By David Greene, Senior Principal, The Tori Group
I'll admit that I'm not the one in the house who is usually in charge of household groceries. But, upon being asked, I had no hesitancy in helping out and doing so - just text me the shopping list and I'm off. However, once in the market, my efforts were squarely stalled once starring down the endless aisle containing cereals. Seemingly thousands of options, most of which seem just a millimeter apart in content and targeted buyer. The boxes look identical but one is multigrain, honey coated, vitamin C & D enriched, low sodium, flakes; and the other is multigrain, honey coated, vitamin C & D enriched, low sodium, flakes with crunch. Imagine the household disaster if the wrong one were placed in the cart?!
Having a bit of marketing geek in me, a chunk of time is then spent studying how the makers of cereal appear to be fighting for shelf space, how closely aligned differentiation is around a central concept of taste, such as wheat flakes with raisins or just plain wheat flakes, kids cereals located lower to appeal to children and healthier cereals up higher for the adult eye... you get the idea. Considered too was a bit of recent research that found if the box has a person/character that looks you in the eye, you are more likely to buy it. But the bottom line was the multitude of it all is paralyzing to a consumer wanting to make a choice. I know I was stopped in my tracks... so I had to call home for "tech support" to make sure the right box was put in the cart.
Exchanges are like Cereal Aisles
· In Florida: One carrier has 18 plans over four metal tiers. In some cases, the premium for a platinum plan is less than a silver tier plan they offer (figure that one out).
· In Texas: One carrier has 17 plans, there are gold plans costing less than silver, and evidently someone got tired after working the bronze through gold tiers because no platinum offerings are made.
· In New York: There are 10 plan offerings per web page... and 71 pages available to scroll through. If you narrow your search to silver tier only (generally the most popular tier selected), the choice is narrowed to 19 pages to scroll through. More, many carriers are offering eight or more plans on one tier... one carrier had up to four pages to scroll through on a single tier!
The choice is overwhelming.
Examples could have easily been derived from other states as well. Please know the above states are not being "picked on". The offerings cited above are within the rules established - that's understood (I'll come back to this comment in a bit). The point is how much do we really expect for a consumer to deal with and still feel confident in their choice? This question becomes more emphatic when the selection is about who will be entrusted with one's health (most likely when they in the middle of a health scare and need the trust most).
Déjà Vu
Déjà Vu
Years ago we as a management team faced the problem of a coverage offering that had overwhelming choice. We had 11 different benefit plans being offered from up to seven different carriers. This created a couple of core issues:
1) Consumers (who were actually employees of small employer groups) were confused. Brokers selling the plan wanted to ensure the employer (as the ultimate decision maker) and his/her employees were happy. To keep all parties smiling, the brokers often remained very close to the selection process and offered advisement based on their expert knowledge. The vast majority of brokers represented all as it should be. Some other brokers took other approaches and proactively limited the choices by informing the employees some plans/carriers were not part of the offering - even though this was not true and was against the design of the product. Further, some of these brokers even created their own sales collateral only showing the two or three options they were most comfortable selling. The outcome of this was some of the carrier who were "screened-out" not being too happy about working to be part of a package offering and then not being shown to potential enrollees.
2) A broad offering of many plan types and carriers creates a more complex array of plan selections. And thus, a more complex assessment of risk management. Needing to incorporate this risk into their entire product portfolio, carriers rightfully looked closely at the membership garnered through each sales channel. Carriers always look closely at small group business. This said, with our offering they may only get a part of group's potential membership and not all of it, thus they looked even closer at plan selection and utilization coming from us. And in fact there were "winners" and "losers" between the plan designs and carriers. We had a risk adjustment process in place, but as you could imagine it had occasion to not make all the players happy.
So, brokers were not always so much working from the perspective of providing great service, they were working from the perspective that their efforts were what was as a minimum needed to sell the product. They were surviving our product, not actively selling it! And carriers were each doing deeper assessment as to remain as part of the product offering or not.
