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The shift toward consumerization in health insurance got rolling with passage of the Affordable Care Act in 2009 and has been gradually gaining speed since then. Now, retail giant CVS’s $69 billion agreement to buy Aetna has put a brick on the accelerator of consumerization in this space.

One driving force behind the CVS-Aetna deal may be the fear that Amazon, the e-commerce juggernaut from Seattle, is plotting a conquest of the pharmacy business. Whatever CVS’s motivations, its entry into the health insurance marketplace will force the industry to become more consumer friendly. That means injecting a huge dose of technology — especially data-analytics technology — along with marketing know-how into a business that has traditionally resisted change and innovation.


CVS will bring Aetna not only a wealth of consumer experience and relationships but also a level of technological savvy that the health insurance industry has never seen. The combined entity will possess massive amounts of data about Aetna’s members. It shouldn’t take long before CVS brings technology to bear that can help Aetna members better manage their prescription medicines, steer them toward CVS’s in-store care clinics, and offer vastly improved tools for managing their care and insurance online.

The deal will leave competing health insurance executives with no choice but to modernize their offerings and provide a user experience that approaches the standards set in the retail and consumer worlds.

It won’t be easy. On the spectrum of customer perception, health insurers rank closer to cable television companies than to retailers. There are plenty of reasons for that, including the fact that health insurance executives run their businesses with a deeply ingrained tendency toward conservative decision-making and incremental change. But if they are to keep pace with CVS, let alone Amazon, they’ll have to make bold investments, embrace change, and move fast.


It can be done. In more than 15 years of advising health insurance executives on technology, I’ve observed plenty of examples of their taking the conservative route. But I’ve also witnessed a few instances in which health insurance leaders took bold, innovative steps. In almost every case, those actions resulted in more modern, agile organizations that are now in stronger positions to compete with the likes of CVS and, perhaps before long, Amazon.

The Affordable Care Act kicked off this process for many insurers by forcing them to market their products to individual consumers instead of to employer sponsors. In addition to driving the development of new technology in the health insurance market, the ACA also inspired insurance executives to engage in new thought processes.

That’s the good news. The bad news is that ACA-driven innovation peaked about three years ago. The challenge now is to take the smart people who worked on the ACA puzzle for health insurance companies and put them to work improving the flow of information both within those organizations and out to providers, payers, and consumers.

Some of this work is a matter of cleaning up the tangle of technologies and systems that accumulated as companies have grew and bolted on various divisions and functions through acquisitions. Insurers largely built these systems themselves. Now they need to get over the historical, widespread fear of acquiring technology — and giving outside technology partners access to their systems — if they want to accelerate the process. The ultimate goal for insurers should be to aggregate all relevant information and services into single screens for their employees and customers. For employees, that means a single login to quickly find the information they need to help customers. For customers, it means managing their accounts, getting questions answered, and conducting transactions in a single, intuitive, personalized interface.

The reality of health insurance companies, of course, is that it’s always challenging to gain approval for investments in technology. The trick is to build a compelling case for return on investment. Some of the return will come from more efficient workflows within the company as employees no longer have to log in to multiple systems just to get their jobs done. With a universal, 360-degree view of customers’ health data, policy terms, and population metrics, insurers can reach out to providers for treatment recommendations while at the same time prompting members to obtain preventive care, such as flu shots, and even contact the pharmacies to fill prescriptions at the proper negotiated prices. It’s safe to bet that CVS will be implementing all of those solutions at Aetna, and likely using their combined data to drive customers into CVS’s in-store clinics. That would save Aetna from paying for hospitalizations and drive revenue for CVS.

The ultimate payoff may come from higher-profit margins as consumers become more engaged with providers and payers to manage their own care. Health insurers have the potential to serve as high-fidelity conduits for information among all three of those constituencies, but they need to invest in new technology to build the pipelines to do it. With the right platforms in place, they can layer on predictive analytics, digitization of medical records, and other technology to drive down costs even further.

As health insurers get more control over costs, they can move on to other strategies that auto insurers like Geico and Progressive mastered a generation ago: cutting premiums to gain market share, building powerful national brands, and inspiring customer loyalty. But the first step is understanding what it means to build a consumer-facing insurance company and investing in the tools to do it.

Mark Nathan is CEO of Zipari, a company that creates consumer-experience technology for the health insurance industry.