Only half of the story – why payers should focus more on the consumer, but not at the expense of their attention to employers

by Torsten Bernewitz

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Since the Affordable Care Act was signed into law last year, there has been a lot of discussion that the health insurance industry will shift from a business-to-business market to a business-to-consumer model.

The reason is that consumers are expected to take a much more prominent role in health insurance choices. More individuals will enter the market through the individual mandate of the law. They will be better informed and they will have a market place that facilitates comparison-shopping.  Engaging consumers effectively will also be critical in influencing behaviors to help manage outcomes, which in turn is an important element in containing medical costs.

Consequently, industry analysts and consulting firms (e.g., BCG), investment groups (e.g., Psilos) and service providers (e.g., Connecture) talk about the “imperative” of sweeping changes in channels, technology, and partnership strategies to move to toward consumer-oriented business models.

They are probably right – healthcare “consumers” are becoming more important, and it will be necessary to find better ways to engage with them. In fact, better interactions with the end-customer might have served the industry well all along, even before the new law. However, they are only half right, and risk missing the other part of the story, which is just as important. We shouldn’t give up on employers as key customers just yet. Here’s why:

First of all, the numbers do not really support the hypothesis of a full transformation to a business-to-consumer approach. Today, about 145 million people in the US enjoy employer-sponsored health coverage, which is 56% of all insured, and 89% of the non-government market. Even in the very aggressive scenario that 30-40% of the people currently covered by ESI would move to the individual market, this would still leave between 90 and 100 million people insured through their employers, probably more if we factor in population and payroll growth. This is still 60% of the non-government market.

In the perhaps more likely scenario that only up to 10% of ESI covered people move to the exchanges, 130 million will be in the employer market – 80% of the non-government market and still a segment that is larger than Medicare and Medicaid taken together.

Thus, the employer market will continue to matter, and falling head-over-heels in love with the consumer – if it is at the expense the employers segment - would be a strategic mistake.

This does not mean, however, that the employers business will remain at the status quo (there is more discussion of the potential changes in the employers market in this post: http://payer-strategies.blogspot.com/2011/10/to-drop-or-not-to-drop-that-is-not.html).

Employers are rethinking their health benefit strategies. Depending on specific conditions like size, hiring and retention goals, labor market conditions etc., employers’ priorities and benefit strategies will change and diverge significantly.  Health insurers must keep the pulse on their evolving needs, create stronger differentiation through products and services, tailor their offering, and become more impactful in bringing the value proposition across. In many cases this means that insurers must get much closer to employers than they currently are.

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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

To drop or not to drop - that is NOT the question

by Torsten Bernewitz

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As most people in the industry are aware, there are diverging opinions about how the Patient Protection and Affordable Care Act (PPACA) may affect the market for employer sponsored insurance (ESI), which currently represents over 70% of the non-elderly uninsured, or close to 150 million people in the US.

In particular, the discussion has focused on the question if - and how many - employers may stop offering ESI. Answers to this question seem highly explosive from a political perspective, going at the heart of what the law wants to achieve and its chance to achieve it.

However, from the perspective of health insurers and payers (as well as other stakeholders in healthcare), this may be the wrong question to ask, may in fact be a red herring that could lead to serious strategic mistakes.

In this post, I want first to summarize the different positions, and then discuss why the black and white perspective is limiting and what might be better questions to ask.

When the PPACA was signed into law in 2010, the Congressional Budget Office regarded its effect on ESI as minimal, estimating that about 7 percent of employees who currently enjoy health insurance through their employer would have to move to the exchanges in 2014.

In June 2011, management consulting firm McKinsey made waves with the bold claim that this estimate was far too conservative. Based on an employer survey they had conducted earlier in the year, the firm concluded that the law would trigger a radical restructuring of employer-sponsored health benefits. 30 percent of employers – potentially even more once everybody fully grasped the implications of employer mandate, the new insurance exchanges, and the law’s system of penalties and subsidies - would “probably” or “definitely” stop offering health coverage to employees after 2014, pushing them to the individual market instead.

However, two further studies published around the same time challenged this view again. Both the Urban Institute and the Robert Wood Johnson Foundation identified health care cost savings to firms with fewer than 50 workers, as well as a small increase in the number of people covered by their employer-sponsored plans, indicating a stabilizing influence of the Affordable Care Act on small firm coverage, which has been eroding over the last decade.

