Rising out-of-pocket medical costs

Healthcare costs today are increasing faster than income growth.

Many members believe their health insurance offers less value than it did ten years ago due to a 212% increase in health insurance deductibles over the past ten years (and other out-of-pocket costs continue to rise). More than 90 million adults in the US alone will be above the age of 64 by 2050. By some estimates, the number of people with three or more chronic diseases will rise from 30.8 million in 2015 to 83.4 million in 2030. Therefore, value-based care models will significantly contribute to the quality of care while keeping patients at the center of the ecosystem. By taking an integrated ecosystem approach, payers can connect all the people, products, and services to promote health and wellness for one and all.

The role of the payer in the future will shift from reactive to proactive, focusing on innovation instead of optimization. They will transition from inflexible provider contract arrangements toward price transparency and risk-based contracting (value-based care). The earlier fragmented patient experiences will become streamlined and personalized with proactive engagements. The workforce will transition from a project-based to a product-centric mindset.

Siloed and legacy platforms will transition toward a modular architecture, which will leverage micro-services, API-based platforms, and a cloud-enabled delivery ecosystem. Payers will leverage the power of social determinants of health (SDOH), population health, interoperability (FHIR), data, analytics, and insights powered by AI and ML, among others, to develop connected care ecosystems enabling personalized product offerings.

Moving toward a VBC model

There is a need to shift from fee-for-service (FFS) to value-based care (VBC).

Healthcare has always been a highly regulated industry. However, increasing regulations to bring more transparency, accountability, and interoperability standards to enable seamless exchange of data has gained momentum in the past few years. Government programs are becoming increasingly value-based, forcing the shift toward VBC.

While the term VBC has been around for several years, however, the transition has been slow due to several factors. What has suddenly changed now might be a question in everyone’s mind.

The most potent catalyst for change is the consumer-centric healthcare ecosystem. The patient is now at the core of the ecosystem. With more financial responsibility shifting toward the member and regulations demanding more transparency (such as the price transparency rules), the accelerated shift toward VBC is now inevitable. For example, the Centers for Medicare and Medicaid Services (CMS) wants to tie 100% of reimbursements to value-based contracts by 2025.

The increasing regulations have played a positive role in accelerating this shift. Concepts such as interoperability (FHIR standards) bridge data exchange concerns across ecosystem players and have a positive impact in narrowing some gaps essential to drive the transformation toward VBC.

The consumer-centric healthcare ecosystem requires payers to deeply understand member behaviors by investing in human-centered design techniques, key personas, and care journeys for members and caregivers. Payers can also invest in health and wellness reward programs (focusing more on wellness than illness) by leveraging data, insights, and analytics to make more informed business decisions.

By leveraging insights derived from the social determinants of health (SDoH), population health, wearables, and member health records, payers can create longitudinal patient journeys and care pathways that are more personalized and relevant and align with outcome-based business models enabled by VBC.

Technologies such as generative AI and digital twin help payers create consumer-centric health products and services like personalized health insurance plans. These products will become the model of the future where healthcare becomes more personalized, and models such as VBC, which drives individual outcomes and accountability, take center stage.

Payers at the bleeding edge and leading the way will become future leaders in this industry and more relevant to the future of healthcare.

A new era of value-based care

Value-based payment agreements between payers and providers must be implemented.

With the help of value-based payment agreements, payers can accelerate the adoption of payment models such as capitation, which have been long ignored in the traditional FFS models. Complex payment arrangements that enable risk-sharing and improved collaboration for payers and providers will become the future models as accountability and transparency take center stage.

Newer VBC models require payers with legacy systems to invest in technology modernization and accelerate the transition toward VBC models. Advancing value-based payments at the intersection of providers’ revenue cycle management and payers’ core processing systems to improve business operations will be pivotal in this journey.

Healthcare payers are redefining their role in care delivery to deliver higher-value care to members. We list the key areas that payers need to focus on:

Encourage scale, capability, and innovation acquisition

Payers have incredible access to members and their health data within the boundaries of consent and privacy. They are strategically positioned to orchestrate players within the health and wellness ecosystem. The payer industry has seen vertical integrations through acquisitions of clinics, home-based care providers, pharmacies, and others that enable them to provide an end-to-end frictionless member experience. Through these acquisitions and integrations, payers can offer new care benefits such as value-based, accessible, affordable, personalized, and preventative care.

Adapt and enhance digital therapeutics

In-person therapy has several limitations, especially around quicker diagnosis, tracking reactions, and enforcing compliance. Treatment using digital technologies or digital therapeutics to augment in-person treatment considerably has resulted in better outcomes and drug compliance. Payers aim to detect, stop or slow down disease progression using digital interventions, as this would directly impact the overall member costs. In addition, payers have exhibited renewed focus on improving access to care and medication adherence and are providing tailored plans for members. They have also started to offer wearables to customers.