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Surprising Science

Business Model innovation for the Health Insurance Provider

Our idea offers a solution for how the for-profit health insurance provider business model can be innovated on to not only allow for active participation and collaboration by policyholders in the creation of value, generate additional revenue and help finance the cost of health plans, but also provide for the realization of an improved, and invariably more productive alignment of interests and strategies across the entire healthcare value network.

Business Model Innovation for the Health Insurance Provider


Our proposal looks to the internet and particularly to the health 2.0 transformation and the expanding role of consumer network platforms as brokers of synergy, and offers an idea on how the for-profit health insurance provider business model can be innovated on to not only allow for active participation and collaboration by policyholders in the creation of value, generate additional revenue and help finance the cost of health plans, but also provide for the realization of an improved, and invariably more productive alignment of interests and strategies across the entire healthcare value network.   

Indeed, the failure by the health insurance providers to innovate on this model in the face of evolutions in healthcare practices and growing consumerism is often cited as one of the key factors behind the defragmentation of the U.S. healthcare system.  Where, as the guarantors of the market (and, by extension, of the entire system), they ought to have sought out ways of progressively aligning their business strategies with the changing needs of the consumers and the other actors in the value network, these providers or payers instead stand accused of choosing to employ, in the words of a recent commentator in the Wall Street Journal, ‘obstructive strategies’ in a desperate bid to protect their bottom-lines. It is such narrow focus by payers, the critics observe, that has over time served to badly confound the configuration of interests, relationships and strategies across the entire healthcare value network, severely hampering the development of efficiencies as the system and society as a whole advance.

Today, however, with the intervention of the internet and the continuing enhancement of online interaction (as through the widespread adoption of so called web 2.0 technologies), a new plane of convergence is developing where new and exciting synergies between the different actors are becoming more and more possible, and where a great opportunity for innovating on the insurance provider model and making it more consumer-centered, presents itself. As it is, the significance of the accommodation being struck on such online health consumer network platforms as Revolution Health and WebMD – between the health information and social support needs of the health-conscious consumer, and the advertising, marketing/sales, R&D  interests (etc) in the industry – is not lost on most observers. Not only is the internet enabling consumers to engage and network around health matters in ways that are significantly influencing health care consumption, but it also provides possibilities that, with the right incentive for consumers, providers of healthcare services and products can tap into these networks and secure the active participation and collaboration of consumers in value creation, enabling synergies of partnership that will radically improve quality, uncover far-reaching efficiencies, and help bring about a more productive realignment of interests in this all too vital industry. 

The Idea

It is in these prevailing circumstances that we believe a huge opportunity exists for the health insurance provider, and for the very simple fact that there can be no incentive more ideal and more compelling in healthcare than insurance. Offering consumers insurance based incentives on such a platform will virtually guarantee their willing and self-motivated participation in value creation alongside other actors and give rise to a myriad of possibilities. What we are proposing then is a business model innovation that will see the insurance provider able to offer such an incentive to consumers through a partnership system that will essentially amount to an alternative mechanism for financing health coverage, and whose ramifications for the entire healthcare value system will not be short of revolutionary. That innovation is this:  to have health insurance firms operate commercial online network platforms, similar to Revolution Health and WebMD, where policyholders can interact and engage around health information and health matters (and help generate revenue from advertising and e-commerce), but with the key difference that users are incentivized to engage and collaborate with business and knowledge actors from across the healthcare industry (and beyond), through a points based revenue-sharing scheme. Points will be awarded for various levels of participation and engagement, and at the end of a set financial cycle the value of these points will be determined against the platforms earnings (similar, in principle, to a determination of dividends) and then applied towards enhancing the user’s/policyholder’s coverage and benefits.

The types of participation for which points will be awarded will range from how often a user logs on and uses the platforms’ services, to their engagement in promotions, marketing surveys, and research studies, to transacting business and making purchases, and so on. In some cases the value of the points to be awarded for a specified activity will be determined as a direct share of the revenue that the firm can attribute to that activity and depending on the pricing model. For instance, a user can get ‘rebate’ points for a purchase that they make through the platform, where the points are directly connected to a discount sum offered by the vendor or to a fraction of the brokerage fees that the vendor pays to the insurance firm for access to the platform’s market; or they can get points for participating in a market survey, research study, marketing promotion, or interacting with advertising (etc), where more complex but wholly feasible micro-transaction pricing and remittance models would be applied. [Because of the risk of manipulation and fraud, however, certain pricing models, such as pay per click for leads and advertising, would perhaps not be ideal, and some more performance based model would work better. At the same time, with user-collaboration as a factor – and given the fact that registration and log in is necessary for the users in question to be identified as policyholders – possibilities exist for innovating on pricing models and for employing tracking techniques using interactive media in ways that offer greater security and effectiveness. Also, assessing the value of the points earned by the policyholders at the end of a set financial period further protects the insurance firm and ensures that the system is fair and results-based. ]. In most cases, however, the value of the points earned will be determined as a share of the platform’s overall profits, and this will include points earned as a measure of the user’s overall level of participation on the platform.

