The Affordable Care Act (ACA) got a couple of things right, so right that we should not throw the baby out with the bathwater if we want to move towards a cost-effective, value-driven, and equitable healthcare system. There are four parts of healthcare insurance reform: private insurance reform; subsidies for low-income individuals who cannot otherwise afford insurance; government coverage (such as Medicare and Medicaid); and operation of markets (exchanges) where insurance is purchased. The ACA scored high grades on the first three elements and poor grades on the latter. Let’s examine why. Private insurance reform included adding children up to age 26 in insured groups (also called pools). Including young people improved the risk diversification of the pool, which was good for everyone’s rates as those twenty-year-olds are so healthy. This policy also kept more young people insured. Pre-ACA private insurance benefited insurers’…
A winning crusade to slash healthcare costs
Want to build a more competitive business model by lowering labor costs? “Why then are you leaving management of healthcare benefit costs to outside health benefits administrators?” John Torinus, Jr. might ask. Torinus, chairman of Wisconsin-based Serigraph Inc. and former business editor at the Milwaukee Journal Sentinel, views health insurers as “middlemen with a busted business model.” With “a foot in both the provider and payer camps,” health insurers fail to extract best value from provider care networks that insurers need to win business. Torinus understands the value of proactive management, which may explain why the printing, in mold labeling and custom industrial graphics company he purchased in 1987 has grown more than three-fold to 1000 employees, with plants in the US, Mexico, India and China. By reinventing his company’s approach to healthcare, he’s avoided the dramatic increases in employer and employee benefit…
Business model innovation starts with challenging hidden assumptions
Impressionist artists were excluded from top official exhibitions because their “fuzzy paintings” did not fit the mold (i.e., set of assumptions) of what constituted great art of its time. So Monet, Van Gogh and others formed their own association, held their own exhibits, and attracted an art dealer who needed to differentiate himself from established art sellers. And that’s how modern art was born. Do these century-old reinvention patterns feel familiar? Treating an assumption as a fact can be very dangerous, as dealers of classical art discovered. Great leaders are willing to unearth hidden assumptions and challenge their validity. Consider the watch industry, at the edge of creative destruction with the explosion of digital communication devices telling time. If you’re like me, a millennial generation parent, you may know that look of disbelief when you ask your child if she’d like a watch…
Disrupt the US health insurance business model
Let Washington fight a tug-of-war over how much or how little of the recently passed federal health care legislation gets enacted. I’d like to step away from the politics and talk about the business model for the health insurance industry, why it needs disrupted and how to accomplish just that. With US health care costs far exceeding that of the rest of the world and health status outcomes mediocre at best, our health care system is ripe for disruption. The insurance industry business model is one lever for accomplishing this. I’m sharing my thoughts here hoping to get your feedback on what’s right and wrong with my thinking. (Note: I am a political independent, seeking pragmatic solutions, whichever political party provides them.) Health insurer profitability is driven by a number of factors: Accurately assessing and pricing risks of insuring a pool of people…
Business Model Innovation Must Fit the Times
Food and healthcare insurance are but two industries that must wake-up. I love the news. It provides a daily reminder of the need for business model innovation. Healthcare and food are increasingly interconnected, each offering insight into business model innovation best practices. Food that expands market share, not our waistlines. I admire PepsiCo. To make its food healthier, PepsiCo leaders have invested in unusual talent (e.g., a Mayo Clinic endocrinologist and World Health Organization Chronic Health Disease chief) and genuine product innovation. This week the company announced work on a lower-sodium solution to achieve a salty taste in potato chips and other snacks. Last week we learned that PepsiCo will no longer sell high-sugar sodas to PK-12 schools. My admiration rests in PepsiCo’s leadership evolving their business model’s value promise and advantages in advance of government regulations or new entrants scoring huge market…