Medical Insurance Industry - the Major Healthcare Industry Challenges

TGM 551: Global Marketing Strategy - Charles David

Medical Insurance Industry - The Major Healthcare Industry Challenges

1. Tax Reforms

• Elimination of penalties for individual mandates to enroll in health insurance
• Increase of risk since healthy individuals would drop out and the remaining pool would become disbalanced
• Premiums and deductibles would increase and policies would be less affordable
• The combination of fewer insured persons coupled with continued high deductibles would lead to increased bad debts

1.1 Proposal

• Continue health insurance mandate for everyone
• Balance of healthy and prospective sick people taking insurance
• Reduction of overall cost of insurance
• Benefit for older people and the sick with reduced deductible and copayment
  

2. From cheap manpower to cheap brainpower

• Shortage of talent with more than 400,000 employees expected to retire from US alone
• Automation unable to replace the qualitative judgement necessary for complex work
• Medical insurance industry not appealing to millennials with majority moving towards IT and Finance industries
• Cost of developing raw talent through elective trainings is very high

2.1 Proposal

• Diversify business to emerging markets such as India and China where there is abundance of talent
• Enabling industry to reduce overall cost due to low real estate cost, labor rates and taxes
• Enhance customer service with more people ready to work in flexible shifts

3. Life expectancy increases, expenses also

• Life expectancy has been steadily rising over the past few decades
• The increase in life expectance rate increases the risk of higher payout by the insurance companies
• When insurance companies sell policies to people, they have no insight or forecast on how much more the longevity could improve. The insurance companies underestimate looking at the current life expectancy data
• This results in lower premium, since premiums are calculated on the present age of the person when enrolled without any estimation on the life expectancy rate

3.1 Proposal

• Diversify risks by reinsurance from other insurance companies. This would reduce the liability of the original insurer
• Revamp method of calculating premium taking into consideration last 5 years average on life expectancy rate
• Relook at current accounting methods by creating a reserve for situation such as these

4. Pandemic risks occur more frequently

• High risk than ever of experiencing large-scale outbreaks and global pandemics such as SARS, Swine Flu, Ebola and Zika
• With growing population and urbanization comes greater opportunity for disease to spread through air or unclean water
•  The insurance industry faces huge challenges in coping with such unexpected volume of reimbursements

4.1 Proposal

• Business Continuity Planning should be done well in advance of a pandemic. A comprehensive business continuity plan defines how an insurer will maintain critical operations during a pandemic
• Diversify risks by reinsurance from other insurance companies. This would reduce the liability of the original insurer
• Insurance companies should work closely with the government and health care industry to promote vaccinations for as many diseases as possible

5. Urbanization means congestion

• While urban living continues to offer many opportunities, the urban environments can concentrate health risks and introduce new hazards
• Health challenges are particularly evident in cities relate to water, environment, violence and injury, noncommunicable diseases
• With migration comes a huge risk of transfer of various diseases
• These factors take a huge toil on the insurance industry as the risk of payouts becomes higher

4.1 Proposal

• Insurance companies should work closely with the government and health care industry to promote vaccinations for as many diseases as possible
• Diversify risks by reinsurance from other insurance companies. This would reduce the liability of the original insurer
• Relook at current accounting methods by creating a reserve for such situations