Under the current business model, healthcare insurance in the United States is sold to individual consumers through brokers and employers. But as the U.S. healthcare industry continues to undergo reform, the market will increasingly shift from a B2B model to more of a B2C model where individuals have a stronger voice in their healthcare decisions, including greater choice over the healthcare insurance provider they select. As such, it's going to become increasingly important for healthcare insurers (i.e. payers) to develop a much better understanding of the needs, behaviors, and value of individual customers in order to tailor product offerings and support more cost-effectively.
At present, most payers are in the early stages of analyzing the motivations and needs of consumers. In fact, parallels can be drawn between the U.S. healthcare and utility industries. Before energy deregulation began to emerge in various states over the past decade, most consumers had no choice but to purchase natural gas or electricity from a single provider for their region. Since then, consumers can now choose power suppliers, depending on which state they live in.
Competition is now beginning to emerge in healthcare, though consumer choice between healthcare insurers is not yet occurring on a national scale. Just as energy companies have devoted more effort to learning more about the behaviors, needs, and value of their customers and prospects, payers will need to follow suit in order to remain competitive.
The power of choice
Going forward, consumers will be in the driver's seat when it comes to making choices on healthcare insurance. For example, the emergence of health insurance exchanges may enable consumers and small businesses to shop for healthcare insurance under a more competitive setting than what's currently available to them. According to the Urban Institute, U.S. families could save an estimated $2,300 each by 2014 if they were to shop for healthcare insurance through one of these exchanges.
Consequently, payers will need to become more flexible in meeting the wide-ranging needs of customers. This includes providing the manner of support that different types of customers require based on their needs and channel preferences.
That's going to require a sea change in the approach that most payers currently take towards delivering customer service. At the moment, for example, most payers only make themselves available to answer customer questions during normal business hours. That's not a convenient time for most people. Customers don't want to discuss personal and sensitive medical issues over the phone while they're at work within earshot of their colleagues. Payers need to provide customers with a variety of channels and time options that offer greater privacy.
Understanding customer motivations to improve business results
Segmenting customers by their needs, motivations, and value offers multiple benefits to healthcare organizations. For instance, the use of needs analysis techniques can help payers to better determine the motivations behind customer actions as well as the needs for different customer segments at different lifecycle stages. This may include a father who feels compelled to take care of his family and seeks peace of mind when it comes to receiving emergency care services. The healthcare needs likely differ for a young adult who is less concerned with her health but is in tune with fitness and wellness. Depending on those motivations and needs, payers can offer different products and services to various customer segments to help expand their product portfolios. Taking these types of steps can help payers to boost revenues by tailoring products and support to specific customer segments.
Analyzing and acting on customer needs and behaviors extends beyond customer value. In the U.S., rising healthcare costs, which now represent about $1 out of every $5 in the economy, are unsustainable at their current pace. Payers have an opportunity to promote fitness and wellness to their customers and provide incentives for healthier lifestyles (e.g., discounts on gym memberships). In turn, healthier customers can help insurance providers to lower their costs via preventive care.
An Rx for customer centricity
In order for payers to become customer focused, they'll need to overcome a number of organizational and process challenges.
For years, the internal culture within many healthcare insurance companies has been akin to how utility companies once operated. The thinking has been, "This is the way we do things and if you don't like it, find health insurance somewhere else." Fortunately, that mind-set is beginning to change. Many healthcare organizations' executive teams recognize the trend toward increased competition and how their companies will need to become more customer-centric.
Changing the mind-set begins with senior management communicating frequently to staff about the importance of customer centricity from a business and operational standpoint. In order to make this message resonate, executives can offer incentives to help employees to become more customer-centric, such as bonuses and compensation that's tied to customer satisfaction or customer experience ratings.
Most payers already have a great deal of customer information they can use gathered from various interactions with customers throughout a multitude of channels, including voice, IVR, email, and chat. Behavioral and value segmentation can also be conducted from existing customer data (e.g., customer revenues, cost to serve customers, number and type of claims) to help companies segment customers by value and behavior. This information can ultimately help payers to guide their least profitable customers to less expensive support channels, such as online self-service and IVR.
In time, physicians and hospitals will also need to devote more energy to understanding customers/patients better. Most patients are currently referred to physicians and hospitals through a healthcare payer, whether they're in network or out of network. But how patients go about selecting physicians and hospitals will change as consumers prompt providers to be more results-oriented). Consumers will want to be admitted to hospitals and referred to physicians that offer the best results. As healthcare reform continues to unravel, customers eventually will have greater choice over which hospitals, clinics, or physician groups to use. This means practitioners will also need to better understand the needs and motivations of customers as the healthcare industry becomes increasingly more competitive.
In the meantime, the onus is on payers to become more customer-centric. Those companies that fail to recognize the winds of change will find themselves blown off course.
About the Author: Dietrich Chen is a Director at Peppers & Rogers Group and an adjunct professor at the University of Miami. Contact him at dietrich.chen@peppersandrogersgroup.com.