In the Age of Health Reform, Healthcare IT to the Rescue? - WKOW 27: Madison, WI Breaking News, Weather and Sports

In the Age of Health Reform, Healthcare IT to the Rescue?


UNDATED (XCONOMY.COM) -- Talking about health insurance is a good way to clear a room. It is a rare person who is excited to interact with their insurance company or who can understand the explanation of benefits they receive in the mail detailing all of the things that the insurance carrier has decided not to pay on their behalf. According to JD Power and Associates, only four out of ten people fully understand their health benefit plan. No doubt those four are also able to read the Dead Sea Scrolls in their original text.

JD Power also found that consumers rank health insurers at 710 on a 1000-point scale, a number heading downhill faster than Lindsey Vonn. In contrast, consumers rank homeowners insurance carriers at 750 on a 1000-point scale and auto insurers at 837. Nothing like being last place in the league: just ask the Minnesota Twins.

"So what am I supposed to do about it?" you might say. "My employer gives me whatever insurance they want to give me and I have little say in it." We as consumers have become accustomed to paying (through paycheck deductions and lower wages) for a service we dislike but over which we have little control and even less affection.

Well that world is about to change—maybe not for everyone, but for many. Whereas our selection of what health insurance plan to use has been more like picking which monopolistic cable company to connect with, the advent of healthcare reform, and especially the provisions of the Patient Protection and Affordable Care Act (PPACA) that go into effect in 2014, may well put the consumer in the driver's seat. In fact, Psilos Group, the healthcare investment firm to which I pledge my allegiance, believes that healthcare reform will have a much greater impact on businesses and consumers than originally predicted, accelerating a sweeping change among health insurers toward consumer-oriented business models and totally different distribution channels, partnerships, and technology solutions. We released a 2011 Healthcare Outlook Report earlier this week that details the expected changes and illuminates the key issues that face the healthcare industry as PPACA becomes reality. You can access the full Psilos Group report for free by clicking here.

One of most significant changes in the health insurance realm will be that more and more Americans—including millions of corporate employees as well as the previously uninsured—will begin shopping for their own health insurance via a new landscape of Internet and call center-based public and private healthcare insurance exchanges. These will function as shopping hubs to connect individual consumers with a choice of insurance products, supported by a broad network of insurance brokers who serve as agents to the consumer. The result is expected to be a doubling or tripling of the market for individual insurance today from about 10 percent to between 20 to 40 percent of the commercial market in coming years, according to industry experts such as McKinsey & Company.

Given this backdrop, health insurers will have to shift their approach from a traditional business-to-business sale to a business-to-consumer model to garner a share of this new market. Like other consumer-oriented companies, health insurers will need to differentiate their offerings based on cost, quality, customization, and service. To survive this paradigm shift and introduce the operational efficiencies essential to avoiding the fate of Blockbuster in a Netflix world, health insurance leaders are going to need to make a quantum leap forward in the use of technology to transform their businesses.

Healthcare and information technology were rarely uttered in the same sentence 10 years ago, unless eye-rolling was involved. While all of the large insurance carriers have a plethora of information systems within their walls, they historically have not been viewed as …Next Page »

Lisa Suennen is a co-founder and Managing Member of Psilos Group, a healthcare-focused investment firm with approximately $600 million under management. She has headed Psilos' West Coast office since the firm's founding in 1998 and focuses on the medical device, healthcare information technology and healthcare services sectors. She serves as a Director on the Board of several Psilos portfolio companies, including AngioScore, Inc. (chairman), PatientSafe Solutions, OmniGuide and VeraLight, Inc. (chairman). Lisa is also an active blogger. You can read her posts at

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