Healthcare legislation has undoubtedly altered the regulatory landscape in ways that are not always beneficial to a private health insurer’s bottom line. But calling it a permanent drag would be an overstatement.
Players in the U.S. health insurance industry are expected to suffer from narrowed operating margins for the next few years. The operating environment has become so tough that some health plans, especially the smaller ones, may be forced to exit the market. A number of headwinds such as high regulatory compliance costs, increased taxes and fees, pricing pressure, rising medical costs, stiff competition and general marketplace uncertainty are faced by the players in the industry.
While the focus of this write-up is to put the spotlight on the headwinds facing the industry; an earlier write-up in this space had the opposite focus.
Challenges Facing the Industry:
Growing Consumer Power
Until the passing of the health reform act, the insurance companies had an upper hand in choosing whom to provide coverage and consumers (people receiving health care) had no active role in the decision-making process. But now the trend has changed. Consumers’ increased purchasing power and access to information to take health care decisions is one of the major threats to insurers.
Prior to reform, big insurers dominating large markets hardly ever bothered to provide consumers with even basic information, such as the performance of health insurance policies, procedures to claim, the size of the provider network and cancellation processes. Now customers demand transparency, value and convenience, leaving insurers grappling for innovative ways to satisfy these unmet needs. The new mission, however, will not be easy to execute.