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Health Plan Advisory Council

Three Differentiators Health Plans Need in the Retail Market

Project DirectorRachel Sokol

Contributing ConsultantsCaroline JensenGeorge Harris Marcus Hincks

Managing DirectorRussell Davis

Project EditorJohn Wilwol

DesignerPhoenix Simone Walter

Sources

Accenture, “Are You Ready? Health Insurance Exchanges Are Looming,” www.accenture.com.

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

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

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

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.


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


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

Miscellaneous

• 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


Appointment Scheduling

• Location search

• Acceptable hours of operation

• Assessment of availability

Carrier Selection


• Brand evaluation

• Service infrastructure and performance review

Product Selection

• Provider network evaluation: geography, speciality, quality

• Cost-sharing analysis


Consumer Health Plan Purchase Process

INSURANCE EDUCATION

PURCHASE & ENROLLMENT

CARE IDENTIFICATION

CARE FINANCING

PLAN EVALUATION

PLAN RENEWAL

Traditional Group Responsibility


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.”


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

43%

21%

36%Lowest-Cost Plan

Second-Lowest-Cost Plan

Any Other Plan


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

HEALTH PLAN

Network Assembly

• HealthDesign Plus

• ImagineHealth

Price Negotiation

• MediBid

• BidRx

Historic Utilization

• Health Insurance Exchange

• HealthKit

Consumer Education

• Gravie

• Healthcare.gov


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?

IMPROVED TRANSPARENCY

INCREASED AFFORDABILITY

ENHANCED QUALITY


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.

THE PROBLEM WITH IMPROVED TRANSPARENCY

Cost Estimates for Cataract Surgery

Illustrative

3,500 Combinations

Highest “price” is actually lowest cost

A

$

B C D E F G A

$

B C D E F G

Member OOP

Plan Payment

PHYSICIANS HOSPITALS

Providing access to more data without context doesn’t help consumers make good choices.


High deductibles make insurance cheap to buy but expensive to use.

Plans competing on the exchanges have been racing to lower prices for consumers. To do this, deductibles have risen. Most exchange consumers, for example, have deductibles over $3,000.

If health plans aren’t able to make an insurance product that’s affordable to use, deferred care could drive up costs at a time when price sensitivity is higher than ever.

THE PROBLEM WITH INCREASED AFFORDABILITY

Annual Deductibles of Individual Plans Selected on eHealth

October 2013–March 2014

*Does not sum to 100 due to rounding.

39% $6,000+

30% $3,000–$5,999

13%<$500

11%$1,000–$1,999

5%$2,000–$2,999

3%$500–$999

Health plans must adapt to new pressures and differentiate in the new market, or risk losing value and becoming a commodity.


Consumers take clinical quality for granted.

Quality initiatives are improving health outcomes for patients, and star ratings are a simple way for health plans to share quality metrics.

But it’s unclear whether or not these measures mean anything to patients.

Quality is a complicated and often subjective metric, and consumers tend to associate it with convenience and patient experience (non-clinical attributes).

Health plans have tried to provide data for consumers to understand the clinical quality of a product’s network. But most members are far more interested in monthly premiums, network access, out-of-pocket costs, and brand.

THE PROBLEM WITH ENHANCED QUALITY

Most Important Factor Influencing Health Plan Selection

n=900 adults

10%Quality

19%Brand

17%Out-of-Pocket Costs

22%Preferred Physicians

Are in Network

32%Low Monthly Premium

Quality is one of the least important factors in choosing a plan.


Health plans’ best efforts have simply made the problem worse.

So, there’s more information than ever about health plans out there. But if consumers don’t understand that information, the fact that it’s being shared with them doesn’t matter.

Many plans also selectively share data to create the illusion of affordability. A plan that is low-cost up front but prohibitively expensive to use doesn’t help consumers who need access to services.

Plans provide quality ratings for consumers with the idea that they will use them to guide their choices. In reality though, quality is highly subjective for consumers, and these ratings often don’t lead to more informed choices.

