Demand for more consumer-friendly experience is driving the creation of 'health/wealth' opportunities, according to a new Diamond whitepaper.
Consumer-directed healthcare plans don't have a reputation for being particularly consumer-friendly. In fact, the demand from consumers and employers for a better health/wealth experience -- from saving and paying for healthcare to making informed choices about treatment alternatives -- is creating $40 billion in new revenue opportunities for financial services firms and healthcare companies over the next five years, according to Diamond Management & Technology Consultants, Inc.
"Consumers and employers can expect a lot of innovation from healthcare companies and financial services firms," predicted Aamer Baig, partner and co- lead of Diamond's Financial Services Practice. "Those innovations might include powerful tools for families to manage their retirement and healthcare finances, quickly confirming insurance coverage before making a doctor's appointment, collecting information about treatment alternatives specific to each consumer's situation, and then paying for service from a special account before leaving the clinic."
"Some of these opportunities offer companies a chance to repurpose their existing assets while other opportunities will require them to reconsider the boundaries of their current organization or even rethink their entire business model," Baig said. "But with five-year revenue potential in the billions, banks, health plans, and technology infrastructure providers can't afford to ignore the possibilities."
For consumers and employers health/wealth innovations may be a means to curb skyrocketing healthcare costs, better manage the spending and saving of healthcare dollars, and even improve the quality of care. At minimum, tighter integration between the processes of paying for and receiving medical care should make it easier to navigate an increasingly complex US healthcare system.
In the new report, Seismic Shifts in the Health/Wealth Landscape, Diamond identifies and values seven specific consumer and employer needs that will generate an aggregate $40 billion worth of demand for new products and services over the next five years.
Integration and Infrastructure: A $10.4 Billion Opportunity
Frustration with cumbersome processes for enrolling in consumer-directed health plans opens the door for a new breed of information integration and infrastructure services. Diamond expects a new breed of "benefits value managers" to emerge; companies capable of providing integrated benefits administration services and enabling electronic health records portability.
Likewise, the complexity associated with managing insurance claims, paying for care through a health savings account (HSA), and getting fact-based medical advice is driving the need for health IT platform providers that can integrate information from multiple sources and provide a single point of access for managing health/wealth decisions.
Planning/Decision Support: A $6.2 Billion Opportunity
Guiding consumers to make the right choices about care and how to pay for it will create $6.2 billion worth of business opportunities over the next five years, Diamond predicts. In particular, consumers and employers are looking for help in four key areas: clinical decision support tools and financial planning tools; ways to compare costs, quality and treatment options; help in picking out the right health plan; and tools for forecasting and saving for health expenses before and after consumers retire.
Payment Processing: A $5.6 Billion Opportunity
Once an employee enrols in a consumer-directed health plan they still have to make difficult decisions about investing in a Health Savings Account (HSA). That complexity affects doctors too. According to some estimates, the uncollectible portion of payments from customers in CDHPs is two to three times greater than it is for patients in traditional programs.
What's ahead? Expect health payments processors to provide an integrated, efficient claims processing platform for enabling the exchange of transaction information among health plans, healthcare providers, employees and consumers. Some companies are also exploring advances such as eligibility verification services, electronic claims submissions, and payer-to-provider payments.
Supplemental Healthcare Protection: A $5.1 Billion Opportunity
The decline in employer healthcare benefits for retired employees is creating a $5.1 billion revenue opportunity over the next five years for companies providing affordable supplemental healthcare coverage.
The needs are clear. Between 1988 and 2006, the share of large employers offering retiree health benefits declined from 66 percent to 35 percent. However, insurers will have to be creative in promoting such products, perhaps by bundling health care planning alternatives with long-term financial and retirement products.
Consumer Healthcare Financing: A $4.9 Billion Opportunity
Consumer out-of-pocket healthcare costs continue to rise and are expected to exceed $1,000 per capita by 2010, according to the Centers for Medicare and Medicaid Services. This trend is driving demand for health-specific lines of credit, bridge loans and new credit instruments to help consumers meet their near-term financial obligations until they can accumulate adequate savings in an HSA or other custodial account.
Diamond's Baig notes that a number of financial services firms are entering this market but adds a note of caution since the average annual out- of-pocket obligation for those in HSA-linked high-deductible health plans tends to be much higher ($3,190 for individuals; $6,350 for families).
"There are some opposing forces at work," Baig said. "Of course, financial services firms need to carefully evaluate the impact of additional healthcare related credit risk. But they also need a thoughtful, consumer-oriented approach to billings and collections. Access to healthcare is an emotionally charged issue. Firms must ensure that they don't pursue policies that tarnish their broader consumer brand and public reputation."
Helping Consumers Save for Healthcare Expenses: A $4.3 Billion Opportunity
Every 30 seconds someone in the U.S. files for bankruptcy in the aftermath of a serious health problem according to a 2006 study by researchers at Harvard University, a statistic that underscores the need for consumers to save for health expenditures. "Health/wealth cultivators" who can advise consumers on savings strategies that incorporate healthcare concerns into an overall investment strategy will be in great demand. Value-added services such as funds management and brokerage accounts, HSAs, healthcare reimbursement accounts (HRAs) and flexible spending accounts (FSAs) will generate significant revenue opportunities for financial services firms.
Wellness Advice: A $3.4 Billion Opportunity
Diamond estimates that the cost of unhealthy behaviour among the U.S. population exceeds $350 billion annually in otherwise avoidable medical expenses. These expenses hit employers particularly hard, and thus they are looking to establish wellness programs that can foster lifestyle improvements among their workers. This creates a $3.4 billion opportunity for wellness program designers, behaviour modification programs and wellness platform vendors, Diamond predicts.
Who Will Capture the Opportunities?
While a variety of financial services and healthcare firms are pursuing many of these opportunities, Baig said it is too early to pick winners and losers. However, it is already clear are companies will require some specific capabilities to be successful.
"We believe that no single company will be able to capture an overwhelming share of all these opportunities," Baig said. "But the companies that compete most effectively will have a specific health/wealth strategy, supported by a new business model, a dedicated organization, specific organizational capabilities, and flexibility within their IT infrastructure. They will inevitably be successful in partnering or otherwise acquiring new capabilities outside their traditional domains.
"But perhaps most importantly," Baig added, "the successful companies will offer services that address the real pain points that consumers and employers are experiencing, and provide a customer experience that engenders loyalty that leads to profitable, mutually beneficial long-term relationships."
