The pendulum in health care continues to swing from paternalism to consumerism. Consumer-driven health plans have all but replaced HMOs. Health incentives programs are as ubiquitous as grocery store weekly circulars. And now employees and individuals will start shopping for their health benefits in public and private health marketplaces.
The consumerization of health care is driving the dynamics of the retail world in an industry largely naïve of the shopping experience. This shift presents the opportunity to apply the hard-earned lessons of consumer retail to the new health benefit exchanges as it relates to selling and engaging employees in benefit decisions.
One truth of retail is that for basic items, shopping is a chore — not a reward. A key challenge of retailing these items is to create satisfied shoppers when the activity itself dissatisfies. Consider groceries, gasoline or basic clothing. For most people, this type of shopping is a chore. As a result, retailers in these commodity categories have a set of common approaches for creating satisfied shoppers.
These approaches are important considerations for health care marketplaces. For most, purchasing insurance – even with an employer or government subsidy – is not an experience that will surprise and delight. Despite these challenges, retailers have found specific ways to make these shopping experiences successful for consumers.
Likewise, HR benefit administrators can look to five of the top lessons from retail to engage employees and develop positive benefit shopping experiences:
1. Minimize time, maximize experience
Time matters. Individuals want to complete a chore in the shortest amount of time possible. This explains why gasoline stations are located on street corners, why pay-at-the-pump exists, and why grocery stores have so many checkout lanes.
Employees looking to purchase health benefits have similar time constraints. Few people look forward to their annual health plan enrollment process every year. Given the option of a passive enrollment, most employees let it ride.
Winning benefit marketplaces will mirror their retail equivalents. They will offer consumers the ability to get in and out quickly with the items they need. With the right focus and the right technology, perhaps the future can be even better than the past.
Consider the revolution to restaurant reservations that the OpenTable app brought to the chore of planning an evening out. This system has dramatically accelerated the reservation process by integrating reviews, cuisine search and table availability into one solution, enabling consumers to optimize for their needs in a tenth of the time required to call multiple restaurants. The service also gives consumers the option to integrate guest invitations, car service and flower delivery into a one-stop shopping experience.
Similarly, an opportunity to transform the benefit shopping experience now presents itself to the health benefit community. As the SVP of HR for a major media and hospitality company said to me recently: “Now I think about how I can create bundles of wellness and benefit programs and plans that encourage employees to think differently about the chore of annual enrollment.”
In order to be successful, the experience — like OpenTable — must offer convenient, one-stop purchasing options fueled by seamless technology.
2. Emphasize navigation
Second, navigational aids are critical. Have you ever noticed the amount of navigation and organization in a grocery store? On average, there are 40,000 items on the shelves. Grocery stores are perhaps the most organized in retail. Each aisle is carefully labeled by category. Each category is carefully ordered, often by brand and then by flavor, enabling shoppers to find what they need as quickly as possible.
As Kent Bradley, MD, chief medical officer of the Safeway grocery store chain recently remarked: “There is an increasing demand for personalization in employee benefits, driving a fragmentation of selection.” Benefit administrators face the challenge of executing increased choice, while still managing to present an edited assortment of options tailored to individual employees.
Technology tools that enable a broad assortment of choices to be effectively presented are critical for successful benefit marketplaces. Tools that leverage consumer choice architecture such as provider selection, risk tolerance, health status and price will enable benefit marketplaces to be organized like retail marketplaces that order their inventory by product type, brand, feature/flavor and size.
However, as Bradley noted: “A key challenge for health benefit administrators will be to offer a personalized selection that is actuarially neutral.” This is one of the key issues that administrators of self-insured plans face in offering a larger selection of benefits in a marketplace.
3. Clearly communicate price
Third, price must be clearly, concisely and correctly communicated. Gasoline retailers post prices on pole signs. Grocery retailers post prices in front of every item. Most shoppers will not purchase items that are missing a price tag.
The same will be true for health benefits. Minoo Javanmardian Ph.D., a partner in Booz & Co.’s health practice, comments: “In public exchanges, shopper choice will be driven by price; brand is simply a gating factor to consumer consideration.” However, private exchanges are likely to be a bit different. “People essentially care about three factors: value, simplicity and a trusted advisor to navigate the market,” says Javanmardian.