 How a particular points system will ultimately be calibrated will off course be up to an individual insurance firm, and will therefore be a major point of innovation and competition. The process of determining the value of points earned will however need to be transparent and a fair portion of the platforms’ earnings should be applied towards subsidizing the costs of coverage. The key thing to emphasize here, at length, is that, as conceived, this point system presents little risk for the insurance firm and is essentially a revenue sharing deal, based on real value creation activities from which revenue will be generated. [And as WebMD, a publicly traded online health consumer platform, has shown, potential revenue generation on such networks can reach upwards of $ 300 million annually, with annual net incomes of $ 30 million and above. And off course this is without the consumer incentive plan that we are proposing here, and without the direct user collaboration in value creation that this plan is designed to secure. If WebMD and the other existing platforms were underpinned by a plan as appealing as this for incentivizing user collaboration, profitability would certainly be much higher, and the impact that this income potential could have on the business of insurance cannot be ignored.]. Also, and as we know, systems of revenue-sharing and benefit distribution based on micro-transaction pricing models, such as Google’s Ad sense/Ad words program, have been successfully applied and been shown to work.

Ultimately, what cannot be denied about this innovation is that presented with the incentive of enhancing their health coverage, policyholders will choose to become active and self-motivated collaborators in value creation alongside the business and knowledge actors, who in their part will value highly the opportunity to engage with incentivized consumers. These actors will range anywhere from hospitals, physicians, caregivers, pharmaceuticals, research institutions, medical device manufacturers, vendors, natural health advocates, health fitness programs, and advertisers. With such convergence of self-interest, the opportunities for synergy in value creation will be enormous, and will unquestionably lead to significant gains in quality of value generated, costs saved, and benefits realized, across the entire system.

Concept Highlights and Benefits Assessment

The weaknesses and limitations of the generic insurance provider business model are familiar to most observers. Basically, insurance providers offer a service, which is to collect, organize and administer a pool of funds that are sourced routinely from consumers of health care, and that are to be used to underwrite the risk of high and unexpected costs, and at the same time provide profits for the insurance firm and its shareholders. As medical practices have advanced and health care consumption risen, this conflict between policyholder and shareholder interests has exacerbated. Matters have of course been made more severe by the pressures of an increasingly competitive climate of financial reporting that demands rising profits as a demonstration of continued viability. In order to satisfy and retain the confidence of shareholders and the financial markets, insurance providers have been forced to employ a variety of measures aimed at limiting consumption. Stricter underwriting rules, rising premiums, higher deductibles and co-pays, stringent treatment protocols and other bureaucratic provisions imposed on the value chain, have become the standard fallback instruments for insurance companies seeking to sustain their balance sheets on an upward trajectory.

Needless to say, these tactics have wreaked havoc on the health care system as a whole, frustrating consumer expectations and the efforts of the practitioners to deliver better health care, and stymieing the development of efficiencies as the system evolves. The irony in all this is of course the fact that as the major underwriters of the health care market (alongside the government), insurance providers are of necessity involved in coordinating between the needs and interests of the other actors in the network, and should therefore be leading the way in the search for efficiencies. To be fair, efforts in managed care have been developed with this objective in mind, but even here, insurance providers have been focused more on curbing consumption than forging productive synergies, and have instead encumbered their care networks with bureaucratic experiments in utilization control.

Enter the internet. One of the most disastrous consequences of the insurance industry’s self-seeking bureaucratic experimentation, has been the creation of obstacles in the way of the insurance companies’ attempts to fully exploit the incredible advantages that the internet presents for value creation. Whether it is to render the insurance value propositions too arcane as to deter customer engagement except on the essential points, or it is to establish a confounding complex of rules and stipulations that encourage obscurantism and impede openness and innovation, or it is to antagonize the value network and to create distrust of the insurance firms’ motives, and a host of other ways, the insurance industries’ missteps along the way have made it difficult for insurance companies to successfully seek online engagement (with the other actors in the network) in ways that effectively deliver the advantages of the internet to the healthcare system. And this is where our business model innovation comes in.