A similar view was shared in another survey, this time conducted by consulting firm Mercer in July 2011. Although employers voiced concerns about rising costs, most said they remained committed to offering ESI. Only 8% of survey respondents were “very likely” or “likely” to stop offering medical plans after the insurance exchanges become available.

Finally, while the above surveys and studies are speculative and based on modeling assumptions and stated stakeholder intentions, there is one real data point: Massachusetts introduced an individual mandate and penalty structures similar to those of the PPACA in mid-2007, and experienced a subsequent increase in ESI coverage. Of course, there is also a debate whether the Massachusetts case is a representative indicator for the national level.

However the black and white perspective on ESI – whether “to drop or not to drop” – is perhaps missing the point. It may also lead to strategic mistakes. Those who conclude that ESI will not change dramatically may be tempted to call off the alarm and continue business as usual. Those who conclude that ESI will be dropped left, right and center, may shift too much of their attention away from one of their core (and very profitable) customer groups, the employers. Both groups will miss opportunities.

The fact remains that offering employer sponsoring insurance is very expensive, and that employers need to tackle this problem to maintain ESI as a meaningful and valuable benefit for employees. According to consulting firm Hewitt Associates, healthcare premiums have more than doubled over the last ten years, growing more than five times as fast as the median household income in the US during the same time.

The 2011 Milliman Medical Index shows that the cost of PPO coverage for a typical family of four has now reached $19,393, of which the employer pays almost 60%, or $11,385, and the employee covers $8,000+ in contributions and out-of-pocket costs. This is significant if we consider that the average household income in the US in 2010 was just about $50,000.

If the underlying costs continue to grow - and it is not clear how they will be stopped - employers will need to rethink their health benefits strategies. Employers offer health benefits primarily to recruit and retain employees. How much can they ask employees to share in the increasing burden through higher co-payments, co-insurance or deductibles without seriously damaging the value recruits and employees put on the offering? Especially, if potentially more competitive coverage options become available on the exchanges?

Employers, in particular large ones, may still feel “morally obligated” to offer health insurance coverage, or see health benefits as a way to signal prestige and industry leadership. So they will likely offer something. The question is thus not whether, but what to offer.

Very likely these benefit offering will not be the same as today. Instead, they will include wellness programs, employee incentives, rewards and perhaps also penalties based on biometric outcomes. There will be more choice. And more options will create more diversified employer as well as employee segments.

It is also probable that, as the exchanges evolve, the relative value of coverage that can be obtained on the individual market - compared to ESI - will change through the effects of economies of scale and stronger competition. Employers will watch this evolution closely, and continue to adapt their ESI strategies.

The key question for health insurers and payers is therefore: how can we get as close as possible to employers to help them navigate their health benefit strategies and leverage opportunities to cross-sell new insurance products, new services like health IT and data solutions, or medical and wellness management?
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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

Stakeholder alignment - difficult but necessary

by Torsten Bernewitz

Payers who want to get closer to their end-customers must become excellent on four dimensions: consumer insights, consumer engagement, simplicity and openness and stakeholder alignment.

I discussed consumer insights, consumer engagement and simplicity and openness in more detail here:

http://payer-strategies.blogspot.com/2011/09/inside-consumer-insight.html
http://payer-strategies.blogspot.com/2011/09/consumer-engagement-making-difference.html
http://payer-strategies.blogspot.com/2011/09/simple-is-not-easy.html

Here are some observations about the fourth success factor: stakeholder alignment.

The experiences of many healthcare companies who are practicing it show that consumer marketing in healthcare is particularly complicated. There are many more stakeholders and influencers than in most other industries, and they don’t always align. In fact they may actively work against each other. 

In a recent study we were mapping the stakeholder and influencer impacts across the multi-decade diabetes patient experience (i.e., from at-risk to death). We found that patient journeys and stakeholder relationships were exceedingly complex, resulting often in conflicting and confusing experiences for patients, and likely poor outcomes as well.

It is important for health insurers to appreciate this complexity. The focus on consumers (or for that matter any other stakeholder in the healthcare supply chain ranging from providers over employers to the government) is not independent from the way we engage with the other stakeholders, and the way that they perceive us.

Pharmaceutical manufacturers had to learn this lesson the hard way, when they “circumnavigated” physicians and started to communicate directly to patients. Many physicians did not really appreciate patients questioning their decisions or asking for specific therapies because of something they had seen on TV.

Payers can experience these conflicts today, when patients redeem co-pay cards they received from their physicians, who got them from drug manufacturers. Payers are not thrilled by the distortions this creates to their benefit designs.

