With the advent of the exchange (HIX), many employers are expected to forgo group-sponsored health insurance because paying the employer penalty instead is often cheaper than their premium contribution. Tis will result in an influx of consumers on the exchange. Consumers often view their out-of-pocket expenses and


payroll deductions as the cost of healthcare because for years the true cost has been hidden with employer-sponsored health insurance; however, in many cases employers cover up to 80% of the premium. Once they start shopping on the exchange, customers will face sticker shock. Tis makes it all the more important for health plans, which have traditionally had a B2B focus, to deliver their value propositions in a way that educates consumers. How well will those individual consumers understand the


value proposition they are selecting? Te benefits and limita- tions will need to be sold to consumers in a very different language. Moreover, if those products aren’t transparent, or if consumers are poorly informed about what they are gaining or giving up, a backlash will be inevitable. Imagine a patient walking into the same clinic he or she has used for years, ex- pecting to see a specific doctor and being refused; or receiving the same care as always, but at a much higher price. Plans may change, but priorities remain. A health plan will tailor products to meet consumers’ vary- ing concerns, based largely on some trade-off between choice and cost. Low-cost coverage will restrict what services are available, which providers can be accessed, and how quickly care can be obtained. Premium care with few restrictions will be more expensive. However, a health plan that plays the consumer game well may win greater market share and more good will by meeting or exceeding expectations. Consider the market for automobile insurance now dominated by former niche players like GEICO, founded to provide insurance to government employees before moving into the larger direct-to-consumer market. Attracting customers on the premise of a quick turnaround on plans that offer low-cost coverage, GEICO retains its market hold through the excellence of its customer service and the quality of its network of assessors and auto body shops. Health plans may well need to connect with consumers


through gimmicky advertisements, too. The longer-term challenge, however, will be whether they can deliver on their promises.


If you build it, will they stay? A consumer-driven health insurance market will not be as stable and static as an employer- or government-driven one. Individuals will be quicker to drop out, move on or change options. Such churn will seriously impact the profitability of any plan or provider organization because most of the invest- ment in an individual patient occurs at the front end. Assess- ments, screenings and initial treatments are necessary to meet a baseline of health status that can then be managed more cost effectively over the long term. Healthcare premiums are built


around the premise that a health plan will make money if a member remains enrolled for at least three years. If patients leave early, plans will bleed money. Te viability of a health plan product will be based on customer satisfaction. What services are being offered, how they are priced, and how well that value proposition gets com- municated will all be critical to achieving satisfaction. However, the ability to deliver on the value proposition will be based on the integrity of the network providing the services. Tis fundamental shift will require health plans to treat


network management as an essential, strategic function that supports a product framework. It will also contribute signifi- cantly to a new relationship between payers and providers. “Any willing provider” will no longer be a tenable proposition for a network. Payers will need to be highly selective about the providers they bring into a network that has been designed to provide specific products at strategic cost levels.


Going forward, providers and payers will need to work closely in a real partnership to develop and support a seamless alignment between product, care model and payment approach. This kind of coordination is simply not possible without a significant upgrade in the network management function.


For similar reasons, providers will want to be more selective about the networks they join and the plans they participate in. Any decision around changing networks or signing on to deliver a new value proposition will have real ramifications. Will the current patient base be retained? Will an influx of new patients lead to improved revenues? How will the providers’ own values and preferred care delivery approaches be affected? How much of an investment in new tools and administrative processes will be necessary? Providers will have many strategic questions to consider. Under the PPO framework, the relationship between


providers and payers has been largely transactional and ad- ministrative. Going forward, providers and payers will need to work closely in a real partnership to develop and support a seamless alignment between product, care model and payment approach. Tis kind of coordination is simply not possible without a significant upgrade in the network management function. In the second part of this three-part series, we’ll examine the


changes that will be necessary to give the network management function the basic capacity to support new care delivery models, new consumers and new reimbursement approaches. HMT


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