Digital Health Ecosystem Series, Part 2: Enabling Incumbents: Top 4 Reasons for Health Insurers to Build Digital Health Ecosystems

Digital health ecosystems are disrupting the way insurers engage and deliver services to customers. Those willing to create or participate in an ecosystem will unlock value for all stakeholders. There are four main reasons why insurers are building digital health ecosystems. These include reducing claims cost, new member acquisitions and retention, attract new clients, and increase process efficiency. Join us for this digital health ecosystem series as we define, evaluate, and explore the implementation of digital health ecosystems.

Digital health ecosystems were being used by insurers before COVID-19 emerged, but their importance increased significantly over the last 24 months. Ecosystems such as Point Solutions Management, Digital Health Formulary, and Find Care all expanded their service offerings during this time to cater to the growing healthcare demands of consumers. (We invite you to read part 1: “Enabling incumbents: building digital health ecosystems to unlock value for insurers” of our Digital Health Ecosystem Series)

These platforms have seen the increased value of their ecosystems in creating better individual health outcomes, helping consumers navigate the crowded digital health solutions marketplace, and improving the affordability of digital tools. As stakeholders become aware of the opportunities digital health provides, we will continue to see these ecosystems expand.

The factors driving a shift towards digital health ecosystems were heavily catalyzed by the COVID-19 pandemic. These include growing consumer expectations, changing consumer behavior, advancements in technology capabilities, and expanding healthcare services. These factors caused insurers to explore ecosystem models, and they have already caused a massive disruption within the industry.

Insurers need to create or participate in a consumer-centric, digitally enabled, and fully integrated digital health ecosystem to adapt to the changing landscape. There are four main reasons why insurers are building digital health ecosystems:

Reduce claim cost

Cost containment is one of the most important factors when considering an ecosystem approach, as insurers ultimately want to reduce the frequency and size of their claims.

Studies from the top digital health providers such as Livongo, Omada, and Hinge Health have shown to be highly effective in chronic diseases such as diabetes and musculoskeletal disorders. They have seen increased member engagement, reduction in lost workdays, and cost-saving through reduced claims.

A study from the Journal of Medical Economics conducted on the efficacy of Livongo’s diabetes program indicated that after one year, members saw a 21.9% decrease in medical spending based on claims data, a savings of $88 per member per month. Including a 10.7% reduction in diabetes-based spending and a 24.6% reduction in spending on office visits.

Cost reduction differs across solutions and therapeutic areas, but there is a direct or indirect net positive effect on costs. The reduction in cost is as a result of utilizing lower-cost virtual care as a substitute for visits to doctor’s offices, emergency rooms, and urgent care clinics.

Improve new member acquisition/retention

Insurance startups like Oscar Health have built their business around a strategy that leverages technology and data to deliver a better customer experience. They have focused on the following areas, which have significantly increase their member growth year-on-year:

  • Engage members in their health.
  • Build an integrated virtual care platform.
  • Use technology and data science to guide members towards more affordable, higher-value care.
  • Use technology to rebuild the insurance stack, delivering scale and transparency.
  • Design more efficient networks and build tools to simplify the provider experience.

Oscar reported 542,220 total members in the first quarter compared to 420,552 in the prior-year quarter, for growth of 29%. Oscars’ approach to engaging members in their health and directing them toward affordable, higher-value care has proven effective, as their Net Promoter Score is three times higher than the average for health insurance companies.

Attract new clients (employer market)

Digital health ecosystems are already becoming a must-have for employers, particularly in the United States. Due to a growing call from employees for digital health solutions such as apps to find healthcare services, telemedicine, and wearables to help them better manage their well-being.

Employers are becoming more cognizant of this, as a recent global survey indicated that more than a quarter of employees would be less likely to move to another company if their employers promote or sponsor digital health solutions.

The survey also highlighted that 68 percent of US employers plan to invest in more digital health solutions over the next five years, as new technologies would help employers reduce their health benefits costs while satisfying employees’ desire for quality, convenient and affordable healthcare.

To keep pace with this growing demand, particularly as the global workforce slowly returns to the office, insurers will have to build ecosystems that cater to this need from the employer market. Insurers who embrace digital transformation and adopt a digital health ecosystem may attract new clients from this market.

Increase process efficiency

When leveraged correctly, technologies associated with a digital health ecosystem empower customers with faster access and efficient services. The ecosystem approach improves the customer experience by delivering an integrated, end-to-end offering that provides greater access and efficiency.

The digital health ecosystem benefits insurers and their customers by optimizing their operations, streamlining the customer experience, and providing a platform that delivers end-to-end integration.

The ecosystem model allows for simplified plan selection, access to digital tools, information access, real-time billing, automation of claims, resulting in better scalability.

In summary, ecosystems provide insurers the opportunity to engage customers, fully automate insurance engines, strengthen partnerships with providers, and focus on better healthcare outcomes.

Insurers willing to create or participate in digital health ecosystems have the chance to drive immense value by helping to build their core business and expand into new products and services. Stay tuned as the next post will address how insurers create these ecosystems and how we help.

Research2Guidance has done extensive research and projects within the health insurance industry. We understand the challenges and opportunities that accompany the digital health ecosystem model, as we hope to help you unlock its value.

Get in touch if you want to learn more about building digital health ecosystems and how our team can assist you.

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