Business Management | January 2018 Hearing Review

Managed care continues to pose challenges and opportunities for hearing healthcare professionals. In 2017, the number of individual Medicare Advantage enrollees enrolled in a plan with a hearing aid benefit increased to 65% from only 47% in 2015. This article presents a perspective on the evolution of managed care and how dispensing professionals can evolve and adapt in these changing times.

Independent hearing healthcare providers have been feeling increasing pressure in the hearing aid market for years. Not only are they facing competition from other independent providers, but big players like Costco, UnitedHealthcare, and manufacturer-owned retail are making aggressive inroads into the hearing aid market. Additionally, many more health plans are starting to offer hearing aid benefits and are turning to third parties to administer their hearing aid benefit programs. What are the implications of these changes for the independent provider? Do these changes present a threat or an opportunity? To answer these questions, it’s important to understand both the dynamics of today’s hearing industry and the way the hearing aid customer is changing.

The Hearing Industry Today 

A majority of US adults with hearing loss do not wear hearing aids. In fact, of the 37.5 million adults with some degree of hearing loss,1 only about 1 in 4 (27%) purchase hearing aids, leaving approximately 73% untreated (based on our calculations from industry sources1,2). These statistics have caused many within the hearing industry, as well as outside the industry, to express concern and look for ways to address this problem.

Some approaches include hearing care providers as part of the hearing aid delivery process, while others do not. For example, the recently passed over-the-counter (OTC) legislation to create a basic hearing aid category would, at least in part, exclude hearing care providers in an effort to reduce consumer costs and increase hearing aid adoption. Some companies like UnitedHealth Group’s hi HealthInnovations®, Buyhear.com, iHear, and others, are already trying a direct-to-consumer (DTC) approach, removing local hearing care providers from the delivery process.

In recent years, we’ve also seen managed care expand its reach in the hearing care industry with more health insurance plans offering hearing aid benefits through a third-party company, such as TruHearing, EPIC, or Hearing Care Solutions. While this approach does include the hearing care provider through participation in the third-party network, some providers have questioned whether they can accept referrals from these programs and maintain a successful practice.

What Is Managed Care? 

Managed care is “a health care delivery system organized to manage costs, utilization, and quality.” In a health insurance setting, this consists of restrictions around what providers you can see, what products and services are covered, and the financial contribution from your plan. For example, dental insurance may provide coverage for a crown but not a dental implant, and may require the patient to be seen by an in-network dentist, and will cover only a portion of the total cost of the crown. With hearing aid benefits, health plans may limit the amount of coverage, products, and services included, and may require members to be seen by an in-network provider in order to use their benefits, which are increasingly being administered by a third-party company.

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Why Is Managed Care Expanding Its Reach within the Hearing Industry? 

In order to understand why more health plans are now offering hearing aid benefits and partnering with third-party companies to administer them, it is necessary to consider the market conditions that have contributed to this industry development. The health plan landscape is becoming more and more competitive. Consumers have many choices for health insurance, and health plans are under increased pressure to provide high-quality benefits, while keeping their costs and their members’ out-of-pocket expenses low. This influences which benefits a health plan may elect to offer.

As a health plan’s membership grows, they are able to offer better benefits to their members through economies of scale. However, because health plans have struggled to control costs for hearing aids, the majority have not offered hearing aid benefits. For those plans that do, the most common benefit is an allowance that can be applied towards the purchase of hearing aids (eg, a $500 or $1,000 allowance). This effectively controls the health plan’s cost exposure, but does not address the underlying cost of the hearing aid, which can still leave members with significant out-of-pocket costs. Members are pushing health plans to address their costs through increased benefits or more effective cost controls.

The health plan landscape is especially competitive for those plans wishing to attract consumers ages 65 and over. These consumers can elect to enroll in a Medicare Advantage plan, which is privatized insurance available to those ages 65+, or traditional Medicare, which is administered by the Federal government.

The Medicare Advantage plans have limited budgets to offer “extra” benefits, and must decide which combination of benefits —such as vision, dental, transportation, fitness, and/or hearing aids—will best attract and retain members. Plans seek solutions that allow them to offer valued benefits but still control costs. This is one of the reasons why more health plans are offering hearing aid benefits administered through a third party; it offers a way to provide a high-value benefit to their members while still controlling costs for both themselves and their members.

