Broad Analogy: The Five Forces In An Industry

Threat of Entry, Intensity of Rivalry, Threat of Substitute Products, Bargaining Power of Suppliers, and Bargaining Power of Buyers, which is also known as the Five Forces in an industry are very important factors to any business which plans on being successful. These forces make the business aware of what they need to improve and can map out an idea of how financially stable the business may be as well. Businesses often change, and sometimes so does what then apply to the five forces.

Threat of Entry

Lack of continue funding for Medicare and Medicaid services has been the biggest threat to the organization as well as those who receive benefits from these insurance companies. There are over 44 million Medicare beneficiaries (this includes the elderly and disabled) and over 70 million Medicaid beneficiaries (this includes low-income children and adults, as well as pregnant women). Loss of these benefits would be detrimental to those who receive benefits. Without such coverage they likely would not be able to afford healthcare. Many of these clients have mental health needs or are on medication for chronic conditions, without coverage to pay for such treatment’s patients would suffer and may not be functioning society members. It is projected that the enrollment numbers will increase to 77 million beneficiaries by 2030. Without funding there would be too many patients to cover which may cause income guidelines to increase or denial of certain high-priced services, in order to cover such high numbers of individuals and families.

Intensity of Rivalry

Since the Affordable Care Act has been enforced there have been many more insurance companies offering Medicare advantage plans as well as healthcare coverage to those who would not otherwise qualify, due to age or preexisting conditions. The ACA does not allow for insurance companies to deny coverage due to preexisting conditions, although those plans can be pricier due to the extent of care needed for the beneficiary. If Medicare lost funding as stated in Threat of Entry, this would allow for other insurance companies to offer plans to those members who could not receive Medicare policies which would be beneficial to those companies but not to Medicare since Medicare does require deductibles be paid.

Threat of Substitute Products

Medicare separates their benefits into four parts Part A- hospital benefits, Part B- outpatient services, Part C- Medicare advantage plans, and Part D- pharmacy benefits. There are separate deductibles for each of these and not every part is included without extra costs. This causes many beneficiaries to lean toward advantage plans as they usually have all services under the same premium plan. This is great for patients but does serve a threat to Medicare. Medicaid covers all services under the same plan so that would not apply to Medicaid recipients.

Bargaining Power of Supplies

With healthcare costs rising premiums are rising as well. This means many people are paying more into premiums and are trying to slim down their health plans to services they believe they will need to avoid paying higher premiums for services they find unnecessary for the time being. Many insurance companies are offering competitive rates with the uprising in options which is has its benefits.

Bargaining Power of Buyers

Many families are living paycheck to paycheck and health insurance is another expense for them to worry about. This causes strain on all aspects of life including on if they can afford healthcare coverage. Having tax penalties for those who do not have coverage have geared citizens to acquire healthcare coverage. However, they are still looking for reasonable prices as stated above.