My sense is that 2016 will see a continuation of trends that have emerged over the past several years.
Each trend is a result of structural changes taking place in our business that directly relate to the passage of ACA legislation. Each has economic implications that will play out for years to come. Here’s a breakdown of what I see as the top four trends in health and benefits in the coming year.
First, consolidation will continue to be a reality in every facet of the healthcare, health insurance and employee benefits space. Historically low borrowing costs will drive deals large and small. Changing regulatory dynamics will impact everyone’s margins, so scale of operations will become increasingly important. Carriers, hospital and medical groups – as well as benefit brokerage firms – will need to grow to survive. Mergers and acquisitions are the fastest way to gain scale and this is an arena we feel very comfortable playing in. Our partnership and acquisition team will continue to grow so that we can find more than our fair share of deals in the marketplace.
Emerging technology firms, solutions and business models will remain a major trend grabbing headlines throughout 2016. Most of you have heard the names Zenefits, GoCo, Zen Payroll (now Gusto), Namely, BambooHR and an almost endless supply of newcomers to a very hot investment space. You may be aware that we are in the process of launching our own Simplify solution. Clearly there is a trend of convergence between HR software, benefits consulting and payroll. Sorting out this competitive landscape and making wise strategy and investment choices will remain a top priority for OneDigital, so stay tuned for more news in this area.
A direct offshoot of this technology and convergence trend will be evolving business models and new alliances between companies. Today in many ways there are new companies with new solutions losing a significant amount of money, giving things away or even charging very little for their products or services. On the other side of the ledger you have a number of entrenched competitors with huge client bases and significant profit streams. Who wins downstream will be about strategy and execution. Who decides to go it alone or align with other firms will be interesting. Who gets in or out of what type of business line also will be interesting. The trend is that siloed offerings are converging, but firms will need to figure out business models that allow them to deliver services profitably. The benefits business is not like taxi cab services, so in my mind the Uber analogy rings hollow. The trend is everyone is talking to everyone to figure out our space. Competitors may end up working together. Again, stay tuned.
The aforementioned trends tie directly to ACA legislation and everyone’s focus on the overall issues of affordability of health insurance and healthcare services. High deductible plans are bringing to light major issues surrounding family budgets and an overall ability to pay for services. At the same time premiums costs continue to rise. There is no silver bullet to address these challenges associated with overall affordability, particularly for small and mid-sized businesses. The politics of this issue will undoubtedly begin to focus on price transparency of services being rendered, and how consumers will increasingly react to this challenge. Of late, the headline has been price gouging by specialty drug manufacturers. My sense is this is just the beginning of a political hot potato.
In all, 2016 will prove to be a year that continues to introduce and evolve new technology offerings, interesting industry partnerships, price transparency as well as an increasing level of debate about affordability from consumers and politicians alike. Through it all, we will continue to look ahead and invest in our business with confidence that our teams and solutions will effectively deliver for our clients in 2016 and beyond.