Strategies for Insurers (and Members) to Win in the Fixed Market

insurersWith the new federal and state exchanges now active, there is an unprecedented opportunity for insurance plans to gain market share.  Segments of the population that have never traditionally had insurance, as well as those already in individual and family plans, are migrating to the new nationally standardized plans.   In April 2014, 7.1 million uninsured people in the United States had become new customers across the nation between the Individual and Family Plans and small business markets.

The health insurance marketplace will not be without challenges for health insurers who are trying to win market share.  One of the main reasons for this is the leveling of the playing field for all insurers, making it difficult for insurers to compete for members outside of a few key areas. In these new markets, all plans have a standard set of essential health benefits that are now required in order for them to be offered, with a fixed out-of-pocket maximum.  With homogenized plans, insurers are left with less than a handful of differentiators to compete with:

  1. Pricing
  2. Operations (e.g., Customer Service, Reputation, etc.)
  3. Provider Networks

Another key leveler for plans is the fact that insurers cannot market and actively target the most advantageous segments in the market, specifically the young and affluent.* According to California Assembly Bill X12 Section10965.5:

“(a) Commencing on October 1, 2013, a health insurer or agent or broker shall not, directly or indirectly, engage in the following activities: (3) Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individual’s race, color, national origin, present or predicted disability, age, sex, gender identity, sexual orientation, expected length of life, degree of medical dependency, quality of life, or other health conditions.”

Ultimately, companies are looking to medical management to deal with the already ill or older members that are acquired, and the reality is,  if done correctly, this could lead to significant gains for the health insurers, but this still does not remove the need or desire for healthier and younger members.  It becomes even more critical for health insurers (e.g., United, Kaiser) that have not yet built out full medical management capabilities.

Given these constraints, health insurers should be asking the question: “Are there other levers that can be pulled to win market share besides price, operations, and networks to win over the choice population?”

The answer: most definitely, yes! This lever already exists in some capacity within your existing channel strategy, but is too far down to register on most executives’ radars. It sits within tools, specifically Web tools and mobile applications.  A payer organization must do more than allow them to exist, but you must have the best of breed that caters specifically to the market segment you are trying to attract.

According to Nielsen in 2012, 66% of Americans between the ages of 24-35 (“Millennial”) own a Smartphone; furthermore, 80% of Web content used on mobile devices is consumed through applications (“apps”). This is exactly the market segment health insurers want to win.  Additional statistics that should be considered when looking at your mobile and online strategy as a way to win over the young are:

  1. Millennials are more digitally connected on a daily basis than their Baby Boomer counterparts. The difference is quite stark: 84.4% of 18-29 year olds versus just 58.5% of 50-64 year olds go online in a typical day.
  2. Baby Boomers lag in mobile usage. While Smartphone adoption continues to increase among all demographics, its rate of growth amongst Baby Boomers is slower than that of younger generations. Approximately 28% of Baby Boomers have smart phone devices, versus the 66% of Millennials highlighted above.

By having a sound mobile strategy with the right kind of applications, plans have the ability to tap into this choice demographic.  However, just building a mobile application that allows an end-user to find a provider or pay their bill is no guarantee to win this audience.  These apps already exist and have become ubiquitous. In reality, you provide very little value to a consumer who looks at health insurance as a resented but un-necessary evil.  Instead, companies must stretch and look to other industries for best practices and build on trending concepts like “gameification .”  You also need to ensure that the tools actually provide value that fits into a complete customer-centric experience: from selecting a plan, to managing costs, to the members’ health outcomes.

If providing a cool and valuable experience helps you attract and retain this segment, then pushing this strategy, plans can see further gains.  As you push more of your services to the Web and mobile devices, it is well-documented that businesses can reduce administrative costs.   Certain members are more likely to turn to these tools for self-service.  Ultimately, customers will not only find but then take the path of least resistance to get what you need.  If you provide all the tools for self-service, but place the right barriers to more costly options, insurers will see the double benefit of:

  1. Reduction of Per Member Per Month (PMPM), and
  2. Minimize reliance on legacy systems and processes.

At this point, plans must exercise caution so as not to overstep boundaries and legal pre-requisites of the law.

To understand the potential of what insurers could accomplish with this strategy, one only needs to look at how banking (another similar industry: highly regulated and financial in nature) has successfully developed and implemented mobile applications.  In a few short years, the banking industry has shifted whole segments of its membership – away from expensive brick and mortar operations with mobile tools – into members who no longer need to take time out of their day to visit expensive local branches to deposit checks, make an investment or transfer funds.   The potential of further winning customers with these tools gets even more exciting when one considers where mobile banking is going with mobile wallet capabilities, location based services and promotions, video support, and individual customization.

Regardless of where insurers draw the line, an aggressive mobile and on-line strategy can pay dividends in attracting and keeping new members, especially in today’s market where every provider’s mobile app and Web experiences are a copy of the others’ features.  Outside of Oscar Health Insurance of New York, there are few examples of companies changing the user experience, winning fans, and converting potential customers.  In short, “the field is ripe for the picking.”  Insurers need to get out of their comfort zone and push themselves to see how members’ lives can be made better, easier, and more efficient.

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