The Affordable Care Act (ACA) was passed in 2010 and continues to be a central topic in the 2016 U.S. presidential elections. ACA, a significant piece of legislation, has introduced new regulations for the insurance sector since the U.S. continues to top the list in healthcare spending among high-income nations and had to broaden the reach of advanced care needs. Insurers operating under ACA are now caught at the crossroads where they have to either adapt to the new environment or risk declining profit margins. So, let’s look at what’s in store for insurers in the light of the healthcare law.
First and foremost, under ACA, insurers have to adopt several mitigation measures to minimize the impact of its mandates. For instance, they have to pay more attention to the analysis of customer data to identify behavioral and health trends. Another area of focus is helping customers understand the importance of getting insured before they become sick.
However, implementing the measures is easier said than done for insurers plagued with operational inefficiencies. A DuPont analysis of the top 10 U.S. health insurers in 2009 before ACA and in 2015 after ACA shows that the return on equity had declined considerably in 2015 primarily due to inefficient operations.
But it’s not all bad news with ACA. When viewed through a different prism, the healthcare act actually offers insurers a huge potential to grow their business from approximately 41 million uninsured Americans. By tapping into just 1 percent of the population who decide to get insured in the first year, an insurance company can gain approximately USD 63 million in that year. A figure like that can hardly be ignored!
ACA also offers insurers a golden opportunity to broaden the reach of healthcare. By emulating retailer tactics — segmenting, targeting and positioning — insurers can sell insurance in the health insurance marketplace/exchange. With 287 exchange-participating insurers in 2016, to thrive in a competitive environment, there is a compelling need to design relevant products for unsubsidized consumers.
To capitalize on the above two opportunities, insurers can leverage the enormous amount of data that they already possess and the ones that are still underutilized. Companies can identify profitable markets by analyzing structured data from sources such as economic and demographic variables, claims history, participation in preventive care programs and past health records. Similarly, they can tap into unstructured data from doctors’ notes, prescriptions, lab reports and procedural data. The data from these sources can also help companies identify the target audience and design outreach campaigns for specific groups.
The first logical step for insurers under ACA is to mitigate risks and carefully identify growth opportunities. It also raises the question, ‘What is the future for insurers in the aftermath of ACA?’ Connect with the author here.
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