As health insurers move closer to the consumer, they need to take care to synchronize their consumer activities and communication with those to the other stakeholders in the healthcare chain.

For example, Cigna’s consumer engagement program includes mobile applications that locate the nearest pharmacies and emergency rooms and decision-support tools that compare quality and medical costs. Cigna also provides access to health coaches for chronic conditions like diabetes. This will only work well if providers are well aligned with the same protocols and priorities.

How easy will it be to create this alignment?

In fact it may be very hard. According to a recent study by the American Medical Association, nearly two-thirds of U.S. cities are dominated by two health insurers, and nearly half of all metro areas are controlled by one. In 60% of the 359 largest metro areas, the two largest carriers have a combined market share of 70% or more, and in almost half (48%) of cities, one insurer had a market share of 50% or more. Local market domination is critical to influence practices of healthcare delivery through contracting terms, guidelines, etc. For example, it helps to introduce new payment models to replace traditional fee-for-service contracts.

Of course the dominant players in these markets are not always the same. For the individual insurer, engaging providers may therefore be easier in some areas than in others. We will continue to see disparities in medical practices, protocols etc., and this will make consumer engagement, which requires overall consistency, potentially very challenging. This may be one of the reasons why companies like Cigna limit their push into the individual market only to select markets, where they think they can build a strong presence - in Cigna’s case currently only 10 states.
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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

Simple is not easy

by Torsten Bernewitz

In recent posts I proposed that to embrace the direct-to-consumer marketing model, payers must become excellent on four dimensions: consumer insights, consumer engagement, simplicity/openness and stakeholder alignment.

I discussed consumer insights and consumer engagement in more detail here:

http://payer-strategies.blogspot.com/2011/09/inside-consumer-insight.html
http://payer-strategies.blogspot.com/2011/09/consumer-engagement-making-difference.html

Here are some observations about the third success factor: simplicity and openness.

The consumer engagement strategy and tactics will be very different across segments, but two important guiding principles should never be violated. Unfortunately, both may require a significant attitude shift for health insurers, whose culture is strongly imprinted by actuarial and risk management considerations.

1. Simplify, simplify, then simplify some more. Consumers have been “trained” by other industries to expect a hassle free, easy and fast experience (think Amazon’s one-click shopping). In fact, health insurers may be well advised to study and emulate how successful consumer companies create these customer experiences. Enrollment, renewal and adjudication must become straightforward, fast and user friendly (with a particular focus on friendly) - today they are anything but “one-click”.
2. Keep everything transparent and easy to understand. Health insurance is complex, but consumers must not get lost in the maze, or they will check out. Helping the consumer navigate the healthcare decisions process, presenting the options in an honest and easy-to-follow way will go a long way in creating trust and building loyalty. The new insurance labels - the mandated standardized plan summaries or “food labels” for health insurance plans - may help, but they are probably just entry stakes to becoming more consumer-focused. Instead of looking at the usefulness of such labels with skepticism, health insurers who are serious about becoming consumer-centric should embrace the concept and push the envelope further. This is not a trivial task, and companies who excel at this can build a real source of differentiation and competitive advantage.

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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

Consumer engagement: making a difference through differentiation

by Torsten Bernewitz

In a recent post (http://payer-strategies.blogspot.com/2011/09/what-does-it-mean-to-become-consumer.html), I proposed that to embrace the direct-to-consumer marketing model, payers must become excellent on four dimensions: consumer insights, consumer engagement, simplicity/openness, and stakeholder alignment.

While another post (http://payer-strategies.blogspot.com/2011/09/inside-consumer-insight.html), probed deeper into the first dimension - gaining deep consumer insights - today I want to explore the second dimension: effective consumer engagement.

Once the consumer landscape has been well understood and mapped out, we need to make two important decisions: with which consumers do we want to build relationships, and how?

We need to tailor the offering, value proposition, messaging as well as the way how products and services are offered, to the specific needs and preferences of each segment. The “Goldilocks Principle” applies: don’t under- or over-serve a specific segment, get it “just right”.

The vast differences in consumer needs and preferences can perhaps be illustrated by two groups of consumers that are expected to join the health insurers market.

