Health insurance value chain in the US has been in flux for the past decade, partly thanks to the political instability (think Obamacare vs. “Trumpcare”), and more importantly, due to significant technological advancements. Impact of digitization has been tremendous in closing the information gap between payers and providers as well as providers and patients – Electronic Medical Records (EMRs) systems facilitate information sharing amongst providers, digitalized billing platforms streamline processes and enable population health analytics, and telemedicine and other direct-to-consumer technologies empower patients to be more engaged in their care and expect higher levels of service, quality, and affordability1.
Oscar Health and Bright Health, two new entrants in the market have each raised $727M and $240M respectively, on the premise of disrupting health insurance by building a direct relationship with customers2,3. At the core, these new business models and others in the category leverage clinically integrated physician organizations to offer health insurance that is simple, friendly and affordable – shifting consumer mindset and their perspective of insurers from “a necessary evil” to a service they love4.
The emergence of these new business models is expected to have significant implications for traditional payers like UnitedHealth, shifting customer demand to lower cost, higher quality payers like Oscar Health and Bright Health while negatively impacting the bottom line due to the increased cost required to match the competitor’s service.
UnitedHealth’s [marginal] digitization efforts
As the market leader and largest insurance provider in the US, UnitedHealth Group has sustained its dominance and “data supremacy” through significant investments and multiple acquisitions – forming a new subsidiary Optum, the largest healthcare IT company in the world by revenue5. Optum’s health data analytics, payment integrity, risk assessment and medical billing capabilities have proved effective and its performance was the highlight of 2016 for UnitedHealth, with earnings reaching over 50% of total operating earnings6.
Importantly UnitedHealth has been ahead of its other large, traditional competitors in adapting to the new paradigm shift, mainly through acquiring health data analytics companies to bridge some of the existing information gap – A few good examples of this are UnitedHealth’s acquisition of Axolotl, a Health Information Exchange (HIE) software and services provider, and Picis, a developer of Electronic Medical Records (EMR) for hospital emergency units. Later in 2013 UnitedHealth also acquired Humedica, a clinical data analytics vendor that enables providers to instantly access and compare medical record data changes across time and provider group – a true prize catch for UnitedHealth in its efforts to build on its profitable data empire and differentiate itself amongst other traditional, large competitors.
Despite Optum’s financial success, however, UnitedHealth has failed in leveraging its data empire to improve quality of care or affordability in meaningful ways – providing fertile ground for new entrants like Oscar Health and Bright Health to grow exponentially4.
Looking forward to [a bright] future
In 2016 alone, UnitedHealth’s revenues grew by $17B and reached $144B7. The company is growing at incredible pace, and investors remain optimistic about its growth path, as evidenced by its sustained share price increase despite overall industry turmoil. Moving forward to effectively maintain its market leadership, UnitedHealth should implement a long-term strategy that ensures the following:
- Integrate more directly with providers and health systems and therefore gain access to large sets of clinical data while reducing the pool of providers available to new entrants
- Invest significantly in mobile apps, telemedicine and concierge services to improve quality of care, customer satisfaction, and operational efficiency
- Consider launching company owned primary clinics, urgent care, and specialty care centers
UnitedHealth has already been experimenting with some of the above initiatives such as select telemedicine and preventive care programs to increase the quality of care but has achieved mixed results. The success of such programs, proven by many startups such as Oscar Health and Bright Health, require more than just monetary budget allocations and investments, and will only succeed if implemented in a fully integrated ecosystem where patients care journey is curated in a controlled setting fostering data transparency, and accountability. UnitedHealth is well positioned to leverage its existing relationships with customers and care providers to create such micro-ecosystems that are more regional and targeted by design and therefore can foster a more holistic and personal service to patients.
Looking forward, two key questions remain: can this disruptive and entrepreneurial strategy be implemented in a sustainable way at a large corporation like UnitedHealth? And if so, are management and shareholders incentivized to commit to this undertaking given the current broken healthcare system and political turmoil?
 “The Innovation Health Care Really Needs: Help People Manage Their Own Health”. Harvard Business Review. October 30, 2017. Accessed November 10, 2017. 1. https://hbr.org/2017/10/the-innovation-health-care-really-needs-help-people-manage-their-own-health
 “Oscar Health | Crunchbase.” Crunchbase.com. Accessed November 10, 2017. 1. https://www.crunchbase.com/organization/oscar
 “Bright Health | Crunchbase.” Crunchbase.com. Accessed November 10, 2017. 1. https://www.crunchbase.com/organization/bright-health
 “Oscar Strategy Teardown: How The Health Insurer Is Beginning To Hedge Against Obamacare.” Cbinsight. October 26, 2017. Accessed November 10, 2017. 1. https://app.cbinsights.com/research/oscar-health-insurance-strategy-teardown-expert-intelligence/
 “Data battle: UnitedHealth deal is the latest move in industry shift”. Modern Healthcare. February 2, 2013. Accessed November 10, 2017. 1. http://www.modernhealthcare.com/article/20130202/MAGAZINE/302029973
 “UnitedHealth Has Trump Insurance”. Bloomberg. January 17, 2017. Access November 10, 2017. 1. https://www.bloomberg.com/gadfly/articles/2017-01-17/unitedhealth-secures-insurance-against-trump-uncertainty
 UnitedHealth Group. (2016). Form 10-K 2016. Retrieved from http://www.unitedhealthgroup.com/~/media/5D60EEEE258F4D2FA4BA765727C41D5C.ashx