Simply put, what our innovation does is present the insurance firm with a robust and dynamic basis on which it can more effectively exploit the internet, and its own pivotal role in the health care value network, to become a more proactive catalyst of value creation. Offering an insurance incentive will attract both policyholders and business and knowledge actors to the online platform, and provide the conditions and capabilities upon which the insurance firm can effectively exploit its leverage in the value network to broker synergies of value creation that will yield enormous benefits for all.  Having its policyholders and business partners actively interacting and engaging with each other, and with it, online, will  deliver the advantages of the internet to the insurance provider in ways that will, in the long run, prove to be groundbreaking. As it is, insurance firms cannot fully and effectively take advantage of the internet and its capabilities. User adoption rates on insurance firms’ customer-facing online platforms are dismal, between 20-30%, and the activity patterns of users are predictably periodic. This is in stark contrast to the evidence that shows that every day more and more Americans are going online to access (and engage one another around) medical information and health matters. Pew Internet Project, for instance, estimates that 61%, or some 122 million, of adult american internet users, use the internet regularly to access health information. (Of these, 60% reported that the information and advice accessed through online search and engagement had had a significant impact on how they mananged their health or that of others in their care.). Online health consumer platforms continue to record increases in web traffic, with WebMD, for instance, receiving an average of 54 million unique monthly users in 2008, an increase of 21% over the previous year, and 1.3 billion quarterly page views, or a 30% increase. The success of this pioneers have even defied market trends and shown a growth in online advertising and sponsorship, thus not just underscoring the uniqueness and pivotal influence of the online health care consumer platform, but the health care consumer’s willingness to engage.All data available show that American consumers are increasingly engaging with  one another, and with health professionals, online, and the only ones lagging behind in exploiting the advantages that the internet offers for value creation are the insurance companies. This is indeed unfortunate, for no other players in the health care sector have better leverage than the insurance companies, for providing the perfect basis upon which online value creation in the health care system can be more systematic, more efficient and more productive. Exploiting their leverage as payers, insurance firms can provide the perfect incentives for more active collaboration between all the players in the healthcare value network, paving the way for the realization of immense benefits for all. Much as they would desire to, the existing online health consumer platforms cannot excercise the same leverage that insurance firms can to bring about these transformational outcomes, unless, off course, they started to offer insurance themselves. As payers, insurance companies are positioned at the intersection of a great number of interests and are taxed with the role of brokering and coordinating between these interests. This makes insurance companies the ideal entities to operate online health consumer platforms and provide the incentives that will see the internet advantages for network and network value creation, fully realized for the health care system.

For instance, with insurance companies, consumers/policyholders, and business and knowledge actors actively interacting and engaging with each other on an (incentivised) online platform, the goal of more widespread adoptions of fully integrated and efficient systems of electronic health record exchange, will have a much more stronger and cohesive basis for rapid and more successful implementation. As evidence accrued from experience has shown, it is within integrated systems of health delivery, HMOs, for instance, that the adoption of systems of electronic medical reports, EMR, has been most successful, and has had the greatest impact. Because it is also based on the insurer and  underwriter of consumption, and because it leverages the dynamic capabilities of the internet, this innovation offers the same potential for integration as managed  care systems, with perhaps greater flexibility, greater potential for value creation, and more value-based competition. Insurance companies will find it to their advantage to offer their platforms as as a channel through which electronic health records were transmitted and coordinated between the different actors in a value chain, e.g.  the physicians, hospitals, patients, diagnostic centers, pharmacies and, of course, the payers themselves. The gains in cost-savings, efficiency and quality of service will acccrue to everyone.

Likewise, using their leverage as payers to incentivise consumers to channel their private out-of-pocket consumption through these online platforms, insurance companies will help deliver the opportunities for cost-savings, efficiency and customer relationship management that the internet offers for online vendors, while managing to earn additional income for itself, its shareholders and policyholders, alike. It is, after all, estimated that private out-of-pocket spending on healthcare by consumers makes up 15%  of the 2.28 trillion current total annual spending on healthcare, or 340 billion. The potential here, too, is obvious, and the extra income will help insurance firms better absorb the pressures of  consumerism and wean them off their obstructive tendencies.

Another way in which this innovation, if implemented, will help the health care system, as a whole, better realize the benefits of the internet, is through the collaborative value creation it incentivizes. The advantages that the internet offers for collaborative value creation have been successfully demonstrated, and the benefits in terms of increased efficiency and quality are clear. By incentivising consumers to collaborate in value creation, insurance companies will present their business partners with an invaluable opportunity to realise great gains, particularly in areas of research and product development.  

In all of this the potential benefits for the insurance provider will be numerous and significant, and will serve to justify the decision to implement. They include:

