The landscape of health and social care is not fit for purpose, according to a substantive new report by The Geneva Association.
Demographic and epidemiological shifts have made age-related and chronic illness a large part of healthcare expenditure, The Geneva Association says. Episodic hospital and speciality care dominate in most health systems. Yet the shifts in consumer needs warrant a greater convergence of all levels of health and social care to improve consumer experience, health outcomes and cost inflation.
Unlike traditional care approaches, New Care Models (NCMs) seek to better coordinate these three elements, the so- called ‘the triple aim’. This report highlights how health and life insurers can adopt NCMs to influence care at all life stages seamlessly and to keep cost in check.
NCMs are driven by three major global trends:
- Shifting disease patterns caused by lifestyle and ageing resulting in an increase in the number of people living with multiple comorbidities and long-term care (LTC) needs, some of which are further exacerbated by social inequality.
- The rise in the cost of care resulting in unsustainably high premiums and high- deductible plans and catastrophic costs for consumers.
- Increased pressure on public finances, with many policymakers now looking at private-sector collaborations.
By moving away from being a passive claims processor to becoming a ‘strategic payer’, the Geneva Association suggests that insurers can correct the common misalignments found between financial flows and provider incentives. Such contracting and payment models reward value over volume by balancing care between costly hospitals and speciality clinics and less costly primary/community-based settings.
The Geneva Association also outlines five purchasing approaches, each with its strengths, weaknesses and considerations regarding potential to improve health outcomes and consumer attractiveness, encourage rational utilisation and contain costs:
- The traditional approach to procurement where insurers work with a constellation of providers to form a network through multiple contracts.
- The accountable care approach where a group of multidisciplinary providers takes on shared responsibility for a defined population using different governance and contractual models with payers.
- The fully integrated model where the insurer and providers operate under a single governance structure and a global budget.
- The direct-to-provider approach where providers offer a package of services directly to consumers on a subscription basis, often bypassing primary insurers – notable for its implications for insurance sales and coverage.
- The consumer-directed payments approach where policyholders directly buy services they need based on a personal budget.
It suggests that improving customer experience is the most common rationale for implementing NCMs, closely followed by the need to evolve business models to tackle cost inflation. Life insurers in particular show a strong pivot towards health solutions to address mortality in risk-based products and the high cost of comorbidities in long-term savings products.
According to the Geneva Association, NCMs have a strong predisposition towards service innovation, i.e. expanding the range and scope of service. Few NCMs match this with the use of new governance and contracting models as well as value-based payments in order to make the most of the new services offered.
While it is too early to assess the impact of such innovations, there are promising indications of improving customer experience and reducing the need for costly care, mirroring those seen in the broader literature.
While overall buy-in for NCMs by consumers and providers is favourable, there is a need to:
- balance consumer preference for choice with service standardisation to make NCMs competitive; and
- dedicate time to improving provider understanding of NCM objectives and associated benefits.
Care Models: How insurers can rise to the challenge of older and sicker societies
The Geneva Association suggests that new market opportunities afforded by NCMs include the use of data to improve existing products, the ability to package and sell new competencies enabled by NCMs, improving risk thresholds through better targeting to previous untapped groups and diversifying from risk-based products to service-based products.
Marketing and distribution are the most commonly cited functions in the insurance value chain influenced by NCMs, helping to open up untapped customer segments. However, the sophistication of NCMs is still unsupported by traditional distribution channels, which remain transactional. As such, many consumers may still not fully realise the benefits of NCMs throughout their life course.
Four areas are considered vital for NCM scalability:
1) conducive regulatory environments, with a focus on licensing rules for life insurers, data protection and provider market reform;
2) collecting, storing and analysing data to allow targeting and monitoring of NCMs in real time;
3) leadership and cultures that enable companies to take risks and allow longer-term horizons for NCMs to mature; and
4) a concurrent focus on key supply-side aspects, such as provider management and payment reforms, to ensure NCMs do not fall short in delivering the desired outcomes.
Based on these findings, this report proposes three actions:
- Insurers need to enhance the value proposition of NCMs. While consumer attitudes will be central to shaping future services, the value proposition of NCMs will need to go beyond the simplistic notions of choice and convenience. The current narrative should evolve to reflect ‘the triple aim’ (i.e. improve consumer experience and outcomes and address cost inflation) to promote its value to consumers, distributors, providers and internally within companies.
- Insurers need to become a strategic orchestrator of services. They will need to shift away from just paying claims and start assuming the role of a ‘strategic payer’ and ensure a favourable supply-side condition that can fulfil the promise of NCMs made to policyholders. This entails stratifying the risks to understand the pressure points; building the foundations to start sharing risks with providers; shifting towards value-based payment; and planning the journey incrementally using a maturity model.
- Insurers need to capture the opportunities afforded by the convergence of life and health products and solutions. NCMs provide an opportunity to create a seamless cradle-to-grave system. This has already been achieved in parts of Asia. As both life and health insurance solutions try to expand by becoming attractive to new market segments and ensuring enough cross-subsidisation in their risk pools, it paves the way for a joint health-life service proposition.
This is an abridged and modified version of the report. To access the full report by The Geneva Association click here.