Perspectives on a selected key topic                                                                                 September  / October 2021


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As major health plans continue to acquire, launch or grow various types of "payer-agnostic" products and services, what specific types do you feel hold the greatest potential for success during this decade, and what significant challenges or opportunities come to mind for plans entering or involved in this arena?"
  
Lindsay Resnick
 Lindsay Resnick

Lindsay R. Resnick
Executive VP
Wunderman Thompson Health

   The Storyline: 51%, 60% and 71% - estimated percent of earnings from non-health insurance businesses for UnitedHealthcare, Cigna and Aetna/CVS respectively.

Non-health insurance diversification by Managed Care Organizations is wide-ranging, extending ownership and control across the health and insurance value chain - from PBMs, urgent care centers, physician practices and banking, to more service-related verticals such as care management, risk assessment, SaaS solutions, and health & medical technology.

Customers these diversification efforts are pursuing also vary widely including employers, hospitals, life sciences, government, health plans, and direct-to-consumer offerings. And they've been successful penetrating deep into these markets. For example, Optum (United Healthcare's non-health insurance arm) boasts serving 9 out of 10 hospitals, 4 out of 5 Fortune 100 companies, and 125 million consumers. CVS is using its retail stores, claiming 70% of Americans live within 3-miles of a CVS pharmacy, as an outlet to sell Aetna insurance plans as well as its SilverScripts Part D Medicare Drug plans. Going into this year, CVS already had the largest share (about one-third) of the PBM market.

Well-resourced, market dominant brands have leverage. MCOs will use their legacy health insurance market position and deep financial resources to be disruptive competitive threats. Their knowledge of the healthcare landscape and existing relationships with providers of care, large employers, regional payers, and healthcare consumers gives them an advantage over the big box retailers (Walmart, Best Buy, Dollar General) and tech giants (Apple, Amazon, Microsoft) also seeking to disrupt healthcare markets.

For employers and consumers, access to affordable health care supported by superior customer experiences that delivers a tangible value exchange will continue as the mantra behind product and service diversification success. For providers and payers, scalability, financial and risk efficiencies, expanded market access and addressing unmet consumer demand will drive non-health insurance venture revenue growth.

The biggest obstacle for growth and expansion of these businesses is a federal clamp down on what is seen as 'anticompetitive behavior'. This means increased scrutiny on healthcare M&A and consolidation...a stronger approach to antitrust enforcement.

All in all, non-health insurance diversification by MCOs will flourish in the near term. These are the big dogs of the healthcare industry, and you know what they say: 'if you can't run with the big dogs, stay on the porch'.
   
Mark Lutes
 Mark Lutes

Mark Lutes
Chairman
Epstein Becker & Green


   Health plans that develop care delivery and management "engines" that "move the needle" on cost and quality will have valuable assets which they can license access to where granting such access fits their strategic goals. Of course, other opportunities will present themselves - remote monitoring tools, data analytic tools, and devices to enhance the delivery of care relative to certain disease states.

However, the investments that will consistently "go the head of the class", will be those that impact the most significant cost drivers. For that reason, disease management type solutions impacting acute and chronic conditions with broad cost impacts will continue to attract health plan investment and investment by private equity sponsors. Such a chassis can be rented by the plans, on somewhat less favorable terms, to competitors in order to provide revenue scale. Where such a care or disease management solution is ecumenical, there may also be "network effects" that work to the benefit of the incubating health plan and investors.
   

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