While not a perfect corollary, the above does share many of the characteristics of the issues shaping up for the new Exchange world. What is important to note is that while there are risk management provisions in existence right now that did not exist pre-Affordable Care Act (ACA), fact is two of the three risk mitigation tools put in place go away after 2017. The only one left after that will be risk adjustment. Thus, putting our longer term thinking caps on, we would do good consider how actions now will affect the lessening of risk mitigation as time marches forward.
A plausible approach
With rules in place that force actuarial values to be +/-2% of a set target for each metal tier, how much is really gained by offering 8-10 offerings per tier? Don't forget that deductibles, copays and coinsurances are complicated concepts for many looking to make their selection. And, it can be seen that this much selection turns-off consumers to the carriers and the exchanges putting forth this tsunami of odd-ball terms. While confused about what each offering is, the consumer at least walks away understanding very clearly any of these options will cost them money!
Right now carriers and exchanges are in a land grab for membership. Exchanges want to reach thresholds for operational independence per the ACA legislation and carriers want to ensure market share of the new growth provided by subsidized membership. It is in both the interest of the exchange and the carriers to put in place rules that align the distribution offering to their shared goals. Carriers have the opportunity to work under this discipline relatively fast - and become winners. However, for the Exchange this may mean considering collaboration in changing the rules under which their particular Exchange operates. And while it may seem that the focus here is on the financials, risk mitigation, and operations expenditures of maintaining massive benefit portfolios, remember what all this work is focused on: It allows for a better consumer experience. And with the consumer in this case being people who are making healthcare selections appropriate for them, that's pretty significant.
Years ago while facing the situation outlined above, the approach we took was to launch a streamlined offering with a built-in common comparison point for consumers, and then opened up offerings carriers could make to designs of their choice. This very much helped the consumers make decisions and carriers to manage their portfolios. A true win-win which sold quite well. There are reasons this can't be cut-and-paste duplicated today. And there are serious considerations to where the pendulum swing between "wide-open" and "managed" offerings should be measured. All this said, what is important is to realize we have available to us a viable approach which can be evolved to work within the new health care environment.
I'll admit that I'm not the one in the house who is usually in charge of household groceries. But, upon being asked, I had no hesitancy in helping out and doing so - just text me the shopping list and I'm off. However, once in the market, my efforts were squarely stalled once starring down the endless aisle containing cereals. Seemingly thousands of options, most of which seem just a millimeter apart in content and targeted buyer. The boxes look identical but one is multigrain, honey coated, vitamin C & D enriched, low sodium, flakes; and the other is multigrain, honey coated, vitamin C & D enriched, low sodium, flakes with crunch. Imagine the household disaster if the wrong one were placed in the cart?!
Having a bit of marketing geek in me, a chunk of time is then spent studying how the makers of cereal appear to be fighting for shelf space, how closely aligned differentiation is around a central concept of taste, such as wheat flakes with raisins or just plain wheat flakes, kids cereals located lower to appeal to children and healthier cereals up higher for the adult eye... you get the idea. Considered too was a bit of recent research that found if the box has a person/character that looks you in the eye, you are more likely to buy it. But the bottom line was the multitude of it all is paralyzing to a consumer wanting to make a choice. I know I was stopped in my tracks... so I had to call home for "tech support" to make sure the right box was put in the cart.
Exchanges are like Cereal Aisles
· In Florida: One carrier has 18 plans over four metal tiers. In some cases, the premium for a platinum plan is less than a silver tier plan they offer (figure that one out).
· In Texas: One carrier has 17 plans, there are gold plans costing less than silver, and evidently someone got tired after working the bronze through gold tiers because no platinum offerings are made.
· In New York: There are 10 plan offerings per web page... and 71 pages available to scroll through. If you narrow your search to silver tier only (generally the most popular tier selected), the choice is narrowed to 19 pages to scroll through. More, many carriers are offering eight or more plans on one tier... one carrier had up to four pages to scroll through on a single tier!
The choice is overwhelming.
