Healthcare Ecosystem Power Structure Explained

This video provides an in-depth exploration of the power structure within the employee healthcare ecosystem, specifically focusing on employer-sponsored health plans. Dr. Eric Bricker begins by establishing the critical importance of understanding industry power dynamics for both incumbents and potential disruptors. He illustrates a recurring pattern of "disruptors" – such as disease management companies, wellness programs, and modern point solutions – that experience a surge in popularity only to fade due to a fundamental flaw: consistently low utilization rates among employees and plan members.

The core of Dr. Bricker's analysis introduces the "Table of Power," identifying three permanent and influential entities in the employee healthcare ecosystem: the Plan Sponsor (the employer, typically represented by HR, benefits, and CFO teams), the Healthcare Consultant/Broker (who aggregates and integrates plan components), and the Health Insurance Carrier (the platform on which the plan operates). He further elaborates on a hierarchical structure within each of these power players, drawing on Jeffrey Moore's framework of "gorillas," "chimpanzees," and "monkeys" to describe large national accounts, mid-market players, and small local entities, respectively. Examples are provided for each category, from Aon and United Healthcare as "gorillas" to smaller regional brokerages and Third-Party Administrators (TPAs) as "monkeys."

Dr. Bricker then draws a powerful analogy between this healthcare power structure and the enterprise software industry, likening carriers to large platforms like SAP or Oracle, and consultants/brokers to integration services like Accenture or Cognizant. He explains that venture capital and private equity typically invest in scalable platforms rather than services. For true, lasting disruption in healthcare, he argues, one must aim to unseat the incumbent carriers by offering a "better, faster, cheaper" platform solution, citing Salesforce.com and AWS as prime examples of companies that successfully disrupted established enterprise platforms. He warns that "fourth parties" (the temporary disruptors) are often either acquired or replicated by the powerful carriers, making their independent existence precarious.

Key Takeaways:

• The "Table of Power" is Permanent: The employee healthcare ecosystem is dominated by three enduring entities: the Plan Sponsor (employer), the Healthcare Consultant/Broker, and the Health Insurance Carrier. Any solution aiming for lasting impact must engage with or become one of these.
• "Fourth Party" Disruptors are Temporary: Historically, solutions like disease management, wellness programs, and current point solutions (e.g., for diabetes, mental health, MSK) are temporary "fourth parties" that rise and fall.
• Low Utilization is the Death Knell: The primary reason for the failure and eventual waning of these "fourth party" disruptors is consistently low utilization rates by employees and plan members, despite their initial appeal.
• Hierarchical Structure Exists Everywhere: Within each of the three power seats (Plan Sponsor, Consultant/Broker, Carrier), there's a hierarchy (Gorillas, Chimpanzees, Monkeys) based on market size and influence, which dictates who serves whom.
• Platforms vs. Integrators: The healthcare ecosystem mirrors enterprise software, with carriers acting as scalable platforms (like SAP/Oracle) and consultants/brokers as integrators/customization services (like Accenture/Cognizant).
• VC/PE Favor Scalable Platforms: Venture Capital and Private Equity firms primarily invest in scalable platform businesses, not typically in services, due to differences in profit margins and growth potential.
• Carriers Absorb or Replicate Disruptors: Incumbent carriers often neutralize "fourth party" disruptors by either acquiring them (e.g., Aetna buying Active Health Matters) or building their own competing solutions.
• True Disruption Requires Unseating the Platform: For a startup to create lasting change and achieve high utilization, it must aim to replace an existing platform (the carrier) with a "better, faster, cheaper" alternative, rather than operating as a temporary "fourth party."
• Salesforce.com and AWS as Disruption Models: These companies serve as prime examples of successfully disrupting entrenched enterprise platforms by offering superior value propositions, providing a blueprint for potential healthcare disruptors.
• Broker/Consultant Loyalty is Transactional: Brokers and consultants are often open to alternatives to carriers, as their loyalty is frequently maintained through override payments, indicating a potential opening for truly innovative platform solutions.
• Strategic Attachment for "Fourth Parties": If a company operates as a "fourth party," its best strategy for survival and impact is to tightly integrate or attach itself to one of the permanent players at the "Table of Power."

Key Concepts:

• Employee Healthcare Ecosystem Power Structure: The established hierarchy and influence of various entities within employer-sponsored health plans.
• Table of Power: The three core, permanent entities: Plan Sponsor, Healthcare Consultant/Broker, and Health Insurance Carrier.
• Fourth Parties / Disruptors: Temporary solutions that aim to improve cost containment or specific health outcomes but lack a permanent seat at the power table (e.g., Disease Management, Wellness Programs, Point Solutions).
• Low Utilization: The critical failure point for many "fourth party" solutions, where employees and plan members do not sufficiently engage with the programs.
• Jeffrey Moore's Hierarchy: A framework categorizing market players into "Gorillas" (large national accounts/dominant players), "Chimpanzees" (mid-market/super-regional), and "Monkeys" (small market/local).
• Platform vs. Integrator Model: An analogy drawn from enterprise software where large, scalable systems (platforms) are distinct from the services that customize and integrate them (integrators).
• Better, Faster, Cheaper: The fundamental value proposition often required to successfully disrupt and replace incumbent platforms.

Examples/Case Studies:

• Disease Management Companies: Active Health Matters, Health Dialog (early 2000s disruptors).
• Wellness Programs: RedBrick Health, Virgin Pulse (2010-2015 disruptors).
• Point Solutions: Livongo (diabetes), Hinge Health (musculoskeletal), Ovia (maternity) (current disruptors).
• Consultants/Brokers (Gorillas): Aon, Willis Towers Watson, Mercer.
• Consultants/Brokers (Chimpanzees): Lockton, Gallagher, USI.
• Consultants/Brokers (Monkeys): McGohan Brabender (regional example).
• Health Insurance Carriers (Gorillas): United Healthcare, Blue Cross plans.
• Health Insurance Carriers (Chimpanzees): Aetna, Cigna.
• Health Insurance Carriers (Monkeys): Various Third-Party Administrators (TPAs).
• Enterprise Software Platforms: SAP, Oracle.
• Enterprise Software Integrators: Accenture, Cognizant.
• Successful Platform Disruptors: Salesforce.com, Amazon Web Services (AWS).