  1. 1.      A wealth of business opportunities in line with the enhanced role as a broker of network synergies. Offering this incentivized engagement platform to all the actors in the healthcare value network, with an insurance incentivize for the most important actor, the consumer, the insurance firm will place itself squarely at the intersection of a great number of online business opportunities. This will set up the incentive for the insurance firm to become a more proactive player in the search for greater efficiency and greater quality in value creation, in the healthcare value network.
  2. 2.      Increased income from new multiple revenue streams, which will help subsidize the cost of health plans and add substantially to the bottom line. The engagement platform we are proposing here will deliver opportunities for generating additional income in collaboration with users/policyholders, and this extra income will help the firm be better able to offer enhanced coverage and benefits to consumers and policyholders, and help allay the conflict between policyholder and shareholder interests.
  3. 3.      Opportunities for developing efficiencies for insurance business operations, processes and strategies, as a result of greater internet interaction with policyholders and healthcare business partners.  Having its policyholders and business partners engaging with each other, and with the insurance firm itself, online, will provide the insurance firm with incredible opportunities for streamlining its business structures, processes and operations, which have long been identified as a great source of waste and inefficiency. It will also provide the perfect opportunity to achieve greater synergy and effectiveness in its coordinating functions as the payer and underwriter of health care consumption.
  4. 4.      This Innovation (and its incentivize plan) will mitigate against the pressures of over-utilization and over-consumption in two key ways. One, by drawing consumers to channel their healthcare consumption through the platform in ways that generate additional earnings and benefits for the firm and for their (consumers) own insurance policies. And two, by incentivizing consumers to engage in health matters in ways that raise health consciousness and promote healthier lifestyles.
  5. 5.      Greater flexibility and adaptability for the firm on the whole.  Taking advantage of the opportunities that this innovation will provide, the insurance firm will be transformed into a more efficient, more versatile enterprise and operation. This innovation will enable the insurance firm to benefit more widely and more dynamically from its unique role in the healthcare value network, and, at the same time, help it better absorb the pressures of consumerism in health care. 
    1. 6.      Increased insurance business as a result of lower costs of health plans, and also as a result of the viral and network effects that the online platforms and incentive schemes will help generate.
    2. 7.      Improved relations with consumers/policyholders and industry business partners, and more productive collaborations and partnerships.
    3. The potential for cost-savings in all of this, too, is huge and glaringly evident; particularly as the insurance firm takes advantage of the various opportunities that will be provided by this innovation for streamlining and adapting its business structures and operations, as well as strategies. With more of its policyholders and business partners participating online, the insurance firm will be better able than before to more effectively exploit the business advantages that the internet offers, and eliminate the wasteful costs and other inefficiencies that have been associated with the traditional model and approach. Clear examples here off course include inefficiencies in areas of administration, information processing, communication and coordination, in marketing and sales, and in consumer relations – all of which stand to be transformed with the shift to the internet and the attainment of user/policyholder collaboration online. 

      Even with regards to its policies and strategies in coverage structuring and underwriting, the insurance firm will stand to benefit from this innovation, as the additional earnings come in to provide greater flexibility and help to relieve some of the pressures brought on by a method of financial reckoning which pits the interests of its shareholders at diametric odds with those of its policyholders.  This realignment of interests between the firm, its shareholders, and its policyholders, will see, in time, the firm shift away from those policies which have earned insurance providers a negative image with consumers and the other industry players, and which, quite frankly, have led to a cul-de-sac in terms of possibilities. The end result, then, of implementing the proposed innovation would be a more flexible, more adaptable, consumer-powered insurance firm, which is able to dynamically take advantage of diverse business opportunities, and be a more proactive catalyst of value creation within the healthcare value network.

      Key Implementation Issues

      One of the best advantages of this innovation with regards to implementation is, of course, that it is a relatively low-cost proposition. Costs are diminished, in the first instance, by the internet advantages of low cost and cost-effectiveness for implementation and operation; and, in the second, by the fact that most insurance companies already have considerable investments in internet infrastructure and operations. Risk is also diminished by the innovative mechanisms of value creation and micro-transaction based benefit distribution that the internet enables, and that can be devised to ensure that benefits are realized entirely based on results, while virtually guaranteeing real value generation. The internet not only allows for real, dynamic engagement and collaboration in value creation, but also provides capabilities for applying precise methods of reckoning transactions of value whereby benefits can be fairly and adequately distributed between the participants. Other key issues to take into account when considering implementation include:

      1. 1.      Engagement and Pricing models. The insurance firm considering implementation will, of course, need to set up a policy and transactional framework under which other business and knowledge actors in the industry will engage its policyholders, and under which these policyholders will stand to be rewarded with a share of the revenue. This system will need to be intricate and flexible at the same time. It will have to provide different models of user-engagement for different types of business and knowledge actors, and strike reasonable accommodations that ensure the interests and concerns of all the participating parties are safeguarded, while optimizing quality value generation. And though there are some obvious challenges and limitations in devising engagement and pricing models that fully exploit direct user-collaboration for all business and knowledge actors, the accommodations that are possible under this innovation are such that incentivized user-collaboration is still a major factor in the quality of value that these actors can achieve. Incentivized user-collaboration on the whole will mean a much more engaged user base; and so, while it may not be viable for some business actors, say advertisers, for instance, to be charged a fee for ever instance of user-collaboration within an unlimited number, the accommodations that are possible under this innovation will be such that the potential benefits for these actors will surpass those that can be had elsewhere. Therefore, if an advertiser were to be offered an engagement model that combined a limited number of instances of direct user-collaboration with more passive forms of advertising, the fact of greater user-engagement, overall, would have the effect of increasing the potential impact of the advertiser’s campaign. (Passive forms of advertising could, for instance, gain from being posted, by consent, on the personal pages of a user with a high participation rating – because of his/her frequency of posting quality content and other forms of contribution – and, as such, had established themselves as a viable avenue to an engaged audience. This user would, of course, stand to be awarded points for this indirect form of collaboration, and the value of the points earned will be a share of the fees for hosting the advertisement.).
      2. Outlines of other possible models of engagement and pricing for other business and knowledge actors include: 

