Editor’s note: Joe Riley is managing member of the healthcare investment firm Psilos, investors in growth stage digital healthcare. He currently serves on the boards of directors of Care Management Technologies, Caregiver Services, HealthEdge Software and OmniGuide.
In 2015, the consumer will really be in the driver’s seat, and this is especially true in the healthcare world. The Affordable Care Act (ACA), better known as Obamacare, is here to stay. Now health insurers today have little choice but to dramatically revise their 50-year old business models that focused on employer-sponsored group products and focus on the consumers who have so much power going forward.
It won’t be easy for the insurers. They aren’t well-liked by consumers. In Forrester’s 2014 Customer Experience Index, health insurers earned a rating of “poor,” which was lower than that of airlines and cable companies. So what should they do? It is a paradox, but in 2015, health insurers will need to start behaving like auto insurers do now.
I love GEICO. Using the gecko as a brand image was outstanding, but then getting Ickey Woods some cold cuts — that was even better. Humor sells. GEICO was the among the first to address the consumer, but today most auto insurers now recognize the power of the consumer, and have tailored core operations to be consumer-focused.
These businesses embrace branding and marketing, price transparency, call center performance metrics, roadside claim adjudication and accelerated claim payments, all designed to drive customer loyalty and satisfaction for a product everyone hopes they’ll never have to use. Sounds like a good model for health insurers to follow, right?
Health insurers have to think like consumers do in 2015, and this focus on the consumer is a seismic strategic shift. Fortunately for investors like me, such change drives enormous investment opportunity.
Immediately after the ACA was passed in 2010, insurers reacted quickly to the emerging opportunity for accountable care organizations (ACOs), making significant investments to get access to clinical data and get closer to providers, with purchases of companies like Medicity and Axolotl.
I predict a similar surge in acquisitions in 2015 as the insurers add technologies, products and services that deliver a differentiated consumer experience on price, quality and service. Significant investment will be required throughout the health insurers’ value chains, from research to product development, to operations and to marketing and sales.
Valuations will rise, as well; just as we continue to see valuations of venture-backed companies in other industries soar (Uber raising capital at $40 billion), it’s easy to foresee billion-dollar valuations for innovative health technology companies.
I expect to see heavy emphasis in 2015 on technology solutions in the following areas:
- Automated claims adjudication and payment software that drive administrative cost savings for payers while simultaneously promoting price transparency and easily understood claims payments for consumers;
- Population health management tools that identify the at-risk consumers and provide incentives to promote their engagement with health and wellness initiatives;
- Mobile and telecommunication strategies with the potential to reach consumers on their own terms, including technologies that permit online appointment scheduling, prescription ordering and direct payments to providers; and
- Software that enables 24/7 customer service that is accessible via multiple platforms.
It’s not hard to imagine a scenario where clever Super Bowl commercials in the coming years are no longer about GEICO’s lizard and Flo from Progressive, but rather are delivered by the likes of Aetna, United and Humana.
However, health insurers will have to put technological infrastructure in place to service their customers in the new world of consumer health insurance if they want to survive.Featured Image: Adam Vilimek/Shutterstock (IMAGE HAS BEEN MODIFIED)