• The first group will join the market through the individual mandate provision of the Affordable Care Act. This group is young and healthy, currently uninsured but with disposable income, i.e., they are “good risks” and potentially a very profitable segment. This group is also used to online stores that serve and simplify all their needs, and it is unlikely that they are very keen on paper applications or brokers. They are quick at making judgments, and vocal - sharing experiences (and griping about bad ones) in real-time with their friends.
• The second group will join the market through Medicaid expansion, the federal subsidies above the 133% FPL cut-off, the guaranteed issue provision of the law, or from smaller employers who stop offering coverage. This group is generally older, in worse health, with larger families but fewer resources. It can be expected that they are less internet savvy and tech-gadget oriented. Some of them, if they are near the 133% FPL threshold, may flip-flop between Medicaid eligibility and the exchanges because of income changes.

The descriptions of the two groups above are just characterizations in big brush strokes. In reality, there will be significant differences within these groups as well, for example based on education, income, location, age etc., which require further customization of the engagement approach. One size, clearly, does not fit all.

It may be beneficial for health insurers to learn from the experiences of other players in the healthcare field who are making similar transitions to engage the consumer, for example manufacturers of medical devices. Blood glucose meters for diabetes are a classic example, and the medical device players in this space may have just as many marketing people focused on patients and channel marketing as they do on healthcare providers. Several companies have publicly declared "patient first" strategies and are talking a lot about "wellness" and "patient experience" – just like health insurers. They have been hiring marketers from traditional CPG companies to help develop effective consumer engagement approaches. They develop solutions that are customized to specific consumer profiles, for example products that are easier to use for consumers with low literacy and numeracy skills.
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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Health Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

Inside consumer insight

by Torsten Bernewitz

With the implications of the Affordable Care Act, many payers are concluding that a key success factor for the health insurance industry is to create effective ways to win, retain and influence consumers, who for a long time have not enjoyed a lot of the payers' marketing attention. A number of companies have declared that they want to become "consumer-centric", but on average the industry has still a very long way to go to achieve such a vision.

What does it really mean to become "consumer-centric"? What new capabilities do we need to create? What can we learn from other industries that have a long history in engaging consumers effectively? What will be easy, what will be harder?

In a recent post (http://payer-strategies.blogspot.com/2011/09/what-does-it-mean-to-become-consumer.html), I proposed that to embrace the direct-to-consumer marketing model, payers must become excellent on four dimensions:

1. Consumer insights
2. Consumer engagement
3. Simplicity and openness
4. Stakeholder alignment

Today, I want to go deeper into the first dimension - gaining deep consumer insights:

If we want to engage consumers more effectively, we need to learn more about them first.

Deep insights about the consumer constitute the platform upon which we can build our customer relationships. They help prioritize the groups we want to target, and identify the leverage points we can use to attract and bind them to our offerings.

We need consumer insights to develop the right strategies to build the brand, develop and refine products and services, price them right and promote them effectively. We must understand the demographics, needs, resources, attitudes, choices and behaviors of different consumer groups. What are their channel preferences and service level expectations? How are they connected socially? How do they respond to different ways of interacting with them? How attractive is each segment for us, both in the short term and the long term? What will it take to identify, win and retain segment members?

Obtaining consumer insights - in particular insights that create competitive advantage - is much more than marketing research, more than “knowing the facts”.

Traditionally, market research tries to find an answer to a specific question, or test a hypothesis in a structured way. It is usually pre-defined, granular, focused on reporting back responses. Building customer insights goes significantly beyond this – it is the process of turning observations and signals into revelations about the consumer that inspire ideas and action:

1. Consumer insights emerge from a holistic perspective and the integration of signals across a variety of sources.
2. They include unprompted signals and can be – in contrast to periodic, individual studies to answer a specific business question – “always on”.
3. Consumer insights search for the meaning of signals, and link them to a business decision and action.
4. They include “Eureka” moments, where we discover something about the consumer that we did not know before, challenging our current thinking, and inspiring new ideas.

Gaining superior, game-winning consumer insights means looking where others don’t look, finding what others don’t find. Marketing gurus like Philip Kotler and Mohan Sawhney view this type of “consumer insight” as critical for marketing success.

If we want to make the transition to become more consumer-centric, we have to master this second, parallel, shift: the move from traditional marketing research approaches to building capabilities allowing us to “fish for knowledge” in vast, unstructured “oceans” of data and information. We may have some caching up to do, and perhaps it is beneficial to look over the fence and learn from other industries that already have a long history in engaging consumers effectively.

Ubiquitous internet access, online shopping channels for virtually anything, social media, GPS-enabled smartphones and other devices etc., are already transforming many retail markets. There is no reason to expect that healthcare will be an exception – health issues already count among the most researched topics on the internet.