        • Providers of health care services, such as hospitals, physicians, hospices and retirement homes etc, would benefit from a ratings and referral directory system that promoted quality and customer satisfaction. Consumer would post ratings on quality and provide feedback that helps these providers improve their services and achieve competitive advantage.  Providers who received leads or business as a result of a favorable rating in the directory of providers would, naturally, be charged a fee per a certain number of leads. The collected fees would be shared with consumers as part of the platforms overall profits, as opposed to a direct share for each instance of  posting a rating, providing feedback, or even engaging the services of the provider.
        • Pharmacies and other vendors of health care products would be allowed to offer their products to a market of incentivized consumers, and charged a fee for each transaction. The fee would be shared between the transacting consumer and the insurance firm.
        • Researchers looking for a limited number of participants for a research study, pharmaceutical trials or market survey, would be afforded the opportunity to place their appeals on the platform long enough to get the required number of respondents, and be charged a fee for each instance of participation. The limited scope of this model could be compensated with other opportunities for engaging the user; for example, through communications and discussions on their work posted on the platform, in which case revenue could be earned from advertisement and sponsorship attached to such content.
        • Agreements between the insurance firm and promoters carrying out promotion campaigns of health and hygiene related products and services could be struck that would see users offered a certain number of points for participation instead of the commonly employed gift or prize options.
          1. 2.      Privacy and Security Concerns. As usual, User’s Privacy and the security of personal information is always a key concern, especially when it comes to personal health. But as we have already pointed out, the existing platform providers have pioneered privacy policies that have been shown to work, and there is nothing about the approach we are advocating for here that would necessitate adopting different policies or significantly modifying on these. Invariably, the main principles to observe are transparency and openness, together with user-control and all the other customer-centered values that are today codified as best practice for enterprises operating in the web 2.0 internet environment. Fortunately, it is in this innovations DNA, so to speak, that these values be front and center for it work. It is not a charade: it is real genuine partnership.
            1. 3.     Marketing and Promotion. The potential that the implementation of this innovation could be met with skepticism from the public is, however, admittedly present, and it is therefore imperative that the firm takes some important steps to overcome this. For one, the insurance firm must be prepared to offer the consumers real significant benefits for their participation and be prepared to open up the business of insurance to greater transparency and to more involvement and participation by policyholders. The method for reckoning the value of the points earned, for instance, should be weighted in favor of the policyholder. There must be real benefit for participation. The details of this method must be shared with the public, just as should the record of the platform’s performance and earnings. The value to the consumer, and to the business and knowledge actors, for participating, must be front and center of a comprehensive marketing and promotion campaign that is executed on the basis of full disclosure and genuine communication of the ideas behind the innovation. This strategy should aim at straightforward communication designed to engage the diverse audience of consumers and producers in the health care system, and in the public domain, in an open and objective consideration of the real benefits that this innovation for all. These and other similar measures would be very instrumental in helping consumers and everyone else overcame any skepticism. Fortunately, and as we have already mentioned, the merits of this innovation are compelling enough on their own, and do not require any sensationalist pitch beyond the simple facts; and, being engaged on the basis of the bare and compelling facts, consumers and business and knowledge actors will be more readily driven to act out of their own self-interest.  
            2. The opportunities and potential benefits for both business and knowledge actors and the consumer/policyholder are given here:

              Business and Knowledge actors     

              1. 1.      Greater potential for impact and better results for advertising, marketing and promotion campaigns as a result of having an engaged and participatory audience.
              2. 2.      Quality and dynamic feedback from consumers.
              3. 3.      Quality market and societal information.
              4. 4.      Quality research through incentivized consumer participation and collaboration.
              5. 5.      Numerous opportunities for uncovering efficiencies and achieving greater quality in value creation through incentivized consumer collaboration.
              6. 6.      Better online sales for vendors like online pharmacies, health books and information publishers, natural health product vendors, health fitness programs etc.
              7. 7.      Quality opportunities for developing effective CRM strategies as a result of incentivized consumer engagement.
              8. 8.      Better value-based, consumer driven competition in the industry.
              9. 9.      Higher quality communication avenues for public outreach initiatives such as public service announcements, appeals for public contribution, and other public awareness efforts.
              10. 10.  Potential for cost savings with the uncovering of efficiencies and the shift away from less successful online strategies.


