Private and State Exchanges

Being competitive in the new health reform environment will require a new view of customers. Jeffrey Troutman, Executive Vice President of PNC Healthcare, a division of PNC Bank, N.A., sees a fundamental shift: “The industry is moving from wholesale to retail, and the need to make every interaction simple and user-friendly will drive much of the success for health insurers,” he said. The direct-to-consumer sales process changes the customer mix insurers are used to. Small employers will also be joining the exchange, making up nearly 4 million of the total exchange membership of 2014.

Affordability More Important than Ever

Of those currently uninsured, 76% say they can’t afford it. Affordability is expected to change for this population in 2014 when the government takes two steps: establishes a national floor for Medicaid eligibility and provides government premium subsidies for middle-income Americans. Previously, states set their own standards for Medicaid eligibility; some states were stingy so as to limit spending, and others were generous. But in 2014, Americans whose incomes fall below 138% of Federal Poverty Level (FPL) will qualify for Medicaid. Americans with incomes of 138% to 400% of FPL will be eligible for premium subsidies to buy private insurance in the exchanges. Incidentally, 400% FPL for a family of four is about $90,000.

Customized Products Needed

With this shift toward a retail focus, it will be more important than ever for insurers to know who their customers are so they can meet their needs and build lasting relationships. Their preferences vary based on their backgrounds, demographics, and genders. consumers who are younger and healthier are more open to purchasing health insurance from nontraditional sources, such as a retail store. This is also the group that is less likely to consider price as most important. Younger consumers, consumers with higher incomes, consumers in very good health are the most familiar with the individual mandate. Most consumers would be loyal to a health insurance company that offers incentives for healthy behaviors—except for the young and those in the poorest health. Younger consumers (aged 18 to 34 years) are three times as likely as consumers over 45 to be willing to give up their choice of doctor for a lower insurance costs.