Age-related chronic and complex medical conditions account for the largest share of healthcare budgets globally. The delivery of health and social care services remains episodic and is often concentrated in hospital and speciality settings, leading to the inefficient use of finite health resources. The result is a reduction in the quality-of-care experiences and outcomes for consumers, as well as uncontrolled cost inflation, as complexity in demand is unmet by ‘traditional’ models of care.
Insurers and consumers are increasingly shouldering the burden of this evolving risk landscape. People with complex chronic illness are often faced with high deductible plans that exacerbate unmet need for care, which also makes it harder for insurers to grow their market.
At the same time, life insurers face stagnation in the demand for retirement and long-term savings solutions at the very juncture when this is needed to address the long-term health and wellbeing needs of ageing populations. As conditions such as dementia and neurological disorders grow in prevalence, there is also a growing need for long-term care insurance to support people’s social care needs, but there remain very few solutions.
New care models (NCMs) represent an approach to care delivery with a ‘triple aim’: To improve care experiences and health outcomes and encourage more cost-effective service delivery. They employ a variety of approaches that emphasise disease prevention and health promotion, proactive management of people with chronic disease to improve consumer experience, and collaboration across health and social care disciplines to improve health outcomes and address cost inflation. This may involve multi-professional partnerships that coordinate care and support for people with physical and mental health needs, or community-based and home-based alternatives to institutionalisation in hospitals or residential homes.
The evidence on NCMs
There is good evidence that NCMs support improved care experiences, favourably influence outcomes and reduce or limit the rise in costs of care. The effects on health outcomes remains more mixed. While some reviews have shown improvements in outcomes overall, they have varied by subgroups and the length of the programme, and in some cases their impact remains unsubstantiated.
Larger scale models seem to have significant potential to improve quality and reduce cost inflation. The advent of accountable care organisations in the US and other countries has been associated with financial savings of between 6–25% when compared to standard practice. In part, this success has been as a result of the change in relationship between the insurer/payer and provider – models that bring them closer together into risk-sharing arrangements where pooled funds can be used in innovative ways. However, the varying contexts and ways in which NCMs are implemented make it harder to infer how consistently they can generate positive results.
Enabling NCMs: The need for a strategic purchaser
Five purchasing approaches have the potential to achieve the triple aim, each with their strengths and weaknesses:
- The traditional approach to procurement where insurers work with a constellation of providers to form a network through multiple contracts.
- The accountable care approach where a group of multi-disciplinary providers take on shared responsibility for a defined population using different governance and contractual models with payers.
- The fully-integrated model where the insurer and providers operate under a single governance structure and a global budget.
- The direct-to-provider approach where providers offer a package of services directly to consumers on a subscription basis, often bypassing primary insurers – notable for its implications for insurance sales and coverage.
- The consumer-directed payments approach where policyholders directly buy services they need based on a personal budget.
Findings from stakeholder interviews
Improving customer experience is the most common rationale for implementing NCMs, closely followed by the need to evolve business models to tackle cost inflation. Life insurers in particular show a strong pivot towards health solutions to address mortality in risk-based products and the high cost of comorbidities in long-term savings products. NCMs have a strong predisposition towards service innovation, with only a few matching them with the use of new governance and contracting models to make the most of the new services offered. While many NCMs are new, there are promising indications that they improve the customer experience and reduce the need for costly care.
While overall buy-in for NCMs by consumers and providers is favourable, there is a need both to balance consumer preference for choice with service standardisation to make NCMs competitive and dedicate time to improving provider understanding of NCM objectives and associated benefits.
New market opportunities afforded by NCMs include the use of data to improve existing products, the ability to package and sell new competencies enabled by NCMs, improving risk thresholds through better targeting to previously untapped groups and diversifying from risk-based to service-based products. Marketing and distribution are the most commonly cited functions in the insurance value chain influenced by NCMs, helping to open up untapped customer segments. However, the sophistication of NCMs is still unsupported by traditional distribution channels, which remain transactional.
NCM scalability depends on:
- conducive regulatory environments, with a focus on licensing rules for life insurers, data protection and provider market reform;
- collecting, storing and analysing data to allow targeting and monitoring of NCMs in real time;
- leadership and cultures that enable companies to take risks and allow longer-term horizons for NCMs to mature; and
- a concurrent focus on key supply-side aspects, such as provider management and payment reforms, to ensure NCMs do not fall short in delivering the desired outcomes.
Recommendations for insurers
- Enhance the value proposition of NCMs to go beyond the simplistic notions of choice and convenience. The current narrative should evolve to reflect the triple aim to promote its value to consumers, distributors, providers and internally within companies.
- Become a strategic orchestrator of services. They will need to start assuming the role of a ‘strategic payer’ and ensure a favourable supply-side condition that can fulfil the promise of NCMs made to policyholders. This entails stratifying the risks to understand the pressure points; building the foundations to start sharing risks with providers; shifting towards value-based payment; and planning the journey incrementally using a maturity model.
- Capture the opportunities afforded by the convergence of life and health products and solutions. Internally, pooling, analysing and sharing data in real time as well as a joint marketing and distribution plan are the obvious starting points. Externally, they need a clear plan that navigates the issues around health licences, price caps, provider and payment reforms and the local ethical and legal climate before engaging with policyholders. A
Ms Adrita Bhattacharya-Craven is director health and ageing with The Geneva Association.