On June 25, in a 6-3 decision, the U.S. Supreme Court upheld a key portion of the Affordable Care Act, a significant overhaul of the American healthcare system that many see as an important legacy of Barack Obama’s presidency. The country’s highest court preserved crucial tax subsidies that support the act and threw out a legal suit that challenged its validity.
"The Affordable Care Act is here to stay," Obama said after the ruling.
Since Obama signed the statute into law in 2010, the ACA has transformed the health insurance industry, causing a fundamental shift in the way insurance is bought and sold. The law makes the industry more competitive by increasing the amount of choice available to the public. As a direct result of the law, there has been a 25 percent increase in the number of issuers offering health coverage in 2015, according to the Department of Health and Human Services. The research firm S&P Capital IQ projected that 90 percent of American workers will transfer their insurance to individual plans by 2020. Today, 91 percent of health insurance customers are able to choose from three or more competitors—up from 74 percent in 2014.
Perhaps more crucially, the ACA is forcing the industry to move away from its traditional business-to-business model towards a business-to-customer one. The Act empowers customers to choose from more insurance firms and to compare between more options. As a result, individual purchasers have become the most important new segment of customers for the industry. Even within traditional group benefit plans, individuals now have more autonomy than ever before.
This move towards a retail model increases the need to be more customer-centric—something that many insurance companies are not quite ready for. Here’s a look at some of the most urgent issues facing the industry.
Dismal levels of satisfaction
Health insurers consistently rank poorly in customer experience surveys, and things aren’t getting better. In fact, in the 2014 edition of the annual American Customer Satisfaction Index survey, the industry saw dismal marks across several measures of customer satisfaction.
The report noted that “there is no area where health insurance companies offer an outstanding experience.” Compared to last year, the public gave the industry lower marks for key services, including access to primary care doctors, claim processing and coverage of standard medical services. The industry scored the lowest in call center operations.
Now that the American public has more health insurance options, increasing customer satisfaction is critical in order to stand out from the competition. Companies need to better understand the pain points in their customer experience and solve them quickly. By understanding the needs and wants of their customers, they’ll be able to gain context and address the issues more effectively. In an industry where people are demanding better experience, companies that improve customer satisfaction are much more likely to increase retention, drive new customer acquisition and gain a long-term competitive advantage.
Lagging in mobile innovation
A 2014 PwC Health Research Institute report shows high customer demand for better apps from insurance companies. The report found that 73.1 percent of customers want apps from insurers that offer alerts and reminders. A majority of customers also want apps to offer access to their personal health information, to disease information and to a specialist search. Most apps from health insurance firms don’t offer these features yet.
Photo credit: PwC Health Research Institute
“Smartly designed mobile applications can provide a competitive edge, especially for younger consumers,” the report says. “But to see the biggest return on investment, insurers should think about conducting targeted market analysis, assessing the value of popular/high-use apps.”
At this point, insurance customers want mobile apps that do everything. The challenge for insurance firms is to identify the features that will drive the most improvement in customer satisfaction and create unique points of differentiation.
Lack of customer insight
In the wholesale, B2B model, insurers could afford not to engage with customers directly. As a result, engagement was seen as a sporadic activity: something you’d do on an ad hoc basis, perhaps once a year.
Today, customer engagement needs to be a priority for insurers. Unfortunately, many companies haven’t made that shift in mindset yet. Many insurance firms still rely heavily on traditional and expensive ways of bringing the voice of customers into the decision making process. These approaches, which include ad hoc surveys and focus groups, can’t provide the quality and cadence of feedback required to make smarter business decisions.
Health insurers need to put the customer first or risk becoming irrelevant. (CLICK TO TWEET)
As they develop a more consumer focused approach, insurers need the ability to follow up on what you’ve learned. Today, after insurers get results back from their survey or focus group vendors, they are often left scratching their heads or wanting to understand why people answered the way they did, but this process can be time consuming, expensive, or even impossible.
Now that health insurance has become a more competitive space, the approach to customer intelligence needs to be much more agile. Engagement should be done on a more consistent basis, so that insurers can continuously learn from the insight they’re getting. More importantly, health plans must start seeing engagement as a way to strengthen their relationship with customers. Insurers should look for ways to engage their customers in a two-way dialogue and show they are actively listening to feedback, and taking action.
Healthcare reform is forcing health insurers to rethink every aspect of their business. Many companies are scrambling to transform their approach to marketing, communications, innovation and delivery. In this era of abundant choices, winning requires a customer-centric lens in all aspects of the business. Insurers need to put the customer first or risk becoming irrelevant.