The problems for payors trying to move into provision
A panel of experts at HBI 2018 discussed the barriers to a deepening of the payor-provider relationship. Otto Bittlerli, Chairman of Swiss health insurer Sanitas; Sneh Khemka, President Population Health for global insurer Aetna International; and Andy Fischer, CEO of Swiss-based telemedicine platform Medgate. What, according to them, is standing in the way of a fully integrated payor-provider landscape? And what is the future of the health insurance industry more generally?
Regulatory framework
Sneh Khemka, speaking about the US but true of most developed markets: “These transactions will be mostly dictated by what the regulator allows. They don’t like insurers owning providers, and that vertical integration is usually regulated against. Sometimes you can have isolated owning of a provider. I see the opportunities there in primary care.”
Otto Bitterli says that Sanitas’ approach to moving into provision over the next few years will be through partnerships rather than M&A. “In Switzerland, culturally we are not quite at the point at which an insurer can buy a provider. Because then people say it is no longer medicine, it is cost control. So we have this image problem.”
Figuring out a sensible business model
Bittlerli adds that getting the two sides to work together in a way that is mutually beneficial is still problematic: “With both sides trying to maximise their money, it’s difficult to convince the two sides to come together in a way that is mutually beneficial. The finance system is not yet developed past the point of just maximising shareholder value rather than figuring out a long-term sensible business model around it [the integration of the two systems].”
Fischer: “As soon as you start operating the integrated care model, your profits will come from different angles. They might be on the insurance side because the provider starts to save costs. Whose profit is this now? Will it belong to the provider or to the insurer? Technically it’s a mix of both. If we continue to operate in these segmented structures we are going to fail.”
Resistance from both the medical profession and consumers, notably in developed markets
Bitterli highlights that doctors won’t change to a system favouring virtual advisors over physical appointments, which is what a lot of insurers and providers are opting for. But it’s not only the medical profession that is resistant to change especially in markets with an existing healthcare ecosystem.
Andy Fischer: “I do understand that patients do not want to experiment with their healthcare. Imagine your surgeon says: ‘I had a very good idea last night, I’m going to change my regular procedure to operate on you, you’ll be the first!’ I’m quite sure the patient will ask you to experiment on the guinea pig beforehand.”
He says the growth in these insurer-led telehealth models which merge payors and providers, such the JV between his group Medgate and Aetna in India, will come from emerging markets where pressure forces people to adapt. Where implemented in economies like Switzerland, he says it has been forced upon the consumer from above.
There is also an issue with professionals finding it difficult to swallow payor-provider integration, which often boils down to pride: “There is a business ego of existing organisations, that, as a provider organisation they think ‘I can’t be acquired by an insurer! They have been my enemies for years.’ And doctors in these organisations do not want to work for insurers, thinking that insurers are somehow bad people. When you look at it on a rational basis it doesn’t make sense: I’m quite sure that you can sort out contracts and asset deals that really work.”
Complexity
Sneh says that insurers have a problem with complexity which is preventing them making meaningful inroads into healthcare and health management. Using Amazon and Uber as examples of simplicity as a disruptor: “Health insurers are anything but simple. You get 30 pages of conditions about what is covered and co-pays, etc. Simplicity is something I would aspire to. Look at new insurers like Oscar and one in France [Alan] that just got funding. They’re saying: you buy an insurance policy from us we cover you for everything. No red tape, no small print. Can we get to that? That’s an aspiration.”
New platforms in health insurance and management have obviously taken note. US health insurance startup Oscar just raised US$165m from Google’s investment arm and others in a deal which values it at a reported US$3.2bn valuation. The group is looking to oust existing players by engaging consumers through a medical appointments booking and health management app. And French outfit Alan just raised US$23m in a Series A round of funding and plans to cover 100,000 people with its health plan within three years. Users can track all appointments, expenditure and reimbursement through an online platform. Chinese app Ping An, which is taking its telehealth app public, lets you cancel your insurance plan at any time within the first three weeks of sign-up.
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