Defined contribution is a useful approach for bringing complete transparency to health care marketplaces. By clearly identifying the employer contribution and the total price of the insurance benefit, these plans make it easier for shoppers to identify the value of their health benefit.
However, defined contribution is only part of the transparency solution. Few marketplaces help shoppers understand their out-of-pocket risk as well. Yet as shoppers are selecting lower cost plans with higher deductibles and out-of-pocket limits, helping them understand their risks is imperative for true transparency.
4. Consumer purchasing behavior impacts delivery cost
Well-designed benefit marketplaces can do more than just optimize the shopping experience for employees — they can be a platform for consumer engagement. Leveraging defined contribution may help employers quantify benefit costs, encourage employees to purchase only the insurance they need, and may help employers better frame cost-shifts. However, defined contribution itself will do little to moderate the individual’s health needs and as a result will have only marginal impact on overall health costs.
Steve Burd, former chairman and CEO of Safeway, says that using defined contribution solely as a way to avoid future health care inflation is short-sighted. “Over the past 30 years, we’ve seen an extraordinary movement toward defined contributions on pensions, but those were strictly formulaic cash payouts,” he says. “In health care, the opportunity to eliminate waste is so huge that employers risk setting their contribution too high when defining their contribution based on prior experience.”
What will really make a difference is bringing market forces to bear across a range of health care decisions spanning benefit choice, provider selection and personal health. Retail health exchanges may have an opportunity to play a role in all three. A marketplace could create product bundles that link health behaviors, purchasing patterns and insurance offerings into an integrated purchasing decision process for employees.
Consider that most online travel sites encourage behavior change so naturally, that we may not even be aware of them. Travel sites clearly display the savings possible by changing the time or day of departure, the number of stops, the number of bags checked. Consumers are rewarded for behavior changes that represent more cost-effective choices for themselves and the travel company.
5. Effective promotion
Promotion drives behavior in retail. Those ubiquitous grocery store circulars generate significant store traffic. However, one of the fundamental challenges of promotions has always been that so many of them are wasted. The traditional shotgun scatter marketing approach is likely to hit individuals without interest in the product as well as current purchasers, neither of whom is likely to change their shopping behavior.
However, this old-school approach is changing with the advent of new technology and massive amounts of consumer data. Retailers are now personalizing their promotions. They are now targeting coupons and incentives to specific shoppers with loyalty programs to increase those shoppers’ purchases. Similarly, technology and data availability enable this approach to be applied to health promotions.
A defined contribution marketplace allows the development of more powerful promotional and product bundling of health improvement offerings than is easily achievable under a typical defined benefit plan. The same SVP of HR for a major media and hospitality firm told me: “The advantage of defined contribution plans is that you can adjust them over the course of the year and make changes from month to month; this is better than the typical payroll deduction discount and enables employers to put everything through the paycheck.”
This option eliminates the challenge of managing multiple promotional channels such as cash payouts and gift cards, in addition to premium discounts. In effect, for health promotion programs, the HR team can incentivize employees to earn a portion of the employer contribution on a quarterly or monthly basis.
This approach is effective for wellness programs and more. It can be personalized to the behaviors that each individual needs to embrace to improve his or her health. An employee who has diabetes who hasn’t had lab work performed recently can earn credits for getting her hemoglobin A1C test done. An employee with high blood pressure who has stopped taking his medication can get credit for filling a script.
The flexibility created by the combination of technology, defined contribution and sophisticated data management enables personalized promotions in health management, which dramatically improves engagement and results. Importantly, promotions are no longer wasted on the converted. In addition, benefit teams are no longer automatically paying it forward — employees have to earn those perks.
Health exchanges are brand new. Product selection is still developing. Merchandising and promotions remain in the experimental stage. However, leveraging lessons from retail and applying them to these new marketplaces will allow employee health benefit providers to capture the value of this opportunity more quickly.
Brad Wolfsen is executive director of exchange solutions for bswift, which offers software and services that streamline benefits, HR and payroll administration for employers and public and private exchanges nationwide.
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