In a new analysis, Health Reform: Prospering in a Post-Reform World, the consulting firm PricewaterhouseCoopers (PwC) in New York provides guidance to providers and payers alike regarding steps they will need to take to thrive as health reform implements over the next few years. The report advises payers to "repackage and develop new products." Mike Thompson, principal in PwC's Global Human Resource Solutions Group, recently shared two key steps that health insurers should take when launching new products.
Step one: Reassess what employers and consumers want.
Many health insurers start with a presumption that they know what people buy and why they buy it. However, "the reality is that the market is changing very rapidly," says Thompson. "Companies are going to have to re-check their assumptions as to what employers want, what consumers want, and validate those assumptions both before they invest and as they launch."
Health reform is going to lead to "a new equilibrium" in how employers approach benefits, explains Thompson. Insurers should expect to see "much more rapid movement toward higher-deductible plans, more first-dollar benefits for prevention, and probably more incentive programs around not just the front end of behaviors but broader consumer engagement strategies," he says.
In addition, health insurers will need to achieve "rapid adoption of any new products" to avoid "continuous constraints in terms of the minimum loss ratio," says Thompson. "It is a bigger bet now to bring out new products because, not only are they an investment for the company, they also add pressure on the minimum loss ratio requirements as insurers are making that investment."
Step two: Review expense structures.
"Companies are going to want to inventory their expenses by product and market segment, and they are going to want to understand product by product what is the impact on the minimum loss ratios," says Thompson. Insurers may "decide to get out of certain products that essentially are creating a drag on their loss ratio requirements or modify those products in ways that will make them more attractive." For example, health plans might decide to eliminate high-cost medical management programs such as coaches unless they can demonstrate significant benefits.
Lower-cost, lower-benefit plans will be "some of the first ones to go because those typically are the ones that are very difficult to manage at higher loss ratio requirements," he points out. - Caralyn