Today I listened to Cigna leadership discuss how they are responding to marketplace dynamics and I realized that this change is as cataclysmic as the HMO revolution was in the late 1980s. During that era, the number of insurance companies dwindled down to just a handful and the indemnity market went into a tailspin. Flash forward to the mid-1990s. Aetna, at the time, a big property and casualty insurer, bought U.S. Healthcare and fundamentally changed the way they did business. MetLife and Travelers spun off their medical business into MetraHealth, which merged into UnitedHealthcare, which eventually acquired Oxford to fundamentally change its business model. The market disruptors like U.S. Healthcare and Oxford set the pace of change. Cigna fared better, but their indemnity models morphed into network-based products.
Today the national carriers are trying to learn from the past. Each one has devoted significant capital to market innovations and are trying to be incubators of change instead of victims. Each one recognizes that they need to look at other digital age disruptors like Apple, Amazon and Google and change their model before they are left behind. The pace of change is fast with a shift to payment-for-value from the old fee-for-service system. And pharmacy consolidation is a recognition that prescriptions drugs are the most frequent access point for consumers. That system is 20% of cost but growing faster than any other component, and specialty medication is driving overall cost trends. So…
UnitedHealthcare + Optum
Aetna + CVS
Anthem + IngenioRx
Cigna + Express Scripts
It is universally recognized that it has to be simpler to access healthcare. The system needs to be more transparent and reliable and costs need to be controlled. And if the BUCAs (Blue Cross, United, Cigna and Aetna) can’t do it – there will be another U.S. Healthcare or Oxford to step into their market-leading space.
They get it – but can they do anything about it before Oscar, CVS or Bezos-Buffet-Dimon take the lead in change? Their survival depends on it.