Okay, Mr. President, game on! We will build a health benefit exchange for now and the future. It's a radical change. My colleagues and I will clear our minds of old modes of selling health insurance and servicing customers. Here's what the blueprint of health insurance selling can look like soon and in the years to come. It is nonpartisan and reflects the interests of many publics with a stake in the outcome, most importantly the millions of consumers who will purchase health care through this system. Most of all, it will work to strengthen purchasing and access in the health care system.
The technology must be simple; easy interfaces and pathways for the common man - buyers from every part of the socio-economic spectrum. Software as a service offers voice, video and accessible menus of benefit plan issuers. Each smart screen runs a prospective buyer through a wizard to help narrow-down choices that are based on quality, plan features and price. The technology needs glitz to promote the computer experience, so we'll have to dress it up.
An efficient purchasing model
Let us call the exchange technology Health Insurance Stores. We can feature these stores in retail establishments where people commonly go, like pharmacies or grocery stores. Give consumers direct access to the exchange from home or work, too. Insurance consultants can also help their customers on the exchanges from their offices.
Contrary to language in the current law, the personal touch of a trained, licensed adviser will be paramount to help consumers make optimal decisions. PPACA statute should be amended to allow navigators to receive compensation for their work with consumers on the exchange. The knowledge required to properly help consumers understand and pick the best plan is vast and expensive to acquire. Consumers will need professional assistance, and the one providing that assistance will want to be paid. It will not work any other way.
Potential exists in this blueprint for many vendors vying for an exchange in retail stores to increase traffic and sales of their mainline products and services. We will have to limit who gets a private exchange so that large pools can be built to spread the risk. Not limiting who gets an exchange is duplicative and adds unnecessary cost to the effort.
Value-added services that consumers want and that help form a competitive marketplace for consumers should be a collateral part of the exchanges. The insurance product, features and price will not be enough to build a competitive market of private exchanges. We must reject one large federal exchange in the interest of keeping the total cost of ownership down through the use of competitive exchanges that have a profit motive to keep distribution costs low.
Eventually, smart business people will connect the dots, a few months or years out, that franchises make sense. Why not launch the concept now? Health insurance companies form alliances with other firms that represent cross-selling opportunities. It is good business. Exchanges can create business relationships with retail businesses that have high consumer traffic. The traditional business model will give rise to the health insurance store franchise. Issuers and brokers will control the selling experience through exchange technology. The exchange should be a legal entity that can align itself with, say, Pharmacy Chain B and Big Box Retailer C.
Communication imperative
Health and welfare brokerages will continue to serve individuals and employers, but some may be dislocated by the presence of exchanges and the franchisees they license. The new geographical footprint of where and how health insurance is sold may mean that sellers will work behind a booth next to the frozen foods at the grocery store.
With more than 300 million U.S. consumers, the locations of exchanges will be far and wide to easily accommodate individuals who will be required to purchase health insurance. Health insurance advisers will need to be on hand to advise consumers on health plan purchases. They will also need to be available for the inevitable problems that occur after the sale is consummated in a complex system like health care.
Buyers in the exchange will want to have a hassle-free experience. These buyers are modern consumers who expect a positive total buying experience, especially with a personal purchase - protection of one's personal health. The health insurance industry knows that, in general, plan participants do not understand their health benefits or consistently use them as designed. Employers spend large sums of money on employee communication, with the goal of improving understanding of health benefit plans. Sadly, it hasn't worked very well. The exchanges can positively affect change on that score.
So what can we do now that hasn't been tried unsuccessfully before to educate consumers on health care benefits? We will have an entirely new model for accessing information and purchasing health benefits. Failing to improve communication and understanding will drive up costs in a model that purports to reduce costs. The point is that exchanges must offer good marketing, merchandising and packaging techniques. Consumers expect that today for all big-ticket purchases.
It's probably a safe bet that price is foremost on consumers' minds. We need, however, to sell a personalized package and value proposition so consumers avoid purchasing health plans solely based on lowest bid.
Pushing a button that initiates the transaction is the easiest part of the process. Leading up to the transaction, consumers should go through a standard wizard that presents the SBC (Summary of Benefits and Coverage), the uniform glossary of terms and other helpful verbiage and simple calculators that help the buyer make an optimal purchase. Those components can be part of a uniform process, with the details and presentation left up to the designer of any particular exchange.
Electronic exchanges are really just an extension of various online enrollment tools that employers use today. Making exchanges law will, in effect, force the purchase of health benefits now and all benefits later into an electronic process that fulfills the aim of HIPAA's standardized electronic transfer of all information bits involved in health insurance purchasing and claim processing. At the end of the day, PPACA may be the enabler that forces the stalwart insurance industry forward into wider use of technology.
Davidson, CEBS, is founder of Davidson Marketing Group and FutureOffice Network. He is also on the faculty at the Sheldon B. Lubar School of Business at the University of Wisconsin, Milwaukee. Reach him at
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