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 circulars. Now, employees and individuals are shopping for their health benefits in public and private benefits marketplaces.
The consumerization of health care benefits (for example, through high-deductible health plans and price transparency) is thrusting retail dynamics upon an industry that, historically, has been largely naïve about the shopping experience. Now that individuals are responsible for shopping and paying for their care, companies developing health care exchanges should apply the hard-earned lessons of consumer retail to the benefits-selection process.
Consider basic necessities like groceries, gasoline or clothing. For most people, shopping for these items is a chore, and the dissatisfaction around this activity presents a key challenge for retailers. As a result, retailers in these commodity categories have developed a set of common approaches for creating satisfied shoppers.
Likewise, for most people, purchasing health insurance is not an experience that will surprise and delight even with a subsidy from an employer or the government. In presenting a health care marketplace to HR and benefits executives, it is worth carefully considering the specific ways in which retailers have created engaging shopping experiences for consumers.
Here are the top five lessons from retail that brokers and consultants can leverage to engage employees in benefits selection and produce a positive experience with benefits shopping.
1. Minimize time, maximize experience
Time matters. We all want to complete chores 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. The same goes with employees looking to purchase health benefits. Few people look forward to investing their valuable time in the annual health plan enrollment process. Given the option of a passive enrollment, most employees let it ride. Winning benefits marketplaces will mirror their retail equivalents. With the right focus and the right technology, they will offer consumers the ability to get in and out quickly with the items they need.
Consider the revolution that OpenTable brought to the chore of planning an evening out. This restaurant-reservation system has dramatically accelerated the reservation process by integrating reviews, cuisine search and table availability into one solution, enabling consumers to achieve in a tenth of the time what it would take to call multiple restaurants. With OpenTable, consumers also have the option to integrate guest invitations, car service and flower delivery into a one-stop shopping experience.
Similarly, employers have an opportunity to transform the benefits shopping experience into something straightforward and efficient for the health benefits 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 plans, wellness and benefit programs that encourage employees to think differently about the chore of annual enrollment.
Like OpenTable, a successful solution must offer convenient, one-stop purchasing options fueled by seamless technology.
2. Emphasize navigation
Navigational aids are critical to effective and efficient shopping. 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, 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. Benefits administrators face the challenge of executing on increased choice, while still managing to present an edited assortment of options tailored to individual employees.
Technology tools that enable a broad array of choices to be effectively presented are critical for successful benefits marketplaces. Tools that leverage consumer choice architecture such as provider selection, risk tolerance, health status and price will enable benefits marketplaces to be organized like their retail counterparts.
As an example, Ask Emma, the interactive benefits advisor in Springboard Marketplace, walks employees through each step of the enrollment process and gets to know their personal needs and preferences along the way by asking a few simple questions. Using these answers, she presents the plans that best fit their specific needs.
3. Clearly communicate price
Price must be clearly, concisely and correctly communicated. Gasoline retailers post prices on large signs. Grocery retailers post prices in front of every item. Most shoppers will not purchase items that are missing price tags.
The same will be true for health benefits. Minoo Javanmardian, a partner in Booz & Co.s health practice, states, In public exchanges, shopper choice will be driven by price; brand is simply a gating factor to consumer consideration.
Adopting a defined contribution strategy is useful for bringing complete transparency to health care marketplaces. Clearly identifying the employer contribution and the total price of the insurance benefit makes it easier for shoppers to identify the value of their health benefits.
However, defined contribution is only part of the transparency solution. Few marketplaces help shoppers understand their out-of-pocket risk as well. Yet, with the growing trend for shoppers to select lower cost plans with higher deductibles and out-of-pocket limits, ensuring that they clearly understand their total future cost risk is imperative for true transparency.
4. Leverage choice to drive behavior
Well-designed benefits exchanges 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 help employers better frame cost-shifts. However, defined contribution itself will do little to moderate the individuals health needs and, as a result, will have only marginal impact on overall health costs.
Steve Burd, former Chairman and CEO of Safeway for 20 years and a long-standing health care innovator, says that using defined contribution solely as a way to avoid future health care inflation is short-sighted. Over the past 30 years, weve 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. Promote effectively
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 scattershot marketing approach is likely to reach individuals without interest in the product as well as current purchasers, neither of whom is likely to change shopping behavior.
However, with the advent of new technology and massive amounts of consumer data, this old-school approach is changing. 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 promotion and product bundling of health improvement offerings than is easily achievable under a typical defined benefit plan. With defined contribution one can eliminate multiple promotional channels such as cash payouts and gift cards. 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 and who hasnt 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.
Instead of wasting promotional energy on those who are already converted, the flexibility afforded by the combination of technology, defined contribution and sophisticated data management enables personalized promotions in health management, which dramatically improves engagement and results.
Health exchanges are 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.
Wolfsen is executive director of exchange solutions for bswift (bswift.com), which offers software and services that streamline benefits, HR and payroll administration for employers and public and private exchanges nationwide. His role includes heading the companys wellness and consumerism strategies. Mr. Wolfsen previously served as president of Safeway Health, a venture to commercialize the grocery store chains health benefit solutions. Under his leadership, Safeway saved hundreds of millions of dollars in health benefit costs for itself and its clients.
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