Examples could have easily been derived from other states as well. Please know the above states are not being "picked on". The offerings cited above are within the rules established - that's understood (I'll come back to this comment in a bit). The point is how much do we really expect for a consumer to deal with and still feel confident in their choice? This question becomes more emphatic when the selection is about who will be entrusted with one's health (most likely when they in the middle of a health scare and need the trust most).
Déjà Vu
Déjà Vu
Years ago we as a management team faced the problem of a coverage offering that had overwhelming choice. We had 11 different benefit plans being offered from up to seven different carriers. This created a couple of core issues:
1) Consumers (who were actually employees of small employer groups) were confused. Brokers selling the plan wanted to ensure the employer (as the ultimate decision maker) and his/her employees were happy. To keep all parties smiling, the brokers often remained very close to the selection process and offered advisement based on their expert knowledge. The vast majority of brokers represented all as it should be. Some other brokers took other approaches and proactively limited the choices by informing the employees some plans/carriers were not part of the offering - even though this was not true and was against the design of the product. Further, some of these brokers even created their own sales collateral only showing the two or three options they were most comfortable selling. The outcome of this was some of the carrier who were "screened-out" not being too happy about working to be part of a package offering and then not being shown to potential enrollees.
2) A broad offering of many plan types and carriers creates a more complex array of plan selections. And thus, a more complex assessment of risk management. Needing to incorporate this risk into their entire product portfolio, carriers rightfully looked closely at the membership garnered through each sales channel. Carriers always look closely at small group business. This said, with our offering they may only get a part of group's potential membership and not all of it, thus they looked even closer at plan selection and utilization coming from us. And in fact there were "winners" and "losers" between the plan designs and carriers. We had a risk adjustment process in place, but as you could imagine it had occasion to not make all the players happy.
So, brokers were not always so much working from the perspective of providing great service, they were working from the perspective that their efforts were what was as a minimum needed to sell the product. They were surviving our product, not actively selling it! And carriers were each doing deeper assessment as to remain as part of the product offering or not.
While not a perfect corollary, the above does share many of the characteristics of the issues shaping up for the new Exchange world. What is important to note is that while there are risk management provisions in existence right now that did not exist pre-Affordable Care Act (ACA), fact is two of the three risk mitigation tools put in place go away after 2017. The only one left after that will be risk adjustment. Thus, putting our longer term thinking caps on, we would do good consider how actions now will affect the lessening of risk mitigation as time marches forward.
A plausible approach
With rules in place that force actuarial values to be +/-2% of a set target for each metal tier, how much is really gained by offering 8-10 offerings per tier? Don't forget that deductibles, copays and coinsurances are complicated concepts for many looking to make their selection. And, it can be seen that this much selection turns-off consumers to the carriers and the exchanges putting forth this tsunami of odd-ball terms. While confused about what each offering is, the consumer at least walks away understanding very clearly any of these options will cost them money!
Right now carriers and exchanges are in a land grab for membership. Exchanges want to reach thresholds for operational independence per the ACA legislation and carriers want to ensure market share of the new growth provided by subsidized membership. It is in both the interest of the exchange and the carriers to put in place rules that align the distribution offering to their shared goals. Carriers have the opportunity to work under this discipline relatively fast - and become winners. However, for the Exchange this may mean considering collaboration in changing the rules under which their particular Exchange operates. And while it may seem that the focus here is on the financials, risk mitigation, and operations expenditures of maintaining massive benefit portfolios, remember what all this work is focused on: It allows for a better consumer experience. And with the consumer in this case being people who are making healthcare selections appropriate for them, that's pretty significant.
Years ago while facing the situation outlined above, the approach we took was to launch a streamlined offering with a built-in common comparison point for consumers, and then opened up offerings carriers could make to designs of their choice. This very much helped the consumers make decisions and carriers to manage their portfolios. A true win-win which sold quite well. There are reasons this can't be cut-and-paste duplicated today. And there are serious considerations to where the pendulum swing between "wide-open" and "managed" offerings should be measured. All this said, what is important is to realize we have available to us a viable approach which can be evolved to work within the new health care environment.
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