Guest Commentary: Consumer empowerment in insurance exchanges


Guest post by Debbie Gordon

Remember when buying an airline ticket involved calling a specific airline to learn about flight options? Or, visiting a travel agent to flip through colorful brochures and get a broader variety of choices?

It is a rarity to do any of that today; travelers can essentially peer directly into the airline reservations systems and comparison shop according to their individual priorities: number of stops, price, duration or even what one travel site aptly calls "agony."

These tools give consumers significantly greater visibility into the trade-offs they want to make between price and other measures, and ultimately, greater control over their own travel choices.

The health insurance market is on the cusp of a similar transition. With 12 million people expected to purchase their own health insurance via an exchange in 2014, and as many as 28 million by 2019, more and more Americans will directly face the trade-offs between price and product features. From deductibles to premiums to provider networks--the number of variables will far exceed those for the average flight between two cities.

Insurers, traditionally reluctant to pursue the individual segment, will have to take notice: Revenue from insurance purchased on exchanges is projected to be $200 billion in 2019. For the first time, the heterogeneous assortment of individual health insurance purchasers will not only have scale, but also a new level of market power, galvanized by exchanges.

Exchanges, and the accompanying shift in power to consumers, create opportunities for payers who embrace them. Like it or not, this pressure is good for health plans. With insurance products sitting side-by-side on a virtual shelf, payers are more likely to be innovative and resourceful with how they bring value to the marketplace. By responding to market preferences and demands, payers will have new opportunities to engage directly with consumers. Providing clear, useful, and approachable information and decision-support tools will become vital; done well, facilitating clarity can build trust and loyalty among consumers.

A better-informed and empowered population can start to upend the premise that healthcare cannot work as a functional market. Markets are generally populated with people who realize they are in the market, care that they are, and have enough knowledge to make purchase decisions. Consumers in other markets exert power by making those purchase decisions, and in so doing, help shape what and how companies provide them with goods and services.

Travelers comparing two different airfares will not choose the higher fare without some offsetting value, such as greater convenience or loyalty points. They therefore bring rationality to the market, and compel companies to offer incremental value. Consumers also reject undesirable options; remember New Coke and Makers' Mark?

Elsewhere in the world, there are countries whose healthcare systems more effectively harness consumer power to leverage market forces, and have enviable results to show for it. They aren't necessarily where Americans have typically looked for healthcare insights.

Singapore, for example, has had a system of consumer co-payments since 1960, right after the country gained independence. Personal responsibility is a hallmark of the Singaporean healthcare system; every worker is required to save a portion of her wages into a health savings account, an approach which should sound familiar to anyone who contributes to Social Security in the United States. Individuals then use their health savings to pay for their own health services and make choices about whether to seek public or private services. This approach works: Singapore spends only 4 percent of GDP on healthcare and ranks No. 1 in the 2012 Bloomberg survey of healthiest nations.

In Australia, personal responsibility takes a different form. Australians are encouraged to purchase private insurance, facing financial carrots and sticks depending on when in their lives they buy into the private system. The Australian government provides an unbiased comparison shopping tool for private insurance plans. But Australia has a national asset less apparent in the United States: a culture of public involvement. Most Australians (80 percent) say they would like the public's preferences to inform health policy.

Contrast that to the now-famous objection: "Keep your government hands off my Medicare!" Most Americans have yet to fully recognize their increasing role as healthcare consumers, and most health plans are just waking up to their potential as facilitators in this process. 

Looking to highly-engaged consumer healthcare markets provides evidence of the potential consumer empowerment can have in the United States. Closer to home, at Network Health, we have experienced competitive pressure and consumer-driven decision making in the subsidized insurance exchange since 2006, when Massachusetts passed healthcare reform legislation that created the Health Connector, the state's exchange.

Founded as a Medicaid managed care organization, Network Health adapted to the opportunities and challenges of competing on price and network design; we focused our network and delivered double-digit savings to both the Connector and consumers who purchase our plans. And our business has thrived, with membership increasing by 85 percent as a result of our subsidized exchange business.

This month, Network Health accepted our first commercial, non-subsidized members on the exchange, deploying similar principles that drive our positioning in the subsidized market: Deliver high-quality, affordable health insurance to bring real value to consumers.

Our experience on the Massachusetts exchange has taught us we must continuously hone our offering and approach to serve individual consumers, and if we do so successfully, we can help shape and support a new role for healthcare consumers.

Exchanges may be the previously missing element that catalyzes the rise of consumer power, providing greater competition, transparency and consumer responsibility--and for the first time, a real mechanism to enable a true shopping experience for health insurance.

Debbie Gordon is vice president and chief marketing officer at Network Health in Massachusetts.