How Small Health Insurers Can Compete With Their Larger Peers

There are hundreds of health insurance companies in the US, though the top 10 health insurers earn as much as 60% of the revenue. Plus, consolidation has enabled larger insurers to quickly grow their revenue and their reach. Surviving as a smaller insurer is difficult.

To help, here are four ways small health insurers can compete, grow market share and thrive in a market dominated by large players:

Invest in Technology

Anyone who tried to hail a taxi to get from one place to another quickly in a busy city knew there was a better way. It wasn’t until Uber and Lyft turned a cumbersome, manual process into a technology-based, simple process that everyone realized how horrible the old taxi-hailing system really was.

Health insurers of the past were known for their cumbersome, manual, paper-based processes. But to compete in the modern insurance environment you need to invest in technology to streamline processes, save time and money and ultimately deliver a better member experience.

There are a number of areas to implement technology. For example, those areas include AI use cases, more engaging chatbots, other automated member service solutions, core admin system replacements, and better technology integrations to improve provider relationships. But it starts with identifying which processes cause the most friction in the business, putting together a plan to add technology and/or automation to the process, and prioritizing each of those enhancements.

Embrace a Culture of Change

What makes large employers most vulnerable? Sometimes it’s their size and entrenched thought. Implementing significant change in a large organization can be difficult, time-consuming, and prone to failure.

Being nimble matters. A common example: Netflix started by mailing DVDs to consumers. Their major competitor, Blockbuster, was a large behemoth with video rental stores across the US. They even sponsored a college bowl game.

But Netflix saw the future of video distribution was online, not through a physical store or even through the mail. Netflix pivoted to web-based video delivery better than their larger competitor because their culture embraced change and continual improvement.

What does it mean to embrace a culture of change? Here are ways to continually succeed in a changing environment:

  1. Have a plan. Change for change’s sake will alienate your employees. But a strategic, well-communicated plan with timelines and a clear “Why?” behind the plan will enthuse them.
  2. Communicate. Communication is the key to ensuring your employees know what and why you’re improving processes and technology.
  3. Give Employees Autonomy. Do you know where a lot of your greatest changes will originate? With your team. So give them autonomy to pitch ideas and try pilots that will deliver organizational change.
  4. Hold People Accountable. If everyone is accountable, no one is accountable. For every initiative, ensure there is a clear owner who will be held accountable for results.
  5. Prioritize. Like accountability, if everything is a priority, nothing is a priority. Health insurers should prioritize based on impact and required resources to get more bang for the buck.

Be Member-centric

Airlines are rated in a number of ways. Embry-Riddle publishes an airline quality rating each year that weighs various attributes — like on-time performance, denied boardings, mishandled baggage, and customer complaints. Other surveys include in-flight entertainment and the reservation process in their rankings. Some airlines — like United — focused on on-time performance to improve their ranking while others — like Southwest — invested in their fleet to make the in-flight experience better.

There are a number of investments a health insurer can make to gain a competitive advantage, but ultimately investing in the member experience can impact your business the most. That investment could take the form of tools to help the member better take advantage of their insurance coverage, it could be value-added wellness tools and resources or it could be enhancing the quality of care members receive. Simplifying — and improving — the member experience can help differentiate an insurer.

Be Where Others Aren’t

Wal-Mart’s international expansion is a good study of how competition influences strategic decisions. The company chose to expand outside the US by creating a presence in the Americas over Europe and Asia. Europe had incumbent markets that Wal-Mart determined would be hard to break into and Asia was culturally much different.

Wal-Mart began by entering Canada through acquisition because the market was mature. In Mexico, they took a different route, forming a 50-50 joint venture with Mexico’s largest retailer so they could lean on that business’s operational knowledge. Next came Brazil and Argentina. For Brazil, Wal-Mart learned from their foray in Mexico and again established a joint venture, but this time took a 60-40 controlling stake. Finally, in Argentina, they chose to create a wholly-owned subsidiary, learning from their experience in other Latin American companies, but also because, unlike other countries, Argentina only had two markets of similar size. So entering the market alone was easier given the limited competition and Wal-Mart’s acquired knowledge of Latin American markets.

Competition plays a role in determining which markets to attack, especially if you’re a smaller insurer. There are a number of regional insurers — Friday and Oscar — that have started in a specific region and gradually grew to other counties and states in the individual market. By analyzing opportunities with limited competition, you’ll be able to scale your organization and maximize membership and revenue growth.

Certifi’s health insurance premium billing and payment solutions help healthcare payers improve member satisfaction while reducing administrative costs.

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