Here is my case:
Our client is Liberty HealthCare, a large health insurance firm based in the United States. Liberty HealthCare sells health insurance policies to businesses, which in turn provide health insurance to employees. While a large and reputable firm, our client has had stagnant revenue over the past five years and is considering entering a new market – the individual health insurance market.
When an individual purchases a health insurance plan on the individual health insurance market, they pay a monthly fee to the insurance company – which is called a premium – and in turn, the health insurance company reimburses the individual for incurred medical costs.
In the individual health insurance market in the United States, plans are sold directly to consumers, and Liberty Healthcare must sell different plans for each state. For example, the healthcare plans sold in California cannot be purchased by Americans living in Texas. Liberty Healthcare must comply with two additional major government regulations:
First, individual insurance plans must be available to all customers, regardless of health status, and all customers pay the same price – whether healthy or terminally ill – this is the guaranteed issue requirement.
Second, the American government provides money to individuals making below a certain income so they can afford their insurance in the form of government subsidies.
The CEO has hired your team to advise the client on whether or not to enter the individual health insurance market.
What are the factors you would look at when advising your client on this decision?
=> My approach: I define this problem as to evaluate the attractiveness of the individual insurance market => then I use Porter 5 forces to analyze the case.
However, when checking the correct answer, they just look at 4 factors: the client's goal, how the client acquires customer, revenue opportunities and cost of providing this insurance.
My question is: is this answer from the case owner correct? If yes, how they can come up with these factors? What is the logic behind these factors?