Three Differentiators Health Plans Need in the Retail Market ... Three Differentiators Health Plans

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    2445 M Street NW, Washington DC 20037

    P 202.266.5600 | F 202.266.5700

    Health Plan Advisory Council

    Three Differentiators Health Plans Need in the Retail Market

  • Project Director Rachel Sokol

    Contributing Consultants Caroline Jensen George Harris Marcus Hincks

    Managing Director Russell Davis

    Project Editor John Wilwol

    Designer Phoenix Simone Walter


    Accenture, “Are You Ready? Health Insurance Exchanges Are Looming,”

    Congressional Budget Office, “May 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage,”

    “Consumers Still Not Considering Quality in Health Insurance Shopping,” HealthPocket, May 29, 2013,

    Kaiser Family Foundation, “The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” April 2, 2014,

    HHS, “Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Open Enrollment Period,” May 1, 2014.

    Health Plan Advisory Council interviews and analysis.

    The retail revolution has begun.

    In the years ahead, health plans will see rising demand from individual consumers due to the following trends:

    Each of these spurs individual choice and responsibility. But as consumers get more say in selecting their health insurance, they may also take on a larger portion of care costs.

    Health plans have so far struggled to thrive in this new diversified market, so they’re altering their strategy to appeal to retail customers.

    Medicare Advantage growth

    Medicaid private option

    New channels for purchasing individual insurance

  • Three Differentiators Health Plans Need in the Retail Market 1

    Changing consumers are changing plans.

    Health plan leaders aren’t the only ones who have to change their approach. Consider these key differences for health plans:

    These changes could empower consumers. If they choose wisely, they could very well end up with a better plan that lowers their health spending.

    Activist employers oversee price- sensitive individuals

    Narrow, custom networks designed to appeal to new market segments

    Easy for individuals to switch plans annually through exchanges

    Variable individual premium contribution, high deductibles

    Clear plan comparison on exchange platforms

    But too many consumers lack the skills or information they need to make the best decision possible.

  • 2 Health Plan Advisory Council

    In the retail market, very complex decisions fall on the shoulders of very average people.

    Established and knowledgeable groups used to drive plan purchasing and enrollment. But by 2018, 87 million Americans may get their coverage through some sort of retail market mechanism, such as a public or private exchange, Medicare Advantage, or private-option Medicaid. When you add the rise of high-deductible health plans to this mix, it means that more consumers than ever will see greater portions of health care costs.

    The stakes to find the right health plan are higher than ever.

    To make an educated choice, individuals now have to evaluate the service delivered by the plan and assess the network and the quality of care.

  • Three Differentiators Health Plans Need in the Retail Market 3

    Insurance Basics

    • Household insurance economics

    • Provider networks

    • Service ratings

    Prospective Needs Assessment

    • Family status assessment

    • Health condition inventory

    • Twelve-month estimate of cost care needs

    Carrier Selection

    • Price comparison

    • Brand evaluation

    • Service infrastructure and performance review

    Product Selection

    • Provider network evaluation: geography, specialty, quality

    • Cost-sharing analysis

    • Price comparison

    Service Evaluation

    • Personalization

    • Convenience

    • Plan operations and communications

    Provider Search

    • Health status assessment

    • Access to care as needed

    Total Cost of Care

    Premium Payments

    Copay Payments

    Health Savings Account Management


    • Coverage clarifications

    • Provider bill resolution

    • Claims appeal process

    Deductible Management

    • Individual

    • Family

    • Annual out-of-pocket maximum

    Symptom Identification

    • Self-examination

    • Individual research

    • Peer networking

    Provider Search

    • Speciality determination

    • Quality assessment

    • Price comparison

    Appointment Scheduling

    • Location search

    • Acceptable hours of operation

    • Assessment of availability

    Carrier Selection

    • Price comparison

    • Brand evaluation

    • Service infrastructure and performance review

    Product Selection

    • Provider network evaluation: geography, speciality, quality

    • Cost-sharing analysis

    • Price comparison

    Consumer Health Plan Purchase Process







    Traditional Group Responsibility

  • 4 Health Plan Advisory Council

    Most consumers in the retail market are amateurs.

    Consumers, most of whom have never purchased insurance directly, have many products to choose from in the retail space. Each contains unique advantages and disadvantages, depending on the consumer’s personal circumstances.

    This variety paralyzes consumers.

    Beneficiary (Baltimore, MD) Kaiser Family Foundation

    Focus Group on Medicare Advantage

    I went online. I had papers taped together, it was six feet wide with the different companies and circles and arrows.”

  • Three Differentiators Health Plans Need in the Retail Market 5

    Consumers buy on price, even when it’s not in their best interest.

    Last year, consumers on the exchanges heavily favored price over other variables like brand and network.

    Among all “metal levels,” consumers overwhelmingly chose one of the two lowest cost plans within each tier.

    As amateur buyers, they perhaps unwittingly chose high-deductible health plans with lower premiums and narrower networks—even though this could mean exorbitant costs later.

    This reminds us: consumers are price-sensitive, but they don’t understand the full implications of buying exclusively on price. They need guidance.

    Plan Choice Within Metal Tier

    All Metal Levels



    36% Lowest-Cost Plan

    Second-Lowest-Cost Plan

    Any Other Plan

  • 6 Health Plan Advisory Council

    To many consumers, all health plans appear equal.

    Health plans risk commoditization because consumers lack a clear understanding of the purchasing levers involved.

    New entrants reduce the traditional role and value of a health plan.

    Plans also face legislative constraints that force them to standardize—coverage areas must be clearly defined, risk-based pricing is limited, and metal tiers must present consumers with uniform options—making it harder for consumers to see differences.

    Competitors to Plans’ Traditional Value Drivers


    Network Assembly

    • HealthDesign Plus

    • ImagineHealth

    Price Negotiation

    • MediBid

    • BidRx

    Historic Utilization

    • Health Insurance Exchange

    • HealthKit

    Consumer Education

    • Gravie


  • Three Differentiators Health Plans Need in the Retail Market 7

    Health plans are working to increase transparency, affordability, and quality to attract consumers. In the individual health plan market, consumers struggle to find the best product. They’re concerned they can’t afford a plan that’s right for them, and they’re unable to compare plans and providers objectively.

    But now, health plans are beginning to respond with clear price points, low monthly premiums, and quality ratings.

    Plan Responses

    These are all reasonable answers to the challenges consumers face.

    So why aren’t they working?




  • 8 Health Plan Advisory Council

    Information overload overwhelms consumers.

    Health plans have provided detailed information about price and in-network sites of care, and they’ve developed cost estimators for common procedures.

    But despite such good intentions, this data onslaught has completely overwhelmed consumers. Consider a person shopping for the best place to have cataract surgery.

    Depending on the market, there can be hundreds of possible combinations of out-of-pocket costs and locations. In some cases, the highest plan price may deliver the lowest cost for the consumer.


    Cost Estimates for Cataract Surgery


    3,500 Combinations

    Highest “price” is ac