In
a recent post, we examined some of the key drivers of margin compression in
this new era of health care reform:
- Increased taxes
- Minimum loss ratio
- Increased competition
- Greater price transparency
- Standard benefit requirements
These
factors, combined with the substantial costs associated with member churn, are
driving a business truism within the health care industry: to effectively
battle margin compression, health plans must strive to be present in multiple
markets, and they should consider how ancillary benefits can be used to
maintain and grow their business.
Of
course, our industry is not the first to face game-changing legislation similar
to the ACA. Following the attacks of September 11, 2001, airlines grappled both
with stricter regulations that were costly to implement and shrinking demand as
travelers responded to the tragedy.
Around
the same time, websites like Expedia and Orbitz emerged as one of the primary
sources to purchase airline tickets. These sites facilitated greater price
comparison and increased price transparency, much like we are seeing today
within the health care marketplace. Clearly, this kind of comparative
shopping can significantly impact consumer behavior and choice.
The
airlines that most successfully navigated these challenges attracted consumers
with competitive base pricing and used optional amenity costs - such as added
leg room, luggage fees, and food upcharges- to bring in additional revenue.
Following a similar model, health plans can use ancillary benefits that appeal
to consumers who are interested in purchasing supplemental care, thus
preserving a significant portion of their customer base and the associated
revenue stream.
Expanding
into multiple markets to offset the effects of member churn can be similarly
powerful in the fight against margin compression. Offloading members is costly
and the movement of members between Medicaid and health exchanges can threaten
the overall stability of a health plan by compromising its ability to predict
its financial risk. Health plans that have a presence in multiple markets can
preempt the negative impact of member churn and better preserve and protect
their bottom line.
As
is often the case with landmark legislation that impacts such a fundamental
part of our daily lives, the Affordable Care Act has brought vast improvements
and interesting challenges to the healthcare industry. Health plans have a
unique opportunity during this watershed time to explore how ancillary benefits
and market expansion can grow and protect their business and membership
base.
On the Frontlines of Medical-Dental Integration
Wednesday, January 28
1:30 p.m. CT
Register at www.dentaquest.com/medical-dental-integration/webinar.