In fact, plans that previously offered a hearing aid allowance can often achieve significant cost reductions for their members by partnering with a third party to administer the benefits. This, in turn, increases their overall member satisfaction and makes it easier to retain and recruit new members.

Why Are Third-Party Companies Involved? 

In recent years, the hearing industry has experienced a rising trend of health plans offering hearing aid benefits, increasing hearing aid accessibility, and reaching some of the 73% of US adults with untreated hearing loss. Some involve hearing care providers in their programs while others do not. For example, the largest health insurer in the country, UnitedHealthcare, primarily utilizes a direct-to-consumer model, eliminating in-person fitting and programming services. Without the need to manage a large provider network or reimburse hearing care providers for their services, their costs are reduced.

Another approach many health plans have adopted is to partner with third-party companies. This approach is attractive to health plans, because it allows them to control costs by outsourcing the management of the provider network, administration of the benefit, hearing aid price negotiation with manufacturers, and product expertise. Though health plans excel at these functions in other major areas of healthcare, they do not have the resources or knowledge to effectively handle these items for smaller, more specialized disciplines like hearing healthcare and hearing aids. In fact, many health plans had never offered hearing aid benefits prior to partnering with a low-cost third-party solution, and may have never chosen to do so without these alternatives.

Direct-to-consumer and third-party benefit programs are reaching more adults with untreated hearing loss, and are a viable option for health plans. Each plan seeks to offer the best value proposition they can to their members, weighing the costs and benefits of including professional services from local providers.

What Role Does the Consumer Play? 

So, how does the consumer fit into this? Clearly, consumer pressure is one of the reasons health plans are adopting hearing aid benefits­—hearing aids and hearing care services are a valuable differentiator. People in the market for both hearing aids and health plans are more likely to choose a plan that offers an attractive benefit than one that does not. So how and why did this consumer pressure increase?

First, consumers today have a better understanding of hearing loss and hearing aids as a result of readily available information from consumer and hearing aid manufacturer sites online. They are also more aware of hearing aid pricing, which is openly shared by big-box stores and direct-to-consumer online retailers. Overall, this creates a more informed consumer.

Secondly, consumers today have different attitudes and behaviors towards hearing care and hearing aids than their predecessors. In general, they are more likely to exercise their buying power in the market than hearing aid consumers 5-10 years ago, whether it’s shopping around for better pricing or being more demanding about the products or services they receive.

Today’s consumers:

  • View hearing as a healthcare issue;
  • Regard hearing aids as medical devices;
  • Expect insurance to help cover costs;
  • Seek their health plan’s guidance in purchasing hearing aids, and
  • Are apt to seek help sooner and purchase when there is a benefit.

Consumers are accustomed to reaching out to their health plan and primary care physician (PCP) for their overall healthcare needs. Given that most view hearing loss as a healthcare issue, it’s not surprising that they seek the advice of their PCP or health plan prior to seeking out an audiologist or hearing aid specialist. For the same reason, many consumers also expect their plan to offer a benefit and a provider recommendation. The result is that today’s consumers are more likely to initially reach out to their health plan for their hearing care needs than they are to respond to traditional marketing methods employed by hearing care providers.

Understanding these consumer behaviors helps provide insight into why health plans want to offer a hearing aid benefit. An affordable benefit both attracts members and satisfies consumer demand, resulting in higher member satisfaction.

Threat or Opportunity? 

So to get back to the original question: With more health plans offering hearing aid benefits to attract consumers, what does this mean for hearing care providers: a threat or an opportunity? There are several factors to consider in answering this question.

Can managed care increase hearing aid adoption? Despite decades of trying, providers, hearing aid manufacturers, the Veterans Health Administration (VHA), and retail chains have only been able to reach 27% of adults with hearing loss. Today’s consumers are more informed about hearing loss, hearing aids, and prices, and many expect their health plan to offer a hearing aid benefit. They also report being more motivated to purchase with greater insurance coverage.3

These consumer dynamics make managed care a promising solution to expand the hearing aid market by reaching more first-time users. Providers who align themselves with health plans—either directly or through partnerships with third-party companies—will have access to these first-time users.