                1. 1.      Top of the list, off course, is the opportunity to earn a share of the revenues from their engagement and collaboration in value creation, monies that will be applied towards enhancing their insurance coverage.
                2. 2.      Through their contributions to value creation, consumers will be instrumental in no small way to the discovery of the efficiencies that will deliver reform and change to the healthcare system.
                3. 3.      Along with this will come the opportunities to influence value creation and to get the producers and providers of healthcare products and services to respond more readily and more effectively to their needs and interests.
                4. 4.      By engaging on health matters with each other, and with other actors, consumers will play a crucial role in disseminating health raising awareness of health issues and promoting healthier lifestyle choices in the larger society. This, too, will have the inevitable effect of influencing quality and value-based competition in the system.
                5. 5.      With greater efficiency and more value-based competition in the system, consumers will stand to gain from increased quality of health care, lower costs and more value added benefits.
                6. Note:

                  Even assuming modest adoption rates that would see only a fraction of the firms’ policyholders active at the beginning, the opportunity to engage with an incentivized consumer will still be attractive to the business actors because of the obvious gains in quality that come with it. Assuming even an active population of say 1 million users for a mid-sized carrier with a customer base of 8 million, or 12 ½ %, which is below the current adoption rate for insurance providers’ customer facing online platforms, business actors would still find it to be an appealing proposition, each for their own reasons, a specific or set of specific ways in which they can gain immensely from user-collaboration, and all of them because of how important the health insurance provider is in their transactions with the marketplace. The incentives are there for everyone and the potential benefits for all, including the insurance provider, are both real and significant. Once the collaborative platforms are up and running and the first-adopter policyholders, business actors and insurance firms are engaging in dynamic and highly productive ways, the efficiencies that they uncover will become part and parcel of the way of doing business in the healthcare system and with time everyone else will be drawn in. 

                  Advantages and Benefits of This Innovation for the Entire U.S. Healthcare System.

                  Two basic features of healthcare industries and value networks across the world, including the U.S., are the high level of interdependence between the different actors, and the great reliance on information/knowledge processing and communication. The critical nature of all value creation activities and the stake that each actor has in the final outcome of better health drives this interdependence and necessitates quality discovery, development, processing and communication of information and knowledge. A distinguishing mark of the U.S. system is of course the large role that private enterprise plays both in the production of health products and services and in the financing of consumption, which opens up the system to the influence of market forces and provides dynamically for consumer choice and informed consumption. And while the participation of the private sector in the U.S. system has led to enormous gains, particularly in research and medical advancement, it has also contributed significantly to a disproportionate and unsustainable rise in costs, linked to a variety of factors, including rapid advancement, high rates of consumption and utilization, and, we have already pointed out, the inherent limitations of the generic for-profit insurance business model. High costs, as everyone knows by now, have invariably been associated with such detrimental consequences as continued contractions in access for consumers, waste and further disintegration of interdependence and market efficiency, more obstructionism from insurance companies, declines in quality, and an overall state of hazardous unsustainability.

                  Not incidentally, what most analysts taking a look at the private sector in the ongoing healthcare reform debates (and in the past) have remarked, is the urgent need for ways to enhance more value-based competition and to achieve a better and more productive alignment of market forces, as the surest means of reigning in the untenable escalation of costs in the U.S. healthcare system. Increased value-based competition in the health care system would mean that the marketplace, specifically informed consumers, exerted greater influence on the nature of value and on quality standards than is currently the case. In such a state of affairs, producers and providers of health care products and services, including insurance firms, would compete to deliver on market and customer expectations through persistent efforts in search of greater efficiency, cost-effectiveness, improved quality and value added benefits, and greater customer service. Now obviously, this is not something that can easily be mandated through legislation, and instead requires change and innovation from within that will organically produce significant realignments of interests in favor of value. An assessment of the ways in which our proposal provides for the realization of these objectives all within a single innovation, offers further confirmation of its strength and dynamism, and validates it as presenting a truly breakthrough opportunity.

                  Value Based Competition

                  (a)               It will incentivize consumer participation, engagement and collaboration in value creation, therefore providing business actors with the opportunities to have their value creation activities informed actively by the consumer. This will undoubtedly lead to important gains in efficiency and quality and ensure that competition in the healthcare market place is value-driven.  Through user generated ratings and consumer feedback, for instance, consumers will ensure that their choices and preferences impact on the value creation activities and choices of producers and providers, and help maintain a focus on the generation and provision of real value.    