User generated content on social networks, blogs, forums, chat rooms etc. provides previously unavailable opportunities to “listen in” - in real time - to the consumer and observe social habits and behaviors without bias. New streams of cheap, previously unavailable data are filling up and enriching the oceans of consumer information. Not only does this emphasize the need for integration of many disparate sources and synthesis of meaning to fish for valuable insights, it also creates innovative opportunities to engage with consumers, as illustrated by the following four examples:

1. Geo-marketing: GPS enabled smartphones allow us not only to target the right consumer with the right messages, but now also at the right time and in the right location. A number of companies have begun using location based social networking services as a way to interact with consumers, offering discounts or other incentives to customers who “check-in” at their store (which means posting on a social networking site where they are). Last year retailer GAP attracted thousands of consumers into their stores through offering them the chance of winning a pair of jeans or receive a significant discount on any regularly priced item. Earlier this year, French automaker Peugeot started a campaign to target users when they are near one of their 400 dealers across France and invite them to make a small detour and test drive the Peugeot RCZ model. Geo-marketing could be an interesting opportunity for health insurers as well, for example enabling them to reach out to consumers with specific messages about adherence, coverage benefits, health maintenance questions etc. when they are near a pharmacy or “check-in” at a doctor’s office. It can also help to avoid sending messages when the time or place is not right, thus reducing the risk of annoying the consumer.
2. Field experimentation: Consumer companies like Capital One, EBay and Google regularly engage small fractions of their customers in field experiments to test new business concepts. Health insurers could make use of consumer field experiments as well to test how consumers respond to communications, service offerings etc. The advantage of these experiments is that they test the actual behavior of the participants, e.g., show what choices they make under different circumstances, allowing to observe, in a contained, “safe” environment, what consumers actually do, not what they say they will do.
3. Co-creation: Companies like P&G, Reebok and even Harley Davidson are taking consumer insights to the next level. These companies have created brand communities where they involve consumers in the creation of products and information. German cosmetics company Beiersdorf used co-creation with consumers to develop a new deodorant for its Nivea brand. Toymaker Lego has boosted sales significantly by recruiting fans to participate in its innovation effort. BMW calls their co-creation lab “a virtual meeting place for individuals interested in cars and all related topics, who want to share their ideas and opinions on tomorrow's automotive world”, and “invites people from all over the world to contribute their suggestions for specific topics and to connect with like-minded others.” This direct channel of two-way (or multi-way) communication provides immediate feedback, brings new ideas to the forefront, and creates a sense of consumer participation that goes a long way in building trust and loyalty. For health insurers, similar communities could significantly enhance the communication with and among consumers as well as healthcare providers.
4. Crowd-sourcing: On a similar line as co-creation, companies like 3M, IBM, Dell or Starbucks proactively solicit from consumers proposals for solutions to specific challenges or problems. This approach of “crowd-sourcing” is based on the observation that consumers, as a large group, have specialized and accurate knowledge about issues that concern them, knowledge which they are amazingly motivated to share when given the opportunity. Ice cream maker Ben & Jerry’s used crowd-sourcing to develop new flavors, and Coca Cola solicited consumer ideas in the development of a new vitamin water drink, and the graphics and labels to go with it. A large number of open innovation websites facilitate crowd-sourcing in many areas ranging from R&D, software development and design to marketing and branding, trend prediction and general problem solving. Crowd-sourcing could be an interesting approach to engage both providers and consumers in the quest for win-win solutions to healthcare challenges.

How can we build the capability to create valuable consumer insights?

First of all, investment in technology is required to acquire state-of-the-art data integration and “insights fishing” tools. Second, employees’ knowledge and analytic skills may need to be enhanced as well, and perhaps hiring of experts from CPG or technology oriented companies could accelerate the transition to become more consumer focused.

Third, the holistic approach demands an effective cross-functional approach across intra-organizational boundaries, e.g., marketing, analytics, product development, database management, and IT. It may also create the need for increasing reliance on vendors with highly specialized expertise, for example in data integration, web-analytics, social media listening, or geo-marketing.