With this in mind, it’s time for health plans to find a more constructive response to consumerism—differentiators that support informed decision making and smarter utilization.

The Three Differentiators

Enable comprehension

Improve efficacy

Enhance consumer experience


Differentiator 1: Enable comprehension

First, help consumers comprehend their insurance product.

The deluge of available data on prices, products, sites of care, and other considerations in choosing a plan can be overwhelming. Consumers struggle to determine the best value and often have no idea how to use their insurance in a cost-effective way.

Plans must ensure that consumers understand how the financial trade-offs of specific insurance options will affect their utilization. For example, consumers should know that although HMOs are often less expensive than other options, they do not allow specialist visits without a referral.

When consumers feel comfortable they have a plan that suits their needs, they’ll be much more likely to renew.

With the opening of the exchanges, health plans have taken major strides to make the cost of premiums, copays, and out-of-pocket maximums completely transparent to consumers. This is helpful, but price is only one factor that consumers weigh when selecting a health plan.

Health plans need to provide consumers with better guidance.

In short, more information simply doesn’t guarantee better comprehension.


Private exchange operator Bloom Health, for example, provides consumers with a questionnaire to personalize their purchase decisions. They match individuals with plans based on financial fit and expected utilization.

By matching health plan options to individual care preferences, Bloom Health is making sure its customers make the best choice for their needs.

Bloom Health Customer

I purchased a health plan well‑suited to my needs, not the needs of all of my co-workers.”

Bloom Health Consumer Questionnaire

When we get sick...

We use home remedies or OTCs

We see our regular doctor

We go to a convenience clinic at a nearby pharmacy or retail store

We usually end up in urgent care or the emergency room

We take a holistic approach, like seeing a chiropractor or acupuncturist


Keeping costs down requires the right care at the right time.

Health plans have always had to worry about high utilization from members, but the growth of high deductible plans has raised the stakes in this area.

If members seek care too often or use expensive treatment options, insurance costs will rise in the short term. But if they defer necessary spending for too long, chronic conditions can become acute episodes, and insurance costs will rise in the long term.

To make sure members receive the care they need—and no more—plans must do their best to see that members use their products properly, balancing care needs with cost considerations.

Controlling costs in the individual market will require plans to shift their focus from affordability to efficacy.

Differentiator 2: Improve efficacy


Florida Blue achieves this by finding a place in members’ daily routines. The health plan operates 18 retail centers across the state, offering services like product consultations and disease management classes.

Of course, retail sites may not work for every plan. Up-front costs may be too high in some markets, and member density can be sparse in certain areas.

But in cases where it’s possible, a retail location acts as a strong reminder of the plan’s role—a way to give members exactly what they need to stay healthy.

Potential Spectrum of Services Offered at Retail Insurance Stores

Attend disease management session

Compare and buy insurance

Complete health screening

Engage with “care consultant”


Remember—consumer experience trumps quality.

When asked about their preferred primary care clinic attributes, consumers prefer convenience and expediency over quality.

They would rather go to a clinic without an appointment and be seen within 30 minutes than go to a clinic with care quality scores in the top 10% in the area.

Knowing this, health plans need to take the next step to enhance consumer experience. They should start with the members who need the most help maintaining good health.

Top Preferred Primary Care Clinic Attributions

n=3,873

4.29

4.26

4.09

4.07

3.87

2.95

2.91

2.14

1.16

0.78

1. The provider is in-network for my insurer

10. I will be treated only by a physician or physician’s assistant

2. No appointment necessary, and seen within 30 min.

12. The clinic has the latest, cutting-edge technology

3. The clinic can do tests or x-rays

24. The clinic’s quality scores are in the top 10% for my area

4. The clinic is open 24/7

33. I will be treated by a nurse practitioner

5. Same-day appointments offered

43. The clinic has standard technology

Differentiator 3: Enhance consumer experience


Wellmark Blue Cross Blue Shield partnered with a local grocery chain to host healthy living seminars and provide personal shopping and nutrition advice.

