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Health Plans: Blocking the One-Two Punch

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Here are ways to survive the fading employer-based insurance market.

Health insurance companies are rightfully concerned about how healthcare reform will affect their companies and offerings, but there is a more immediate threat to their future: the loss of the employer-based health insurance market.

For decades, insurers focused their efforts on employer outreach. However, as employers, especially small businesses, drop health insurance coverage as a way to remain solvent, health insurers need to survive in a vastly different world that features more individual member outreach, retention, and marketing.

Consider that more than 1 million fewer Americans in 2008 received their insurance through employer-based plans than they did in 2006, and add to that the fact that Medicare will soon cover millions of aging baby boomers.

With that one-two punch to the employer-based health insurance market, what should health insurers do? Here are three ways health insurers can switch to this new way of doing business.

Prepare for a consumer one-on-one world
Fred Karutz, general manager of health plan solutions at Silverlink Communications Inc., a Burlington, MA-based healthcare communications company, says insurers will need to go beyond focusing on having large employers under their umbrella. He predicts the individual insurance market, which now features 20 million members, will grow to 80 million members in a short time.

Moving into the consumer world will mean a greater focus on Web strategies and direct marketing to educate members—both about healthcare and your multiple offerings and healthcare—as well as member retention to make sure members who lose employer coverage move seamlessly into individual plans.

Alexander "Sander" Domaszewicz, principal at consulting company Mercer in Newport Beach, CA, says any loss within the employer market as well as possible health reforms are requiring a new mind-set for insurers.

"With the potential for co-ops, exchanges, and an individual mandate, the necessity for significant investment in the direct nongroup channel is clear—there's been a lot more effort to borrow tactics and skill sets from consumer product companies to learn how to segment buyers and meet the needs of the individual," says Domaszewicz.

Retain employer-based members through individual plans
When members are covered by employers, insurers see little turnover. Sure, there is the usual flow of customers through job changes, but not to the extent that is seen in individual coverage. Karutz says insurers lose 2.2% to 2.5% of their individual book of business every month.

Karutz says a key to retain individual members is focusing on outreach and education within the first 30 days. That's when the insurer must educate the new member about the company and the healthcare industry. That first month is where an insurer can win brand loyalty.

"In the past, a plan would seldom think of investing the time and effort to automatically every day do a download to see who has left the plan. But that's a quick hit, low-hanging fruit," he says.

Create a door for every customer
Health insurers must understand that many of their new individual plan members have not needed to get involved in their healthcare finances and they did not need to fully understand the workings of the healthcare system. That was their employers' human resources departments' responsibility.

In addition to direct marketing and Web strategies to educate members, a handful of insurers is creating a door for customers through retail space. Highmark Inc., the Pittsburgh-based Blues plans, which has 4.8 million health insurance members, is one insurer that has opened storefronts to reach out to new members while helping current members in their communities.

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