Finally, we may need to align on a new way of thinking and a new vocabulary about business information. For example, what exactly defines a “consumer insight” and how is it different from other information? How is a small insight different from a large one, i.e. how do we prioritize and rate them? Where do we store our consumer insights and how do we make them available to the right stakeholders and decision makers?
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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

The spirit is willing, but...(or, what does it mean to become consumer-centric?)

by Torsten Bernewitz

Yesterday I mentioned that - for a number of reasons - it is a key success factor for the health insurance industry to create effective ways to win and retain consumers, who for a long time have not enjoyed a lot of the payers' marketing attention (http://payer-strategies.blogspot.com/2011/09/winning-hearts-and-minds-of-consumer.html).

I also observed that although many companies proclaim their intent to be more consumer-centric, the industry still has a very long way to go to become really good at this. New capabilities will have to be created, and perhaps a change in culture is also necessary.

Direct-to-consumer marketing must not be misunderstood as running a TV campaign or placing radio spots, buying ad space in newspapers, sending direct mail or advertising on the internet. Although these means may create a “background noise” – albeit frequently for a significant price tag - they are much too crude to address the diverging needs, preferences, expectations and questions of many consumers, let alone influence their behaviors.

Modern direct-to-consumer marketing is something different: a continuous, multi-channel two-way (or even multi-way) relationship that integrates communication and feedback, sales and service, activities and measurement, in a synergistic way.

If we want to embrace the direct-to-consumer marketing model, we must excel at a number of things:

(1)   Consumer insights

(2)   Consumer engagement

(3)   Simplicity and openness

(4)   Stakeholder alignment

The first two elements will require building new analytic capabilities, channels and technologies. With the right resources, they should be relatively easy to achieve.

The third element will likely may require a significant culture shift – and will potentially be much harder.

The fourth element, finally, calls for a holistic and synergistic approach in the engagement of all stakeholders, not just consumers. Considering the exceedingly complex (and often conflicting) interests and influences across the healthcare supply chain - as well as differences in local markets - this may be a difficult task that requires careful attention, and time, in order to get it right.

Over the next few days, I will post a few more detailed thoughts about these four success factors.

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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

Winning the hearts and minds of the consumer – the battle is on!

by Torsten Bernewitz

Two days ago, health insurer Cigna announced a national brand campaign directed at consumers. With the theme “GO YOU” and to the tune of $25 million, national advertising will be on major television and cable networks including USA, CNN, Discovery and A&E. Print ads will appear in publications such as Time, Marie Claire, Family Circle and Runners World as well as online on Monster.com, SheKnows.com and iVillage.com. The company has also updated its logo to reflect its focus on individual customers.

Here’s the story: http://newsroom.cigna.com/NewsReleases/cigna-enhances-business-model-to-meet-changing-customer-needs.htm

It can be expected that this initiative – though certainly standing out as a high-profile move - will just be the kick-off to a series of similar activities by health insurers aimed at capturing the hearts and minds of the consumer. Or perhaps other strategies to achieve the same goal.

Why do health insurers all of a sudden care about consumers?

After the Affordable Care Act - in the new world of health insurance - individual consumers will have a much more prominent role. There will be more of them. They will be better informed, and with the exchanges they will have a market place that facilitates comparison-shopping. 

Consumers will have different and more heterogeneous profiles, needs and expectations than the people in the small individual market today. Their choices and behaviors are crucial for healthcare utilization and outcomes, which in turn are critical to contain medical costs.

For all these reasons it is obvious that a key success factor for the industry is to create effective ways to win and retain consumers, and to engage them in a mutually beneficial way that builds trust and loyalty, and that encourages the right behaviors to keep them as healthy as possible.

There is still a very long way to go!

Historically, the industry has not been very consumer-centric. And that shows. In a 2010/11 survey by consulting firm McKinsey, 72% of the 11,000 survey participants thought that plans were too complex to understand what was covered, and at what cost. 57% found the process of choosing a health plan “overwhelming”.

The prevailing health insurance go-to-market approach is not well suited to the retail space. The insurer perspective has historically been group focused and transaction based. Because insurers are relying on brokers, there is relatively little direct contact with the consumer. Worse, in the cases where there is contact – for example if there is a question regarding coverage or claims – the circumstances surrounding these interactions are usually negatively pre-loaded and stressful, not the natural habitat of trust and open exchange.

Perennially rising premiums, network constraints, administrative hassles, mediocre service levels and lack of transparency have all contributed to consumer relationships that are frequently adversarial.

So how do we change this?

Answer: we have to put the consumer more at the center of our marketing efforts!

OK- but what does this mean? What capabilities do we need to create?

I will post some thoughts about this over the following days.
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Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Health Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com