By working with the provider to secure a group of participants, Wellmark has targeted a high-risk population. The people who attend these events have more interactions with the health care system and appreciate an enhanced consumer experience.

Like the retail example, this approach isn’t necessarily a one-size-fits-all answer. But health plans should still seek innovative ways to help customers have the experience that is best for them.

Wellmark’s Personal Grocery Shopper

PCP Suggests Better Nutrition, Diabetes Education

• Member visits in-network PCP

• PCP sends referral via online tool

Dietitian Conducts Nutritional Counseling

• Dietitian conducts 1:1 counseling including walks through store, meal planning, and healthy shopping lists

• Dietitian provides details back to PCP via secure data exchange

Member Visits “In‑Network” Grocery

• Member goes online to schedule an appointment with dietitian in-store


Enable comprehension, improve efficacy, and enhance experience—and you’ll have three true differentiators.


Health plans looking to differentiate themselves from competitors must transform their approach and mind-set or risk commoditization.

Responses to Consumerism

Those that help members make informed purchase decisions and utilize their products perfectly will win the new health insurance consumer.

Plan Responses

Plan Differentiators

Abundance of data confuses, even paralyzes, consumers

Cost sharing and high deductibles make products affordable to buy but expensive to use

Consumers struggle to assess clinical quality and place a high value on non-clinical attributes

Shortcomings

Transparency Affordability Quality

Enable Comprehension

• Individuals understand options and can explain them to others

• Members can make informed, personal choices

Improve Efficacy

• Members at optimal level of utilization

• Providers closing care gaps to improve health

Enhance Experience

• Care personalized for member based on preferences

• Each member treated as an individual


LEGAL CAVEAT

The Advisory Board Company has made efforts to verify the accuracy of the information it provides to members. This report relies on data obtained from many sources, however, and The Advisory Board Company cannot guarantee the accuracy of the information provided or any analysis based thereon. In addition, The Advisory Board Company is not in the business of giving legal, medical, accounting, or other professional advice, and its reports should not be construed as professional advice. In particular, members should not rely on any legal commentary in this report as a basis for action, or assume that any tactics described herein would be permitted by applicable law or appropriate for a given member’s situation. Members are advised to consult with appropriate professionals concerning legal, medical, tax, or accounting issues, before implementing any of these tactics. Neither The Advisory Board Company nor its officers, directors, trustees, employees and agents shall be liable for any claims, liabilities, or expenses relating to (a) any errors or omissions in this report, whether caused by The Advisory Board Company or any of its employees or agents, or sources or other third parties, (b) any recommendation or graded ranking by The Advisory Board Company, or (c) failure of member and its employees and agents to abide by the terms set forth herein.

©2015 The Advisory Board Company • advisory.com

Additional Resources

What Health Plans Need to Know About Consumer Choice

Expert Insight | Learn how consumers’ top health care priorities stack up, and what it all means for health plans.

How Health Plans Are Preparing for the Retail Market

Webconference | Discover the latest trends in the individual market and how this is impacting health plans, along with the results from our 2014 Individual Market Survey.

Care Management Readiness Audit

White Paper | Use our new audit to determine which providers need care management support from your health plan and which are on the path to full ownership of their care management efforts.

Why Member Engagement Efforts Are Doomed to Fail

Webconference | From our 2014 HPAC National Meeting, learn the flaws in your member engagement strategy and how to better connect with individual consumers.

The Risk of Great Quality

Expert Insight | Understand the limits of quality improvement, and why experience is a better lever to drive consumers.

The Trouble with Transparency

Expert Insight | Manage the flow of data to consumers to make sure they understand what they’re buying—and how much it will cost.

Project DirectorRachel Sokol

Contributing ConsultantsCaroline JensenGeorge Harris Marcus Hincks

Managing DirectorRussell Davis

Project EditorJohn Wilwol

DesignerPhoenix Simone Walter

Sources

Accenture, “Are You Ready? Health Insurance Exchanges Are Looming,” www.accenture.com.

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

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

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

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