Fwd: qotd: "Where-to-compete" decisions for insurers

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-------- Original Message --------
Subject: qotd: "Where-to-compete" decisions for insurers
Date: Thu, 10 Oct 2013 11:06:56 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



Health Affairs Blog
September 30, 2013
Where To Compete In A Post-Reform World
By Shubham Singhal, senior partner in McKinsey's Detroit office

The power of "where-to-compete" decisions, particularly in an industry
in as much flux as US health insurance, is enormous. Our analyses
suggest that the bottom-line performance differential between a payor
who selects a market-average portfolio across businesses and geographies
and an identical payor who instead selects a top-quartile portfolio is
likely to be almost twofold. Across industries, McKinsey research shows
that the majority of the performance differential among corporations
results from their alignment with "rising tide" markets rather than from
share gain within less attractive markets.

Furthermore, we have found that there are three "macro" approaches that
can enable companies to thrive during major industry disruptions:
refocus their portfolio on more attractive businesses, build one or two
large new businesses, or radically transform their business model. The
first two rely squarely on where-to-compete decisions. The last approach
is not for the faint of heart.

Thus, today's payors must carefully choose which markets they want to
concentrate their resources on to win. The choices made will be critical
not only within the payors' core health-plan business but also in
adjacent areas within the healthcare value chain.

***

Given the disruptive changes in the healthcare industry, payors that
want to thrive over the next few years will need to develop the
discipline to make and act on where-to-compete decisions. They will need
insights into where growth and margin will be earned, the foresight to
determine when inflections points in the market might happen, a clear
view of their own competitive advantages and capabilities (which would
give them the ability to win and earn a superior return), the fortitude
to make tough resource-allocation decisions, and the agility to alter
their course as the market shifts. Acquiring the needed discipline is
challenging but necessary. The upside from getting where-to-compete
decisions right is substantial enough to demand top management's
attention — and the downside is potentially fatal.

http://healthaffairs.org/blog/2013/09/30/where-to-compete-in-a-post-reform-world/


Kaiser Health News
October 4, 2013
Marketplace Plans Vary Widely In Costs, Within Counties And Across The
Country
By Jordan Rau and Julie Appleby

Consumers shopping in the new health insurance marketplaces will face a
bewildering array of competing plans in some counties and sparse options
in other places, with people in some areas of the country having to pay
much more for the identical level of coverage than consumers elsewhere.

Nationwide, 18 percent of counties have only one insurer offering plans
and 33 percent of counties have only two insurers competing, the KHN
analysis found.

http://www.kaiserhealthnews.org/Stories/2013/October/04/Marketplace-plans-variation-counties-and-nation.aspx?utm_source=intop&utm_medium=email&utm_campaign=101013


Comment: Private insurers are a totally different animal than public
health coverage programs, and this "where-to-compete" industry advice
typifies that difference.

Public programs, such as Medicare, make every effort to deliver health
care to those that need it. Private insurers make every effort to ensure
the success of their business model.

Mimicking Willie Sutton's famous strategy to rob banks because that is
where the money is, private insurers "carefully choose which markets
they want to concentrate their resources on to win." The Kaiser analysis
shows that one-third of counties have only one or two insurers offering
plans. According to the McKinsey advice, for the insurers covering those
counties, the decision is "potentially fatal."

The Affordable care Act has put the wrong people in charge. We can
change that. Fix Medicare and then provide it for everyone. Let's
replace "where-to-compete" with "where-to-provide-care."