Becoming a health insurance covered benefit

“If they don't give you a seat at the table, bring in a folding chair.”

- Shirley Chisholm

Getting to the table

I have advised a few start-ups recently, helping them with strategies to get in the door at health insurance companies - with the hope of getting their products and services covered as part of an insurance plan. Being on the outside looking in can be challenging. Here is some helpful information for start-ups and smaller companies regarding the journey to becoming a covered insurance benefit or program.

What insurance companies want

Health insurance companies live and die by forecasting and mitigating the risk of increasing utilization and high cost claims. They prioritize and focus on chronic conditions management over episodic care, since the expense associated with a chronic condition has a longer term impact on their underlying unit costs. While a cool digital platform that helps consumers be more active is nice, a product or service like one that increases medication compliance – and thereby averts hospitalization or expensive interventions – will be much more likely to gain traction.

Products and services that target a large consumer cohort with a chronic condition that is costly to manage will have a greater chance of interesting an insurance company than a product targeted at a smaller consumer population. Cardiovascular disorders, chronic heart failure, chronic lung disorders, neurological disorders and disabling mental conditions are some of the chronic conditions where health insurance companies are seeking cost containment and quality improvement opportunities.

Health insurance companies in the Pacific Northwest operate in a very competitive market. Medicare Advantage plans nationally are also highly competitive. Products and services that create differentiation and even offer exclusivity are highly attractive. One example is Papa Pals – a company offering a unique companionship program for seniors. They have carved out a new market niche within Medicare Advantage with little competition and solid interest from insurance companies.

Who’s who at the table

Marketing and networking efforts targeted at health insurance companies often end up being fielded by sales staff. These are the wrong folks to help you get a foot in the door. Insurance company medical directors typically are responsible for managing the total cost of care across all insured lives, with a focus on costly conditions both chronic and acute. Presenting solid data demonstrating efficacy of your product or service will garner the attention of a medical director, particularly if that product or service targets high cost encounters or chronic conditions.

Insurance companies will have a director or vice president of patient/member experience. These folks are tasked with improving CAHPS experience scores in the Medicare Advantage market. There will also be a leaders charged with improving quality outcomes who focus on improving HEDIS scores, which drive risk coding and improved outcomes.

CAHPS and HEDIS scores correlate directly to millions of dollars in Medicare Advantage financial incentives, so tools that improve these metrics will always desired. Many companies believe their product or service will positively impact patient experience scores, but again data and documentation proving efficacy is required to stand out from the many other companies offering similar products and services.

The product managers at an insurance company lead the search for differentiation and can be advocates for adding a new product or service to the company portfolio. At times, sales leadership may also be advocates for adding a new vendor solution, but they are not likely to be the first people you would want to pitch to. There are also provider contracting teams, responsible for managing and renewing network contracts with providers, hospitals, and facilities. These teams typically operate downstream from the decision making regarding new vendor products and services, so they are not likely to offer a path in.

Types of health insurance business models

Keep in mind there are multiple lines of business in health insurance. The two that are likely to offer the greatest potential for success are Medicare Advantage and self-funded employers. Because Medicare Advantage has a full risk revenue model paired with significant upside/ downside financial incentives there are plenty of opportunities to launch a new product or service to create value. Start-ups that can demonstrate improvements to CAHPS and HEDIS scores to drive financial incentives will get the attention of leadership at health insurance companies.

Self-funded employers take on the full risk of all medical costs incurred by their employees, with a maximum cost ceiling provided by stop loss insurance. These employers engage a third party administrator (TPA) to manage the plan, process claims, administer a provider network and manage all vendors. Self-funded employers have financial skin in the game and are motivation to engage their employees via add-on products and services that will control costs. TPAs are the gate keepers to accessing the self-funded market, so they are the marketing target to gain entry to that market sector.

Making the pitch

Health insurance companies and TPAs are data driven businesses. A creditable track record of data and outcomes, as well as proven financial models showing projected savings are all critical to a successful pitch. In fact, you may find there is little interest in any other portion of your pitch deck. It is also helpful to be consumer cohort specific if possible – highlighting the type of insurance, demographic targeted, and the health conditions addressed and mitigated.

Proposing a capitation payment model will likely be viewed favorably over a subscription fixed fee agreement. Adding performance incentives and upside/downside risk measured against agreed upon expense benchmarks should also be proposed. There is also the option of proposing a utilization based fee agreement paired with performance incentives. Either way, taking financial risk will get leadership’s attention and send the message you are confident in your product and understand the insurance game.

Getting it done

Once you have compelling data demonstrating the efficacy of your product or service, the next step is strategic, targeted marketing to the right decision makers. Be persistent as these folks are peppered with similar marketing calls daily. Go in with an understanding of the healthcare revenue model you can impact, and the experience or care quality metrics you can improve. Consider offering a test pilot at cost as a proof of concept, keeping any implementation efforts by health insurance staff to a minimum. Be open of price negotiations with upside/ downside risk to demonstrate confidence in your solution.

Trying to get a seat at the table can be daunting. But if you position your offering to positively impact the health insurance revenue and incentives, you will increase your chances of getting in front of healthcare leaders.

Copywrite 2itive 2024

2itive is a Portland based consultancy founded by Erik Goodfriend, offering a unique combination of market intelligence, knowledge of healthcare payment systems and creative business strategy insights. Feel free to contact us at info@2itive.com