                  (b)              It will deliver the internet and, more specifically, an incentivized online marketplace, where business actors can achieve greater impact from their marketing and value delivery strategies. With greater engagement and informed consumption by consumers, these strategies will naturally emphasize value and further reinforce the bias in favor of quality.

                  (c)               It will present opportunities for the realization of operational efficiencies by enabling synergies of online connectivity between the different actors in a value chain, thereby strengthening value creation and enhancing quality.

                  Market Realignment    

                  (a)               It will provide incentivizes for the convergence of diverse synergies of self-interest around a collaborative dynamic of online value creation wherein the benefits for all will be numerous and significant.

                  (b)              It will provide the perfect basis on which all the actors in a value chain can collectively exploit the internet for better information communication, exchange and coordination, and for more effective interdependence.

                  (c)               It will provide great incentives for the insurance companies to become more proactive catalysts and brokers of value creation. The benefits that insurance companies will stand to gain from this innovation will help to extend the limitations of the generic insurance business model and help wean them off their obstructive tendencies.

                  (d)               It will incentivize consumers to engage on health matters with each other and with other actors in the system, thereby serving to raise health awareness, promote healthier lifestyles and disease prevention habits, all of which will help mitigate against over-consumption and over-utilization.

                  (e)              It will serve as an alternate means of financing healthcare consumption which will help to ease the pressures on both insurance companies and policyholder premiums, and help to keep costs down. The revenues earned from these platforms will provide insurance companies with the extra flexibility to offer policyholder more coverage benefits, and deliver greater, expanded coverage to the market.  

                  From all of the foregoing, it is clear that this innovation is a fully free-market proposition for achieving better value-based competition, and greater market and system efficiency, in the interdependent and information/knowledge heavy healthcare industry in the age of the internet. It provides the perfect and most dynamic basis on which all the actors in the healthcare value network can collaboratively exploit the internet, the greatest information/knowledge communication and network tool in history, to independently and collectively realize incredible gains in efficiency, quality, and cost-savings, better benefit distribution and more effective interdependence. It incentivizes and empowers consumers, the actors with the greatest stake in the final outcome of improved health, to play a greater role in value creation, to inform the value creation activities of business and knowledge actors in ways that lead to significant gains in efficiency and quality, to engage more on health matters and help promote better health in society, and through their overall participation, help make consumerism a much more productive force in healthcare. And last, but not least, this innovation provides the insurance provider with great incentives (by way of significant potential benefits) for adopting more productive strategies in relation to the other actors in the value network. 


                  In the short term, an insurance firm that implements this innovation will begin to see growth in activity and growth in early adopters, both policyholders and business and knowledge actors, on its platform. With increased activity, the insurance firm and its business partners (including the policyholders) will begin to explore what engagement and pricing models are most effective and decisions will be made on what changes to adopt. In time, the business and value creation opportunities will become clear and the work of exploiting them will begin in earnest. From the engagement and collaborations between policyholders/consumers and the business and knowledge actors, will come a wealth of benefits that will see other actors attracted to the platform. Advertisers and marketers, for instance, will see their campaigns achieve greater measurable impact. Online vendors will register better sales and benefit additionally from quality CRM strategies as a result of incentivized consumer engagement. Researchers will have their pick of incentivized participants for their research and studies, not to mention the benefits that the platform will provide for data collection and tracking, all of which will impact significantly on the quality of their work. Health service providers like hospitals, physicians, caregivers etc, will benefit from consumer rating systems, and so on. As they continue to reap the benefits from this incentivized engagement platform, many of these business and knowledge actors will make the decisions to adapt their strategies, fully or partially, to the opportunities on offer, and, in time, lock-ins will form in terms of new ways of doing business.

                  Consumers/policyholders, on the other hand, will take increasingly to the platform to perform a variety of tasks: for example, to search for health information and research on providers, products and services; to participate and engage with other consumers on forums, discussion boards, through blogs and other forms of user-generated content; to engage with health experts and other types of knowledge actors and acquire information on health matters that they will in turn help to disseminate. They will also develop their personal spaces to communicate their interest and concerns and in so doing help to spur more activity from other participants. And oh yes, they will increasingly channel their consumption through the platform, purchasing prescription meds, health supplements, health publications and countless other products from online vendors, earning rebate or discount points for themselves in turn. And of course, in everything that they do on the platform, consumers/policyholders will, in one way or another, be helping to generate significant revenues from e-commerce and advertising, and will stand to get their fair share.

