Health plans seeking to enter new lines of business should assess their portfolio, expertise and scale, and consider the following factors to address potential challenges head on:
- Which LOBs serve members with needs that are complementary to our current capabilities?
- Do our current marketing capabilities align with the sales channels of other LOBs?
- Are there other plans and/or vendors we can partner with to leverage their expertise?
Consideration 1: Which LOBs serve member with needs complementary to our current capabilities?
Entering Medicare Advantage: Resource intensive, high potential payoff
As a rapidly growing and potentially lucrative market, Medicare Advantage is an appealing opportunity for many plans with ambition to diversify. However, MA plans must be equipped to serve a demographic with far different needs than the commercial or Medicaid population and operate in a highly regulated market. Medicare Advantage serves individuals with more complicated and costly health conditions than the average commercial health plan member. To enter the MA market, commercial health insurers often require sufficient capital and infrastructure investment to manage risk for aging individuals with complex medical needs.
There is unique opportunity for Medicaid-focused plans to enter the MA market through Dual Eligible Special Needs Plans (D-SNPs). D-SNPs are MA plans that serve beneficiaries dually enrolled in Medicare and Medicaid, designed to streamline the coordination of services for members who are eligible for both programs. D-SNP beneficiaries are typically low-income and report lower health status than the average commercial enrollee. Managed Medicaid plans are familiar with these types of members and may be well equipped to manage their complex needs. Moreover, some states are pushing for more integrated Medicare-Medicaid dual plans because they reduce administrative burden and duplicative costs. These states make a favorable environment for smaller Medicaid plans looking to enter the MA market.
Entering Medicaid managed care: Strong opportunity for MA plans with high-acuity members
MA-focused plans might look to enter the Medicaid market because both programs need strong care management capabilities. To be successful, Medicaid and Medicare plans must manage high-acuity members with complex conditions. Plans with expertise in managing the Medicare population likely have supplemental benefits, staffing, and data infrastructure to manage Medicaid beneficiaries effectively. However, since the Medicaid market varies on a state-to-state basis, it is more difficult for plans to scale their programs uniformly across geographic regions and grow in the Medicaid market.
Entering the individual market: Stable growth prospect for commercial and Medicaid plans
The individual health insurance market presents an opportunity for all plans (especially commercial and Medicaid plans) to enter a new market. Enrollment in the individual market has increased 17% since 2021, mostly driven by enhanced government subsidies making premiums more affordable. The ACA individual market covers approximately 17 million people and will likely grow as more people become eligible with the end of the public health emergency (PHE) and corresponding end of the continuous coverage requirement for Medicaid.
Commercial plans looking to diversify face a lower barrier to entry to the ACA individual line of business relative to government lines of business. The individual market has seen steady growth in participation from insurers since it was launched in 2014, due to stabilization of marketplace enrollment and increased federal subsidies for members. Commercial insurers can enter the ACA market to build experience managing a more complex population with lower relative costs per member than Medicaid. This can also act as a steppingstone into the Medicaid managed care market by giving commercial insurers a chance to build their care management capabilities and provider relationships.
Similarly, the individual market is an opportunity for insurers with expertise in the Medicaid market. Given the similarities between the socioeconomic status and health conditions of the two populations, Medicaid plans are well equipped to manage members covered by the ACA individual insurance market. Moreover, many people fluctuate between the ACA individual market and Medicaid based on their eligibility over time. Therefore, operating in one of these markets allows plans to build trust and recognition with members, and an opportunity to retain those members in another line of business.
Consideration 2: Do our current marketing capabilities align with the sales channels of other LOBs?
Entering Medicare Advantage and the commercial group market: Bolster broker relationships
Medicare Advantage plans rely heavily on broker relationships to market and sell their product. Today, the average Medicare beneficiary has 43 plans to choose from, making it more crucial than ever for plans to stand out. Selecting a plan is difficult for beneficiaries to navigate on their own, so many of them rely on brokers to understand which plan to enroll in. Given that brokers play an important role in the selection process, new entrants in the MA market should establish strong relationships with brokers and communicate their value proposition clearly to those individuals that will market their product to prospective members.
Similarly, the commercial group market is a broker-dominated business. Employers often hire a broker to navigate which health plan would be the best fit for their company and employees. Brokers provide information on available plans in the area and their assessment of what the plans can offer each company. Commercial insurers with long-standing relationships with brokers benefit because brokers are more likely to understand and recommend those plans to employers.
Entering Medicaid managed care and the individual marketplace: Market to individual consumers
While commercial and MA plans interact frequently with brokers and agents, Medicaid managed care organizations (MCOs) and plans on the ACA marketplace market directly to individual consumers. First, plans must submit and win a request for proposal (RFP) bid to the state to be selected as an eligible Medicaid provider in that state. Individuals eligible for Medicaid are sent a list of the eligible Medicaid providers they can choose to enroll in, but they are often automatically enrolled in a plan selected for them because they do not select one in time. Medicaid plans must establish a community presence—through partnerships with local community organizations—to attract Medicaid members to their plan. For individual marketplace plans to be successful, they need to effectively market themselves to members navigating the marketplace. In this case, it is crucial to clearly communicate a plan’s value proposition and differentiating factors to consumers. Both types of plans must identify the right channels to reach consumers directly and build trust within the communities they serve to engage individual consumers.
Consideration 3: Are there other plans and/or vendors we can partner with to leverage their expertise?
Create scale with vendor partnerships
Large national players have the financial position to acquire and build out capabilities needed to serve new markets. Smaller players, however, should leverage partnerships to create synthetic scale to overcome capital constraints. For example, some MA and Medicaid managed care plans have partnered with NourishedRx to connect their members with nutritious, accessible food options. NourishedRx is a digital health platform that provides personalized food solutions, including groceries, meal prep guidance and nutrition consultations. This is especially relevant for Medicaid plan members, who often lack access to nutritious and affordable food options. Small and midsized plans can leverage partnerships with companies like NourishedRx to provide members’ access to fresh produce and distinguish themselves as a plan in a new market like Medicaid.
Build capabilities through joint ventures
A joint venture can also facilitate the process of entering a new market by allowing an organization to leverage the strengths of another organization rather than expend capital to build capabilities internally. Several health systems have launched joint ventures with health plans to drive patient volume. Health plans, too, can leverage a hospital’s patient relationships and access to members, while both entities work to improve outcomes and close gaps in care. For example, Blue Cross and Blue Shield of North Carolina partnered with Duke University Health System to launch a Medicare Advantage product called Experience Health in 2019. The plan, jointly owned by the two entities, leverages the network and health management programs of the health system and the claims management capabilities of the insurer. Outside investments through venture capital firms or private equity also enable smaller plans with limited capital to enter new LOBs. This type of partnership gives plans the necessary capital to make investments in costly infrastructure, knowing they won’t see short term returns.
Note that while these partnerships are helpful steppingstones into new markets, they still require time and capital. Most companies will not see returns on the investment immediately. Health plans should leverage these partnerships to lower the barrier to entry into a new market but understand that it is still a long-term investment.