Power to the People?
How health care reform could result in the disruption of the group health insurance industry
Upstart carrier Southwest Airlines turned the industry on its ear by pioneering process innovations and a lower-cost operating model that gave it a decisive advantage over larger, incumbent hub & spoke carriers. Southwest's experience is a classic example of Disruptive* innovation - and today's health insurance companies should apply lessons learned to looming ACA-driven changes in the individual health insurance market.
As the insurance market's center of gravity shifts from a focus on savvy purchasers of group plans to relatively less-sophisticated purchasers of individual benefits, the door is opened to a full-scale Disruption of today's incumbent group carriers by smaller, more nimble upstarts. However, by recognizing and acting upon the early warning signals, today's market leaders may be able to survive and thrive as the market transforms.
Power to the People? How health care reform could result in the disruption of the group health insurance industry is a new paper that:
- Explains how, through a mechanism of change known as “Disruptive innovation,” upstarts and new entrants may assume marketplace leadership at the expense of group health insurance incumbents;
- Provides examples of Disruption in other prominent industries;
- Reviews the potential risks and opportunities associated with insurance exchanges and government support for the purchase of individual plans for lower-income earners;
- Describes three market entrants that may pose threats to health insurance incumbents;
- Explains how incumbents can position themselves to be the beneficiaries of Disruptive change, rather than its victims.
Download Power to the people? How health care reform could result in the disruption of the group health insurance industry.
*Throughout the paper, we have capitalized “Disruption” to signal that we are using the term in a technical sense. Specifically, we are following the convention initiated in The Innovator's Manifesto, by Michael E. Raynor (Crown Business 2011), the most recent book to explore and extend the theory of Disruptive innovation, first discovered by Clayton M. Christensen (see The Innovator's Dilemma (HBS Press 1997) and The Innovator's Solution, co-authored with Michael E. Raynor (HBS Press 2003).