Health Insurance Industry - Research Paper Example

Health Insurance Industry The overall development of health insurance industry started during 1930s and the current market structure and economic orientation of the market has remained complex one. As the overall transition took place within US society due to migrations from rural to urban areas, the overall depth and breadth of the industry expanded and new products and services were offered to cater to the new needs of the industry. (Stevens) It is important to note that the early development of the industry took place in a manner to avoid overall competition between the providers.

However, as the industry grew and matured, competition gradually increased and now industry is considered as one of the competitive industries in the country. Individuals and families seek health insurance in order to cover the risks of adverse financial impact their health situation can have on their savings as well as the current income. Health Insurance Industry therefore pools the funds and covers the risks of adverse health situations of the subscribers. (OHare). As it is a sub-industry of the overall insurance industry within financial services industry.

Health care insurance market is an inter-related market where insurance providers are complexly related with other health care service providers also. As such Health care insurance firms work as intermediaries between the patients and the providers and reimburse the providers with the expenses incurred on health care provided. It is however, important to note that the overall market structure of the industry is considered as imperfect as lack of perfect information for the consumers as well as limited choices in terms of number of providers.

Overall market is concentrated as two top companies i.e. Wellpoint and UnitedHealth have more than 36% of the share with total membership of 67 million subscribers. What is important to understand that the industry has also witnessed many mergers since 1990s as such increasing the overall size of the individual companies? (American Medical Association) The overall product offering are differentiated as the product development depends upon the kind of services subscribed by the consumers. Since this industry is regulated too and involves the contribution from the employers in some cases therefore the overall products offered in the market are quite differentiated depending upon the premiums paid and add on services subscribed by the consumers.

Though the industry is highly concentrated however, the role of regulations as well as the involvement of public insurance firms has limited the ability of large players in the market to increase the prices or potentially distort the market. Some studies however, do suggest that the health insurance providers were able to charge higher premiums to firms which were more profitable. Further, this however, only happened when the insurance firms were largely concentrated and comfortably exercised their market power.

Due to more concentration in the industry, the overall level of premium has increased by at least 2% after the adjustment of inflation. (Duszak) The overall structure and conduct of the major players in the market however, is mostly dominated by the way other factors such as health care service providers. Three Health Insurance Firms The leading firm in the Health Insurance industry is UnitedHealth Group with over 70 million customers who have been serviced by the firm over the period of time.

It is important to note that the UnitedHealth Group works with the name of United Healthcare- its health insurance arm which is also the leading health insurance provider in the country. One of the key to the overall success and dominance of United Healthcare is the success with which it has been able to execute differentiation strategy. Over the period of time, it has been successfully able to differentiate itself from others in terms of claim processing, accuracy of payments. Further, it has been further able to differentiate its services through the formation of strategic partnerships with the key healthcare service provider, acquisitions of other firms as well as innovation in terms of reaching out to the customers.

United Healthcare has been able to reach its customers suffering during Hurricanes and have been able to demonstrate the focus strategy to respond to the customer requirements in much faster manner. (Hernandez, Karas and Rounds) Overall, the firm has been able to execute a combination of strategies such as differentiation as well as diversification in its range of services offered. WellPoint Inc. Apparently, the overall strategy of the firm is based upon delivering value to the customers by providing best healthcare value in the industry while at the same time becoming best at the execution of the day to day claims.

1 Over the period of time, firm has been able to develop a work-force which is considered as one of the best in the industry. Since, firm works in a services industry with personal selling to the customers therefore it focuses more on delivering value through its trained and qualified human resource base. (Monson) One of the keys to the success of WellPoint is its ability to form strategic relationships with the healthcare service providers. This network of businesses has therefore allowed the firm to become one of the dominating players in the industry with substantial market share.

Kaiser Permanente This firm is third largest firm in the industry and is a non-profit health plan- a unique feature which gives it a distinct advantage over other firms. The overall strategy of the firm is the tighter integration of its clinical services with its health insurance services. As such the firm is engaged in forward integration where at the one hand, it offers health insurance services while on the other hand, it is also offering medical and clinical services. Its services are based upon primary, secondary as well as hospital care. (LOHR) This firm is also significant player in terms of using electronic medical records and health pathways and is considered as one of the cost effective players in the market to offer health insurance services.

Its overall value generation and strategic advantage therefore comes from the tighter integration of its various services which are combined together to produce desired results. Bibliography American Medical Insurance. Competition in health insurance - A Comprehensive Study of US Market. 2007. http://www.ama-assn.org/ama1/pub/upload/mm/368/compstudy_52006.pdf. 29 January 2012. Duszak, Alexandra. Health reform law gives states $250 million to analyze higher premiums sought by companies . 2 August 2011.

http://www.iwatchnews.org/2011/08/02/5468/us-states-step-oversight-health-insurance-companies-rate-increases. 29 January 2012. Hernandez, Maria, et al. UnitedHealth Group, Inc. 2011. http://www.stjohns.edu/media/3/af5b5ed78ff34b10ab0c5499431e7112.pdf. 29 January 2012. LOHR, STEVE. Is Kaiser the Future of American Health Care? 2004. http://www.nytimes.com/2004/10/31/business/yourmoney/31hmo.html?_r=1. 29 January 2012. Monson, Thomas S. People will work hard for paycheck, harder for a person, and hardest for a reason. 2008. http://astd2008.astd.org/PDF/Speaker%20Handouts/ice08%20handout%20SU218.pdf. 29 January 2012.

OHare, Thomas P. Individual Medical Expense Insurance. New York: The American College, 2000. Document. Stevens, Rosemary. In Sickness and In Wealth: American Hospitals in the 20th Century. New York: Basic Books, 1989. Document.