Health Plans Step Into Retail Operations

If Blue Shield of California has its way, the grocery lists of many of its San Francisco members will now include a health insurance check-up as well as eggs, orange juice, and milk.

On Monday the Blues company opened an insurance store inside a Lucky Supermarket. This is the first bricks-and-mortar facility for the health insurer, which usually connects with its members via the Internet and the telephone.

Blue Shield joins a handful of health insurers across the country that have opened retail stores in recent years, including Blue Cross Blue Shield of Florida, Highmark Blue Cross Blue Shield in Pittsburgh,  Blue Cross Blue Shield of South Carolina, and Humana.

The retail move is in response to several market forces: high unemployment, the decline in employer-sponsored insurance benefits, and healthcare reform. Many of the more than 14 million unemployed are uninsured, which has created a market for individual policies.

And fewer employers are offering health insurance. Sixty percent of employers offered health benefits in 2011, down from 69% in 2010, according to the Kaiser Family Foundation. Meanwhile, healthcare reform will require millions of the uninsured to have health insurance beginning in 2014.

Doug Biehn, vice president for corporate marketing at Blue Shield, explains that the post-healthcare reform environment will require health insurers to differentiate themselves in new ways. "We think healthcare products will be fairly synonymous across competitors and that health insurers will need to think about ways to differentiate themselves beyond price and medical benefit design. We think the opportunities this store will offer for face-to-face interaction will help differentiate us from competitors and make us more attractive to customers."

Within the rather staid and traditional health insurance industry there is a lot of discussion about the paradigm shift that must be made from a wholesale model based on large and small groups to a retail model focused more on individual policyholders.

One industry observer sees the advent of the retail health insurance store as a master stroke in terms of reaching out to customers on a one-one-one basis."Your customers are sitting right there in front of you. It's a great opportunity get feedback on what tweaks you might need to make on existing products, programs and services to prepare for the tremendous influx of new members expected in next few years," said Rittman, senior healthcare industry consultant for SAS, a Cary, N.C.-based business analytics firm.

Health insurers are pursuing a variety of models in developing their retail stores. Highmark has located its eight Highmark Direct facilities in storefronts in shopping centers. The Florida Blues prefers the free-standing model for its seven stores. UnitedHealthcare has used storefronts for its four consumer support centers. Most are located in high-traffic areas that offer increased visibility.

The insurers are interested in locations that put them close to existing members but also offer them exposure to the members they want to attract—an important distinction as guaranteed issue means health plans will no longer be able to rely solely on risk underwriting for member selection.

The stores typically offer a wide mix of services, including wellness classes, insurance applications, bill payment, and claims checks. The Blue Shield store will include a nursing staff to provide basic primary care services and a dietician.

Biehn said the 500-sq-ft. Lucky Supermarket location was selected because according to recent studies the grocery store is the number one place where people think about their health. He said the grocery store attracts about 13,000 unique customers each day and the average customers visits the store 1.5 times per week. "The reach and frequency factor will be good for us. We'll get greater word of mouth and we don't have to market to them."

He declined to disclose the financial details of the arrangement. Rittman said health plans are at the beginning stages of deciding how their return on investment can be calculated for this type of investment. Much of the discussion involves the medical loss ratio. "If they can acquire, service, manage, and retain customers for a decrease in projected MLR of 1% to 2% then they can invest a significant amount of money into refining their patient engagement strategies."

Biehn explained that Blue Shield will be looking at a number of factors in determining if the one-year pilot can be scaled and expanded. "Of course we'll be looking at utilization. We'll also look at the level of customer engagement meaning are they buying our products. And we'll see if the store helps us develop efficiencies in resolving issues and answering questions. Other metrics will include the level of increased advocacy for the company and increased customer satisfaction with our services."

Rittman says the retail centers will help health insurers compete against a host of new competitors in the health insurance marketplace. Already insurers are facing a new form of healthcare service distribution from Target and Walgreens, which offer an a la carte menu of medical services such as flu shots or basic primary care through in-store health clinics.

She notes that the health insurance industry today faces many of the same challenges as the banking industry did 10 or 15 years ago when its business model shifted. "Banks began to really understand their customer's behavior so everything they did with their business model was designed to appeal to those behaviors and drive the best results. For health insurers that will translate not just into financial viability, but also into improvement in the health of their members."