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The Only Must Have in Healthcare Could be a Low Premium

We’re a “must have.”

I hear this sentiment from dozens of hospital and health system executives across the country every year. They are rightly proud of the strong reputation their organizations have earned by doing what leading healthcare providers do: delivering exceptional care.

But they make a crucial mistake.

They assume their quality translates into loyalty. They assume their patients will seek them out at any cost.

Most of them are wrong.

As a recent New York Times article makes clear, people who purchase health insurance through the ACA-established exchanges are increasingly focused on one single factor: Price.

In 2015, about half of the people shopping on the exchanges chose the cheapest plans available. These plans often offer very limited networks to their members and don’t include in-network access to prestigious health systems, children’s hospitals, and academic medical centers that tend to be more expensive than other providers in their market.

The feeding frenzy on plans offering the lowest premium has enormous repercussions.

It is causing huge financial losses for health insurers, who need more of their customers to use fewer services, but also to buy higher priced plans in order to turn a profit. No business — whether it’s an insurance company or a clothing retailer — can survive if it only sells the items in the clearance isle. Already, UnitedHealthcare Group and Humana have announced plans to exit the marketplaces and other national health plans have significantly scaled back their participation.

Just as importantly, the laser focus on low prices is proof to health insurers that the broader market — namely, employer-sponsored plans — could respond favorably to price-focused plans that sacrifice broad access in exchange for low premiums.

There are already signs that suggest health insurers are eyeing a shift toward narrow, cost-focused plans. In January, Horizon Blue Cross Blue Shield of New Jersey launched OMNIA a tiered plan that offers a very limited low-price network to its members. The plan has enrolled nearly 250,000 members in its first year, outperforming its own forecasts and shifting enormous volume away from Blue Cross’ more traditional health plan offerings. It has also shifted enormous volume away from providers who were never even given a chance to participate in OMNIA’s top tier. More importantly, OMNIA’s success has provided further proof that customers are willing to buy plans that exclude “must have” providers, even if one reason is those customers don’t know which providers are in- and out-of-network when they choose the low-price option.

If this is a trend, and it sure looks like a trend, it’s an ominous one for prestige-driven health systems. They could be on the outside looking in as health insurers increasingly look to shift customers toward plans that exclude them in the race to offer the lowest premium plan design.

September 13, 2016
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