Healthcare Reform
While the post reform picture is still forming, the U.S. healthcare financing and delivery systems are clearly poised for major changes as a new healthcare bill emerges and works its way through Congress. Proposed changes are likely to shift major elements of the current competitive environment—increasing the value of selected customer segments and components of the value chain while diminishing the value of others, and creating new white space opportunities. As a result, Oliver Wyman expects proposed healthcare reform to drive meaningful shifts in future sources of growth and margin. We believe health plans that anticipate and proactively prepare for the post reform marketplace will have a strategic advantage over other plans that wait before responding to new elements of the market.
Oliver Wyman has identified four specific business areas we believe warrant health plans’ focus and potential near-term action.
Direct business model and portfolio implications of proposed healthcare reform:
1) Rating and pricing analysis: Pricing, product, underwriting and profit implications abound from the proposed move to community rating. Determining how payers should position themselves for a state-based but quasi-nationalized community rating environment is also critical
2) Small Group and retail connector-based distribution model: State-based market exchanges (connectors) must be considered and call for the development of a product distribution strategy that requires optimized performance in a web-enabled marketplace. Payers must also determine their options for the evolution of their current broker and agent relationships in the new marketplace while considering a blueprint for the new go-to-market model
3) Provider (physician and hospital) contracting and partnering strategy: With the development of a new health management marketplace, payers must develop provider strategies that reduce unwarranted practice variation, improve treatment management and care coordination and integrate health/wellness services into the model. New value based reimbursement models and information exchanges must also be anticipated to facilitate the provider practice changes and align incentives
4) Portfolio and white space model: Reform also encourages payers to evaluate how their current mix of businesses are likely to evolve and perform in the new environment, prioritizing the future growth/earnings engines, and mapping important white space opportunities into the portfolio model
Experts
Tom Main, Mike Lovdal, Mark Luck Olson, Helen Upton Leis
