the fact that their existing approaches will not work, and they will need to replace them with something better designed for individual customers.

Fortunately, most health plans are fairly well prepared, especially larger plans. They have done a lot with the capital and knowledge they had to work with. Now they are in the mode of determining whether their assumptions about exchanges, Medicaid expansion and the individual market were true, and making changes to their business models and operating strategies, if need be. Increasingly, health plans will look to sophisticated analytics to verify if they are making money, reaching the populations they are targeting, spreading their risk, and making correct assumptions around pricing.

Even though the coming year may be bumpy—you can’t go through this much change and not have some hiccups and unintended consequences along the way—the outlook for health plans is very positive. There are opportunities to grow, to do new things and do existing things better.

What trends might disrupt “business as usual” in 2014?

Consumers using their increased purchasing power and access to information to drive health care decisions could be a major disruptive trend in 2014. After several years of shifting responsibility for co-pays, premiums and deductibles, it’s no longer just the employer paying for coverage—it’s the consumer’s money, and they want a say in deciding where and how to spend it, and what courses of treatment to follow.

Another disruptive trend that’s on the horizon: It will become more common for a health plan to offer clinical services—both professional and technical—and for health care providers to offer health care financing products. I expect to see cross-sector convergence on the agenda at almost every health plan board meeting in 2014. Should we buy mini clinics, a physician practice, build a virtual care network to generate new revenue streams? How can we guard against providers who are setting up their own insurance plans? The lines are blurring, generating both opportunities and threats for health plans. These growth and competitive positioning strategies will continue to fuel the already hot market for mergers, acquisitions and affiliations.

What are some steps companies can take to foster innovation and/or growth?

Some people say that the term “fast mover” in insurance is an oxymoron. Traditionally, there has been little innovation in the health plan sector because there has been little incentive to be innovative. Executives have been reluctant to take risks because they couldn’t see a clear payback.
Now, however, health plans are operating in a rapidly changing market where consumers—not employers—are driving purchase decisions. Innovation will come from health plans satisfying the unmet needs of these consumers, who want transparency, value and convenience. These items aren’t what health plans typically put on their top-10 list of things to do. But, increasingly, plans realize they need to be more customer-focused to survive and grow.

I also see health plans and providers collaborating to innovate in approaches to wellness and prevention. Lifestyle-related habits and chronic diseases contribute to 75 percent of health costs1. Patients often get off track in their treatment regimen. If plans and providers can develop robust programs and incentives to keep patients on track, it could make a huge difference.

Finally, looking a few years out, I think the power of technology will enable us to experiment with a virtual health care delivery system. You will meet with your doctor via computer, take and submit a blood test at home, have clinicians all over the world working on your case and keeping track of your progress. This type of innovation could produce a step-change in care quality and lower cost.

1 Center for Disease Control and Prevention, “Chronic diseases: The power to prevent, the call to control—at a glance 2009,” December 2009.

“I expect to see cross-sector convergence on the agenda at almost every health plan board meeting in 2014.”

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