Review Payer Products, Customers, and Trends

Learning Objectives

After completing this unit, you’ll be able to:

• Describe the main healthcare payer products and services.
• Identify healthcare payers’ most common customers.
• Identify major trends impacting healthcare payers.

Payer Products and Services

Now that we know what payers do, let’s learn what they sell. You probably already buy a health insurance product or two. The most common categories for these are:

• Medical
• Dental
• Vision
• Pharmacy

Payers also sell services. These include: 

• Medical management services like chronic care management and behavioral health services.
• Administrative support services like help with billing and enrollment for self-funded employer groups.
• Health and wellness programs like services that focus on prevention. Healthy people mean reduced risk, which means reduced payouts for treatment. This isn’t just a win-win solution, it’s a live-live solution.

Typically, customer purchases payer products and services through their employer. But that’s just one group that payers sell to. Take a look at the other customers payers sell to as well.

Payer Customers

The customers of the payers in the healthcare industry receive healthcare. They fall into four main groups.

• Individuals: People who pay for their insurance out of their own pockets
• Government: Recipients of government-funded insurance such as Medicare, Medicaid, or military health systems
• Employers: Companies that provide benefits for their employees
• Labor Groups: Purchasing entities such as labor unions and retiree organizations

Individuals make up the smallest group, followed by government programs. The largest segment includes employers and labor groups. The rest of the population in the US are uninsured.

Out of the payers’ customers, the employer group is further separated into fully insured employers and self-funded employers. Why would an employer self-fund? 

Let’s say a fully insured employer buys insurance from a payer for US$10 million. The payer comes up with that premium cost based on data and historical information that anticipates the medical cost for the group’s employees. The payer projects a range of costs they may need to pay out, which typically leans toward the high side. This allows the payer to cover the administration and cost of claims—and make a profit.

Self-funded employers take a different approach. Using similar data and historical information, they develop their own estimate of medical costs. They pay their insurers to process the claims. But the self-funded employer then pays the actual medical costs themselves. By assuming the risk of the medical cost, employers often save money. In this example, they estimate only needing $7 million. In today’s market, employers both large and small are choosing self-funded insurance offerings.

The Only Thing Constant Is Change

The American sportswriter Robert C. Gallagher once said, “Change is inevitable—except from a vending machine.” It’s just a slight modification of a quote from Heraclitus: “The only thing that is constant is change.” In the healthcare industry, this is truer than ever. 

Now, let’s look at these changes so you understand the trends that payers face. Some of these are similar to the trends of the healthcare industry, but they affect payers in a unique way.

Trend: Shifting focus to growing payers’ Medicare business

Three million baby boomers now reach retirement age every year. Medicare business is desirable, and payers compete to grow this membership. New entrants are also focusing on this market.

Trend: Mergers are changing payer business models

Payers grow their membership and expand reach by combining with retailers, pharmacy benefit managers, and healthcare providers. Combined organizations bring fresh approaches to engage members, build loyalty, and drive renewals.

Trend: Rising need for better member experience

Payers view better member engagement as a key strategy to increase member retention and loyalty, and improve health outcomes. Many members are willing to switch plans for a better experience.

Trend: Continued shift to value-based care programs

Centers for Medicare and Medicaid are providing more incentives for value-based care delivery. Payers have increased the need to track both provider and member engagement in value-based care programs.

The payers sector is constantly evolving by offering products and services to address new trends, and it’s a vital part of the healthcare system in the United States. As all sectors work together toward an optimized healthcare journey, payers are at the forefront of the customer experience.