BlueCross BlueShield of Tennessee recently announced it would be opening its first bricks-and-mortar retail store, directly helping individuals and families evaluate BlueCross BlueShield plans. The store will be in Nashville, and is scheduled to open later this year. This move is a great illustration of how health reform’s changing dynamics are causing industry participants to move into new businesses. As a health care consumer, it’s helpful to understand the underlying dynamics at work.
Industry dynamics before reform
Before reform, the result-getting activities and target customers of the various health care industry participants were fairly well defined.
Health insurance companies: As a health insurance company, your job was to evaluate people’s health risk and charge more in premiums than you expected to pay out in claims. You needed more healthy customers than sick customers, as the viability of your organization depended on paying less in claims than you got in premiums.
Medical providers: Your job as a medical provider was to do whatever it took to treat people’s illnesses. You needed patients who were sick or had health issues, as the viability of your organization depended on treating them and getting paid reimbursements by insurance companies and the government.
Brokers/advisers: Your job as an insurance broker or adviser was to help people figure out how to plan for their health care. Whether or not a potential customer had health issues did not impact the viability of your organization; rather, it was the quality of your advice and service that was important.
Again, before reform, the lines separating these participants were fairly clear. Health insurance companies sold some policies directly and without a broker or adviser involved, but they generally only did so passively. Medical providers may have had some risk-sharing arrangements with insurance companies where the medical provider took a financial hit if patients had higher-than-expected claims, but those arrangements were the exception, not the rule.
New rules blur the lines
Health care reform’s new rules have created factors that are driving industry participants to either move into each other’s businesses or form closer partnerships with each other. Among the new factors: insurance companies can no longer evaluate people’s health status when issuing a policy; federal subsidies in the individual market often make individual coverage less expensive than group coverage; and government payments to medical providers will increasingly be based on quality, as well as quantity.
The first two factors have contributed to BlueCross BlueShield getting more active in promoting its individual products directly to individuals and families. Historically, BlueCross has not been so active in promoting its products, instead relying on its broker/adviser channel. This was an important channel for BlueCross, and going direct posed the risk of upsetting these broker partners.
As individual health insurance becomes increasingly important, however, brokers have to decide whether to adjust their business models to serve more individuals or exit the health industry altogether. BenefitsPro, a publication that serves the health benefits industry, recently reported that 49 percent of benefits brokers are considering taking the latter option and leaving the industry.
Now, if you’re BlueCross and you see that many of your broker partners are thinking about parting from the business, it only makes sense to be more active about promoting your own products directly. Furthermore, according to the Richard Wood Johnson Foundation’s “County Health Rankings,” Middle Tennessee is home to some of the healthiest counties in Tennessee. Since you’re not allowed to evaluate people’s health status when selling them a policy anymore, it makes sense that you’d put your first resources in actively promoting your products in the part of the state where people tend to be healthier.
This is just one example of how new health reform rules are creating new dynamics and blurring the historical lines that delineated our health care system. As a health care consumer, understanding these underlying dynamics can help navigate it all.
Alex Tolbert is the founder of Bernard Health, a company that provides non-commissioned, expert advice on health, Medicare and COBRA insurance and medical bill consulting.
Date: July 1, 2014