Health insurers are reimagining their roles. Each of the global industry executives we interviewed recently expressed a common ambition: to improve their value proposition by moving beyond reimbursement. They are striving to evolve into orchestrators of health care to improve outcomes, customer experience, and growth.
This transformation requires expansion along the health care value chain—from prevention and screening to coordinating care and treatment. A growing number of payers are achieving vertical depth, adding company-owned or closely aligned clinics and other physical and digital assets to their offerings.
Insurers are in a unique position to orchestrate end-to-end care. They have trusted relationships with members, have rich data sets, can aggregate care services, and wield immense purchasing power. To succeed, however, insurers must clearly define their strategic goals, design the right business models, navigate regulatory boundaries, and build an ecosystem for delivering services.
Insurers must clearly define their strategic goals, design the right business models, navigate regulatory boundaries, and build an ecosystem for delivering services.
To understand the forces driving this trend, we interviewed 15 senior executives from leading global health insurers that have begun expanding beyond reimbursement. The sample included organizations with various degrees of vertical integration in multiple markets, primarily in Europe. We asked how they define and are implementing value-chain expansion, key strategic considerations, and lessons they have learned. (The slideshow below offers summary highlights based on our interviews.)
That research enabled us to identify three core strategic objectives that are driving insurers’ value-chain expansion strategies.
Enhance the value proposition. Each company we interviewed cited this goal. Executives are seeking to leverage excellent service and integrated health offerings to engage and retain customers.
Optimize claims. Around half of executives said their companies are strengthening cost controls and enhancing efficiency by streamlining care delivery.
Diversify revenue. Around one-quarter of executives said they are looking to unlock new revenue beyond insurance.
Deciding Where to Play
To achieve these objectives, insurers must choose which business segments of the health-care value chain to target. Value can be unlocked in the following areas:
- Prevention. Offer prevention initiatives, vaccines, and lifestyle support to promote wellness.
- Prediction. Offer early screening and monitoring of risk factors and behavioral changes.
- Detection. Offer laboratory and screening services to identify health issues early and guide care with diagnostics, telemedicine, and other services.
- Treatment. Expand into primary care, pharmacies, and hospitals.
- Rehabilitation and Management. Offer rehabilitation, long-term care, and palliative services that support recovery, improve quality of life, and prevent complications.
- Claims and Policy Management. Improve claims management.
A growing number of insurers have already begun expanding across the care value chain, using a wide variety of approaches.
For example,AXA is positioning itself as an “online dermatologist” by offering digital services that support early assessment of skin changes, reducing the need for in-person visits and providing fast feedback. And Humana is partnering with CenterWell in the “primary care orchestrator” space to strengthen coordination and improve the patient experience by integrating primary, home, and pharmacy care with wellness and care-management programs.
AXA is positioning itself as an “online dermatologist” by offering digital services that support early assessment of skin changes, reducing the need for in-person visits.
Similarly, Sanitas Spain is acting as a “care network scaler.” It is integrating health insurance and health care services by combining digital health platforms with owned hospitals, clinics, and other facilities. Meanwhile, Vitality is encouraging healthy behavior as a “prevention champion.” It offers personalized wellness programs and digital engagement tools that reinforce exercise, good eating, and regular checkups. Another insurer, Interamerican, is transforming into an “integrated health care system” by coordinating end-to-end care delivery and leveraging data to optimize cost, customer experience, and health outcomes through owned assets and digital touchpoints.
Design Choices Shaping How Payers Expand
To create such value, payers need to make some strategic design decisions. Our research revealed a number of questions insurers must address before expanding:
- The Service Delivery Model. Does the payer want to pursue a digital-only strategy, to invest in brick-and-mortar care delivery facilities such as clinics and hospitals, or opt for a hybrid approach?
- Member Steerage. Should patients be guided through information and transparency, financial incentives, or active engagement?
- Access and Exclusivity of Services. Should services be available only to members or also through select external partners or multiple payers?
- Degree of Business Integration. Should health care businesses be separate entities, independent but coordinated, or integrated into one business?
- Ownership Model. Should the structure be a contractual alliance, equity partnership, or majority or full ownership by the insurer?
Generally, the insurer’s primary strategic goals are what determine its optimal business model design. To enhance their value proposition, for example, payers should consider a hybrid service delivery model that combines digital and brick-and-mortar offerings. They are likely to achieve the best results by focusing on information and transparency to improve member steerage, offering selective external access, keeping businesses separate but coordinated, and having a contractual alliance ownership model.
If the goal is to optimize claims, payers should consider a hybrid service delivery model and keep external access selective––while actively navigating member steerage, integrating the businesses, and moving toward equity partnerships or majority ownership.
To diversify revenues, payers should focus on a brick-and-mortar delivery model and active patient navigation, while providing access to multiple payers, operating separate but coordinated businesses, and considering full ownership of assets.
To diversify revenues, payers should focus on a brick-and-mortar delivery model and active patient navigation, while providing access to multiple payers.
Regulatory Systems Influence the Strategic Options
Apart from design, an important consideration when it comes to service expansion are health regulations, which often vary by country and region. We assessed the regulatory environments in more than 20 countries globally to understand how they impact payers’ options. These environments fall into three basic categories.
Regulated Systems with Steering Options. These systems adhere to strict rules regarding ownership of health care assets. But digital health laws often allow insurers to selectively contract with providers. Insurers seeking to enhance their value propositions should consider digital partnerships and hybrid services offered through alliances with providers. Those seeking to optimize claims can improve navigation of the patient journey and contract with preferred health care service providers.
Permissive and Market-Driven Systems. Payers can form partnerships with providers and own assets such as clinics and pharmacies and access clinical data under clear governance. Insurers can diversify their revenue by expanding into health care delivery as a commercial unit and enhance their value propositions with integrated offerings. They can optimize claims through integrated care pathways and better alignment with providers.
Partially Liberalized Systems. Insurers may diversify their revenue into high-margin segments by owning selective care providers or through joint ventures. They can optimize claims through targeted services and partnerships with providers and diversify through selective ownership or joint ventures in high-margin segments.
Executing Value Chain Expansion
Our research identified several key success factors that distinguish leading health care value creators. They enhance their value propositions by leveraging customer trust and addressing unmet needs. They optimize claims by resolving fee-for-service conflicts and unlocking synergies through integrated data. And they diversify revenue by building the management capabilities of providers and committing to long-term value-chain expansion.
Implementing a successful value-chain expansion strategy requires a structured, phased approach built around the following steps:
- Prepare. Define the strategic intent and ambition, whether it be enhancing the value proposition, optimizing claims, or diversifying revenues. Map the regulatory boundaries that define what’s feasible in the target market and mobilize a dedicated, cross-functional team that can turn ambition into a workable concept.
- Conceptualize. Identify and prioritize high-potential opportunities along the value chain. Make design choices based on the available options, and analyze the business case by weighing economic upsides against capital requirements.
- Implement. Launch new business initiatives in strategically selected areas along the health-care value chain that can have a measurable impact. Track performance against clear KPIs, refine the approach based on what works, and scale up successful business models in specific markets, services, and segments.
Define the strategic intent and ambition, whether it be enhancing the value proposition, optimizing claims, or diversifying revenues. Map the regulatory boundaries that define what’s feasible in the target market.
For today’s health insurers, the race is on to branch out from their core businesses of reimbursing patients’ claims and become orchestrators of care. Lucrative opportunities to unlock growth still abound across the health-care value chain. The winners will be insurers with the right business model for their target markets and segments and the ability to implement robust execution strategies to capture the opportunities.
