Retail Sales Will Be Vital for Insurers as 125 Million Switch Health Coverage - Health Plan Week

Over the next five to six years, as many as 125 million consumers are expected to transition — at least once — to a new type of health insurance coverage. As a result, $1 trillion in potential sales could be up for grabs, according to one former health plan executive. But to take advantage of this mass migration, health insurers will need to pay far greater attention to retail marketing while transitioning away from the employer-based wholesale market.

Health insurers traditionally have spent the bulk of their marketing dollars selling products to employers, either directly or via benefits consultants and brokers. By signing large employer accounts, health insurers have been able to secure more attractive rates from providers. Individual and retail sales, by contrast, have always been an afterthought, explains Fred Karutz, general manager of health plan solutions at Silverlink Communications. Prior to joining Silverlink, Karutz spent 10 years as a corporate vice president at Health Care Service Corp., which operates Blue Cross and Blue Shield plans in four states.
But as the health reform law accelerates a switch from wholesale to retail health insurance sales, health plans will need to forge relationships with their most valuable but least visible members — the ones who rarely use health care.
In every consumer market, customers who leave are seven to eight times more valuable than those who stay, according to Karutz. While members who regularly use health services tend to be most loyal, those who rarely seek care are most likely to switch carriers. “And those members are the ones who help create a fiscally stable book of business. Without those customers, you really can’t service the other ones,” he explains.

Group Enrollment May Decline 40%

The commercial group market, according to Karutz’s estimate, will shrivel from 160 million members in 2010 to just under 100 million by 2017 as some employers — particularly those with fewer than 100 workers and those with a large number of low-paid employees — drop health coverage and encourage workers to purchase their own individual policies. As a result, the individual market will balloon from an estimated 18 million members now to as many as 51 million. Other former group-insurance members will seek coverage through state insurance exchanges or will qualify for Medicaid coverage, Karutz estimates.
Mass migrations are nothing new for the health insurance industry. When Medicare prescription drug coverage became available in 2006, millions of seniors suddenly had options for drug benefits. “The group retiree market imploded, and a lot of employers got out of the retiree insurance business as a result,” Karutz says. The upcoming migration, he predicts, translates to about $1 trillion in gross risk premiums in today’s dollars. Health insurers that have very strong brand names — such as Kaiser Permanente and Blue Cross and Blue Shield plans, as well as national companies such as UnitedHealth Group, Humana Inc. and Aetna Inc. — will have a leg up over the competition when it comes to retail sales.
To take advantage of the migration, health plans must become more “retail centric”, he asserts. 

Go ‘Where Consumers Are’

Highmark Inc., a Pittsburgh-based Blues plan operator, has been a pioneer in retail health insurance for the past several years. The company operates six retail stores and also has two specialized tractor-trailer trucks that it uses to tout products and educate members. The idea is to “go to where our customers are instead of forcing them to come to our space,” explains Matt Fidler, vice president of consumerism and retail marketing. Highmark, he says, has been marketing products directly to consumers for more than a decade, but adds that learning to serve consumers as well as employers is a “big shift” for health insurers.
As employees who previously had employer-based coverage strike out on their own, Karutz says health plans will need to help them understand their coverage options and why one plan might fit their needs better than another. “Many of them have always relied on their employer to select the plans for them,” he says.
Fidler agrees and says consumers who visit Highmark’s retail stores typically are trying to make a decision about coverage and are seeking guidance. A recently laid-off worker, for example, might want to know about more affordable alternatives to COBRA continuation coverage. Or a 64-year-old might have questions about Medicare’s limitations.
While the stores offer a unique sales outlet, much of the floor space is dedicated to educating consumers — on everything from smoking cessation to Medicare coverage. Moreover, the retail presence, Fidler says, helps to build Highmark’s brand recognition. And brand recognition will be critical in 2014 when Highmark has to compete with the state’s three other Blues plans.

Retention Marketing Is Key Part of Retail World

The new retail economics of health care is a move away from risk selection and underwriting to a model based on risk management and “retention marketing,” says Karutz. Gathering data about customers, he says, is going to be just as important as managing claims. Health insurers will need to build profiles of their customers and personalize the health care experience by helping members make better-informed decisions.
Moreover, Karutz says health insurers must learn to connect with existing members throughout the year, so that when it comes time for them to renew a policy, they feel that their health plan is working to save them money and keep them healthy. “This is a challenge for health plans because they’ve always invested in [acquiring employer clients] rather than on retaining members.”