                  All the while, the insurance firm will in turn be taking advantage of the increased interaction between itself, its policyholders and business partners, to achieve incredible efficiencies in its business operations. The immediate opportunities for achieving such efficiencies will of course be in the communication, exchange and coordination of information within a value chain. Claims processing, for instance, which is surely supposed to be a core capability of any insurance firm, but which is increasingly outsourced (because in the current state of things insurance firms find it easier to do so than to develop efficient systems), will obviously stand to be strengthened by this increased interaction. The exchange and coordination of patient medical records between providers of health services and the insurance firm will also stand to be made more efficient under this platform. The insurance firm will also right away take advantage of the greater interaction and engagement with its policyholders and business partners to improve relations. With time, as business increases on the platform, and as lock-ins occur in terms of new ways of doing business, the insurance firm will find that more areas of their operations stand to be transformed. These include areas of administration, coverage structuring and underwriting, marketing and sales, amongst others, which have continually been associated with waste and inefficiency. Administration will stand to be transformed as operations become more centralized around the platform, reducing the need for extended operations in multiple locations. Marketing and sales, likewise, will be revolutionized by the shift of business onto the internet, lessening the dependence on agents as the buzz around the platform and the viral and network effects work to bring in new insurance business, and open up new ways of reaching the market with product and service offers.

                  In addition to taking advantage of the opportunities that the platform will provide to transform its operations, the insurance firm will also pursue the new business opportunities related to the convergence of interests that will be made possible under this innovation. As the operator and initiator of the platform, the insurance firm will find itself squarely at the intersection of a great number of business opportunities that will be to its advantage to help broker. In so doing, the insurance firm will be helping to underwrite value creation, albeit in more a proactive sense than in simply putting up the finance for it. And of course, the benefits from this for the insurance firm, in terms of revenues earned, will be enormous.

                   Indeed, the totality of revenues earned and costs saved, directly and indirectly, from this innovation, will be so significant as to transform the business of insurance radically. At the end of a full financial year in operation, the insurance firm will find that the income earned from this innovation will be considerable enough to satisfy both its bottom line expectations and the demands of its customers for enhanced coverage. As a result of the increased, the insurance firm will begin to experience greater flexibility with respect to its coverage structuring and underwriting strategies, allowing it to expand coverage and offer more competitive benefits to consumers.

                  In the long term, say 2 to 5 years, and with more insurance companies making the decision to adopt this innovation, the health care system will stand to be radically transformed. The efficiencies and new ways of doing business that will have been discovered by the early adopters will have experienced lock-in and the newcomers will serve to expand the reach and benefits of these new practices. Online value creation in the health care system will become more systematic, more efficient, and more productive. The gains in quality and value-based competition will be considerable and will have a significant, measurable impact on health outcomes. Increased participation and engagement by consumers will also begin to register a measurable impact on the health lifestyle choices of the larger society. Information communication, exchange and coordination within value chains will be drastically enhanced, and the goal of widely adopted systems of electronic medical record exchange, will, more readily than with any other approach, be realizable. Together with the increased income for the insurance provider, and for its business partners, these things, all these varied ways in which this innovation will deliver benefits to the U.S. healthcare system and its actors, will, above all, translate into one ultimate outcome:  a drastic cut-back on runaway costs.

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                  With more insurance companies choosing to implement this innovation, more consumers and business and knowledge actors will be drawn to the online platforms and into their collaborative dynamic of value creation. The efficiencies and new ways of doing business that will come from this innovation will become more widely spread, and the benefits generated will accrue to an even wider range of actors. This expansion will serve to push back against rising costs a lot more effectively than any single piece of reform or legislatively mandated change could.

                  Inevitably, however, some insurance companies will be more successful at this than others. Competition will be made even more perilous by the very nature of business on the internet, where, more than in any other sphere, consumers exercise choice more readily. While this undoubtedly a good thing in terms of driving quality, insurance companies will have to work harder to retain their customers, who will always have the choice of switching carriers to join different platforms for whatever reason. The less successful companies will naturally lose their market-share of consumers/policyholders, while the more successful ones will move in to consolidate their positions and to maintain growth. Inevitably, corporate consolidations and outright buyouts will occur, leading to instances of regional and niche dominance. Far from being detrimental, such instances of dominance will actually be beneficial in terms of enhanced efficiency and the sort of concentrated value creation that will ensure an optimization of benefits for all.( And again, due to the nature of competition on the internet, and because this is a fully free-market approach, no instance of dominance will ever be invulnerable.). With all the actors within a region, for instance, interconnected together through one or two carriers, the integration of value creation activities will be much more enhanced and will lead to greater quality productivity. Invariably, the circumstances that will prevail in the U.S. health care system after this innovation becomes entrenched will be ones where value creation is greatly enhanced, quality is significantly improved, access is broadened, costs are down and under control, enormous benefits are widely distributed, and the interests and strategies of all the actors are more effectively and more productively aligned.


                  Jones Mereu

                  [email protected]


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                  Our idea offers a solution for how the for-profit health insurance provider business model can be innovated on to not only allow for active participation and collaboration by policyholders in the creation of value, generate additional revenue and help finance the cost of health plans, but also provide for the realization of an improved, and invariably more productive alignment of interests and strategies across the entire healthcare value network.