"Where-to-compete" decisions for insurers

Where To Compete In A Post-Reform World

By Shubham Singhal, senior partner in McKinsey’s Detroit office
Health Affairs Blog, September 30, 2013 The power of “where-to-compete” decisions, particularly in an industry in as much flux as US health insurance, is enormous. Our analyses suggest that the bottom-line performance differential between a payor who selects a market-average portfolio across businesses and geographies and an identical payor who instead selects a top-quartile portfolio is likely to be almost twofold. Across industries, McKinsey research shows that the majority of the performance differential among corporations results from their alignment with “rising tide” markets rather than from share gain within less attractive markets. Furthermore, we have found that there are three “macro” approaches that can enable companies to thrive during major industry disruptions: refocus their portfolio on more attractive businesses, build one or two large new businesses, or radically transform their business model. The first two rely squarely on where-to-compete decisions. The last approach is not for the faint of heart. Thus, today’s payors must carefully choose which markets they want to concentrate their resources on to win. The choices made will be critical not only within the payors’ core health-plan business but also in adjacent areas within the healthcare value chain. *** Given the disruptive changes in the healthcare industry, payors that want to thrive over the next few years will need to develop the discipline to make and act on where-to-compete decisions. They will need insights into where growth and margin will be earned, the foresight to determine when inflections points in the market might happen, a clear view of their own competitive advantages and capabilities (which would give them the ability to win and earn a superior return), the fortitude to make tough resource-allocation decisions, and the agility to alter their course as the market shifts. Acquiring the needed discipline is challenging but necessary. The upside from getting where-to-compete decisions right is substantial enough to demand top management’s attention — and the downside is potentially fatal. http://healthaffairs.org/blog/2013/09/30/where-to-compete-in-a-post-reform-world/

Marketplace Plans Vary Widely In Costs, Within Counties And Across The Country

By Jordan Rau and Julie Appleby
Kaiser Health News, October 4, 2013 Consumers shopping in the new health insurance marketplaces will face a bewildering array of competing plans in some counties and sparse options in other places, with people in some areas of the country having to pay much more for the identical level of coverage than consumers elsewhere. Nationwide, 18 percent of counties have only one insurer offering plans and 33 percent of counties have only two insurers competing, the KHN analysis found. http://www.kaiserhealthnews.org/Stories/2013/October/04/Marketplace-plans-variation-counties-and-nation.aspx?utm_source=intop&utm_medium=email&utm_campaign=101013

Comment:

By Don McCanne, M.D. Private insurers are a totally different animal than public health coverage programs, and this “where-to-compete” industry advice typifies that difference. Public programs, such as Medicare, make every effort to deliver health care to those that need it. Private insurers make every effort to ensure the success of their business model. Mimicking Willie Sutton’s famous strategy to rob banks because that is where the money is, private insurers “carefully choose which markets they want to concentrate their resources on to win.” The Kaiser analysis shows that one-third of counties have only one or two insurers offering plans. According to the McKinsey advice, for the insurers covering those counties, the decision is “potentially fatal.” The Affordable care Act has put the wrong people in charge. We can change that. Fix Medicare and then provide it for everyone. Let’s replace “where-to-compete” with “where-to-provide-care.”

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