How does this compare to alternative solutions? Today’s consumers are increasingly aware they have many choices in hearing care from DTC options, to local independent provider care, to big-box retailers. When compared to DTC options and the potential of OTC hearing aids, managed care is the solution which is most likely to drive consumers to local providers.

Some existing hearing aid users are likely to explore cost-saving options being offered through their health plan if they previously paid out-of-pocket for their hearing aids. In that respect, managed care does represent a threat—turning a former retail customer into a third-party referral. On the other hand, it’s also an opportunity for providers who opt to participate in the customer’s health plan network, either directly or through a third-party company. In-network providers will have an opportunity to retain their relationship with existing patients who elect to take the health plan route as well as receive first-time user referrals.

How will managed care affect hearing healthcare providers?  In 2015, the number of individual Medicare Advantage enrollees enrolled in a plan with a hearing aid benefit was 47%, and this grew to 65% in 2017. While hearing aid benefit adoption is lower in other health plan segments, there are others where hearing aid benefits are increasingly being adopted. As mentioned previously, to handle the administration of these benefits, more health plans are partnering with third-party managed care companies. This trend is a clear indication of the direction the healthcare industry is going.

To be successful with third-party managed care referrals, providers will need to adapt many areas of their practice. For example, providers will need to determine whether or not to selectively or completely unbundle services for their retail patients in order to be consistent with the service model offered to third-party managed care referrals. While this allows providers to put more value on their expertise and services and not just product, providers must determine how they will incorporate this into practice.

Providers may also need to adapt to working with a higher volume of patients and managing the different requirements of the various third-party companies.

Traditional marketing methods will continue to be a necessary and important part of a successful practice. However, it would be a mistake to ignore the first-time users that managed care has been successful in reaching, especially because there is no marketing cost to acquire referrals through this channel.

Any one of these changes may cause some providers discomfort. However, with the expected growth in the number of health plans offering aid benefits, managed care presents an opportunity for the provider who is willing to evolve and adapt.

A Promising Solution 

Untreated hearing loss has sparked a lot of attention recently. As an industry, hearing aid manufacturers, retail chains, and independent providers are feeling increased pressure from both within healthcare and outside it to deliver a more inclusive solution. With consumers having many choices for health insurance, they are empowered to be more demanding of their health plans to offer a hearing aid benefit. In turn, many health plans are partnering with third parties to administer these benefits, and their members are enjoying lower out-of-pocket costs for hearing aids.

Managed care presents a promising solution to reach many of the 73% of US adults with untreated hearing loss who have not been attracted through traditional marketing methods, because it can maintain both quality of product and quality of care, while dramatically reducing their out-of-pocket costs. Providers who evolve to successfully incorporate these patients into their practice will be able to take advantage of this growing opportunity.

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References

  1. National Institute on Deafness and Other Communication Disorders (NIDCD). Quick statistics about hearing. December 15, 2016. Available at: https://www.nidcd.nih.gov/health/statistics/quick-statistics-hearing

  2. Strom KE. Hearing aid sales increase by 7.2% in 2015 after strong Q4 by private sector. January 13, 2016. Available at: http://www.hearingreview.com/2016/01/hearing-aid-sales-increase-7-2-2015-strong-q4-private-sector/

  3. Abrams HB, Kihm J. An introduction to MarkeTrak IX: A new baseline for the hearing aid market. Hearing Review. 2015;22(6):16-23. Available at: http://www.hearingreview.com/2015/05/introduction-marketrak-ix-new-baseline-hearing-aid-market/

Citation for this article: Singleton A, Greene P. Managed care: Threat or opportunity? Hearing Review. 2018;25(1):24-26.

Correspondence can be addressed to Patty Greene, MA, at: patty.g@truhearing.com

ALSO SEE…In the January 2018 issue of HR, Kim Cavitt’s article, Managed Care: Some Caveats and Common Sense for Hearing Care Professionals.