Disrupting Distribution's Status Quo

Who or what will control the future trading flow?

Industry change is never fast; in fact, it’s often agonizingly slow. This is especially true when the status quo is protected by incumbents who control the industry’s trading flow.

In the health and group benefits space, the business-to-business (B2B) broker/consultant has long been the clearinghouse for the sale and configuration of employee benefits.

Past attempts to go around the channel have largely failed, and for good reason: Employers like having trusted feet-on-the-street broker/ consultants who can educate them on industry trends, and help select and structure their benefit programs.

However, the winds of disruption are upon us, driven by the mounting power of the consumer and technology advances. We now see the distribution engine, with the encouragement of an ever-increasing number of plan sponsors, start to shift its focus to the employee, pulling the supply and delivery players along with it. Innovators across the value chain are changing the focus of their business models to a business-to-business-to-consumer (B2B2C) approach from B2B.

The evolution is not dissimilar to the power shift that has been taking place in the media industry, since streaming video and watching television on mobile phones became realities. Suddenly, cable operators no longer call the shots; content does. A consumer doesn’t have to pay Xfinity or Verizon Fios to watch a popular show; there are multiple channels and mediums available as alternatives.

Might the same be true for the incumbents in the healthcare distribution space? Will brokers continue to control the trading flow, or will consumer-centric content and/or user-friendly technology platforms be the center of gravity in the future distribution landscape? The likely winners are those that can curate the needed solutions across the value chain, leveraging the new technology via targeted partnerships.


As health insurance premiums continue to escalate and employees take on more of the cost burden of their benefits, employees are demanding more value from their benefit dollar. There is ever-increasing pushback on one-size-fits-all plans; higher co-pays and deductibles; forced adherence to arcane health risk assessment requirements; long waits to see doctors in inconveniently located offices with limited business hours; and disconnected product choices across health, wellbeing, and ancillary. Our research, and research conducted by others, shows employees crave bundled, customized solutions that span the risk and wellness spectrum and are more relevant to their personal health and wellness needs.

The first wave of digital distribution platforms – most from broker- or consultant- led private exchanges – achieved only modest uptake because they missed what employees really wanted. These efforts, focused on acquiring arms and legs, not hearts and minds, and pushed for membership primarily through promises of cost savings.

That promise soon rang hollow, as those cost savings were achieved via skinnier benefits, further cost-shifting, or narrow networks. They depended largely on glorified spreadsheets with rudimentary choice algorithms and cartoon graphics.

Today, leading B2B2C platforms are focusing on consumer value and engaging the employee on selecting, or subscribing, to the benefits package that best meets their needs. Their goals involve engaging the employee throughout the year, not just at enrollment, on technology that is simple and convenient to use.


Source: Oliver Wyman analysis


The next-generation digital platforms are emerging with navigation and choice algorithms, driven by machine learning and a sophisticated understanding of behavioral economics. Data capture has become more advanced and distribution platforms are better able to engage, educate, guide, and deliver meaningful consumer-centric solutions, along with providing administrative ease and simplicity. 

Enabled by technology advances, and in response to shifting employee/consumer demands, we now have a different distribution landscape than we did 10 years ago. Brokers have consolidated to achieve scale and cover more areas of expertise; professional employer organizations and third-party administrators have emerged to outsource large areas of human resources administration; a flood of new technology platforms has entered the market focused on small-to-medium businesses, selling to both brokers (versus trying to disintermediate them) and carriers.

Some payers have had good success with proprietary platforms; and many of the large consulting houses are repositioning private exchanges as “marketplaces.” Emerging from the flurry is a new portfolio of consumer- centric solutions, both on the product and delivery front. Future winners will act as curators of digitally enabled networks of solutions, earning their keep more from per- member, per-month payments or in consulting fees than in ever-tightening commissions.


Future winners will act as curators of digitally enabled networks of solutions, earning their keep from per-member, per-month payments or consulting fees.


Customer demands and enabling technology are forcing insurers to rethink product development. And that is leading to benefit- stack innovation, such as benefits linked to wellness, linked ancillary-protection products, benefit and price bundling, life-stage solution packages, and more. Such benefit-stack innovation will allow payers to differentiate themselves, expand share of wallet (into integrated health, ancillary, wellness, and retail delivery), and protect against churn.

Meanwhile, providers are revolutionizing care delivery to meet employees’ needs with anywhere-anytime service and accessible delivery mechanisms – everything from retail to urgent care to tele-health to in-home. These new delivery systems will become more ingrained into the benefit stack, configurable via digital platforms focused on targeted value solutions.

To deliver these solutions, payers and providers will need to develop more select and targeted partnerships with distribution players. It’s not about trying to get as much shelf space across as many platforms and brokers as possible, but rather a very purposeful distribution portfolio strategy aligned with geographic and segment priorities, where distribution arrangements look more like joint ventures than traditional arms-length relationships.

Health- and group-benefits distribution, driven by consumer demands and new technology innovation, is being transformed. We already see successfully curated models and benefit stack innovation such as life-stage packages and linked medical-ancillary benefits. Brokers might still control the trading flow going forward, if they can control access, but how and what they sell will change dramatically.

Payers and providers as developers of consumer-centric solutions can also become critical influencers, à la the content providers in the new media landscape. Those who fail to recognize this sea change in the distribution landscape – and those who are still asking “Are we there yet?” – will be left behind.

About the Author

Howard Lapsley is a Boston-based partner in Oliver Wyman’s Health & Life Sciences practice.

Disrupting Distribution's Status Quo