The idea

Health plans are diversifying outside of their historic business operations in response to heighted market pressures and to achieve long-term stability and growth. Line of business (LOB) diversification is one of the traditional methods of diversification, in which plans expand outside of their core market segment to leverage opportunities in other markets.

The promise

Each line of business presents unique opportunities for growth. Plans that pursue line of business diversification can take advantage of products that are growing particularly fast, have favorable demographics, or are becoming profitable under shifting market conditions. LOB diversification is an opportunity to support existing market needs while pursuing internal stability and even growth.

Why now

While some large health plans have historically operated in multiple LOBs, smaller plans are now diversifying as well to remain competitive. Along with increased competition across the industry, plans are facing higher medical costs and economic uncertainty due to high inflation and rising interest rates. These factors have shifted the health care landscape and heightened the urgency for plans to make plays that increase their revenue and, ultimately, improve stability. Entering new market segments within health insurance is one strategy plans are pursuing to achieve these goals.

Reality check

Health plans can grow through LOB diversification, but they face challenges such as resource constraints, marketing a new product, and serving new demographics. Plans need to consider these challenges in their approach to LOB diversification.