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by Tony Novak, CPA, MBA, MT, NAHU certified consumer driven health care consultant, originally published 5/19/2011 revised 8/12/2011
In 2007 the Harvard Business Review published the results of a survey completed by two researchers with Diamond Consultants1 that explored the relationships that consumers express about their personal finances, their health, and their confidence in the ability to pay for future health care. Since health insurance consumers represent the widest possible range of diversity in every possible demographic factor, it was somewhat surprising that four predominant types of thinking about health insurance became apparent.
While this research was published several years before the drafting of federal health insurance reform laws, the results may be useful in the implementation of the new law. The Affordable Care Act of 2010 creates a new type of health insurance agent or adviser called a "navigator" who helps consumers choose among the various health insurance choices available. To be effective, a health insurance adviser or navigator must recognize and address the widely different expectations that consumers have about their health insurance.
Health insurance policies have evolved to address different types of individual needs as well. Health insurance policies designed for those meeting preferred risk measurements and no ongoing medical issues, for example, are significantly different from those policies available to individuals with pre-existing medical conditions. Traditional group type insurance policies that provide a "one size fits all" approach to coverage are expected to gradually diminish as health reform gains stride. Consumer-oriented publications from the U.S. Department of Health and Human Services (HHS) now make it clear that national health policy will be geared toward identifying and changing specific behaviors rather than using a single approach toward all. In this context, it makes sense for health insurance providers to identify consumer expectations of health insurance and broadly categorize and segregate these expectations in order to more effectively meet consumer expectations.
The first group of consumers were "healthy worriers" who recognize that health insurance costs are rising faster than their own income. They feel financial pressure from the need to trade off health insurance with other life needs. They prefer to obtain health insurance through their employers with few significant choices. They want simplicity, uniformity, and wish to avoid involvement as much as possible.
We notice that these individuals may say they can't afford the best type of health insurance but what they really mean is that they think that health insurance is priced higher than they believe that it should be and they are unwilling to make lifestyle changes that would make health insurance a priority. These individuals may be most likely to have gaps in coverage that destroy their ability to qualify for takeover of pre-existing conditions and may not be aware that this risk becomes more severe under the new health insurance law.
When their employers switch to post-reform health insurance plans with high deductibles, they are likely to seek out private supplemental health insurance. Their decision to enroll typically depends on whether the employer offers a salary-deducted program that breaks the premium cost down to minimal amounts per paycheck. Unfortunately, these individuals are also most likely to postpone and avoid health insurance coverage decisions when they perceive the lack of attractive and affordable choices. This might lead to a higher likelihood to be uninsured during transfers between one group health plan to another. The macroeconomic environment outside of the control of these consumers remains a major obstacle. It will take years until we see a significant shift in national consumer spending and an economic balance of that addresses the concerns of these health insurance buyers. At Freedom Benefits, these are most likely to attracted to limited benefit policies that are proceed less than prevailing major medical insurance.
Individuals in this category are likely responsible for the rapid growth in supplemental and limited benefit insurance like Core Health Plans. Cost-saving innovations like those being used in commercially managed Medicaid plans from companies like Celtic Insurance will also appeal to individuals in this category.
The second group were "healthy, wealthy and wise". They are best informed about health care issues, concerned about health and fitness issues, possess the highest incomes and are most confident about their ability to manage their future health insurance costs. They are most likely to prefer Health Savings Accounts and high deductible health insurance. They are least likely to be uninsured. Their overall financial assets will eventually exceed the roughly $200,000 that is typically needed to pay for health care in the final years of life.
The focus of these individuals is tax efficiency (paying for health care with pre-tax dollars) and financial benefiting from their healthy lifestyles. Consumer driven health plans with cash-based incentives and defined contribution employer health plans make sense to these individuals. They are most likely to seek out and initiate enrollment in the most innovative health insurance plans without the legal requirement or outside financial motivation to do so.
The third group was "unfit and happy". They are financially secure, and generally overconfident about their health and ability to pay for health care. They tend to distrust the health care system and are the least receptive to new health insurance approaches and products. They may be attracted to limited benefit health plans because of their full coverage for routine health care without large deductibles or co-payments. Conversely, they may underestimate the importance of catastrophic coverage. They are likely to wait until legal changes require them to modify health insurance choices before taking action. Even if the individual mandate provision becomes law that requires everyone to carry government-approved health insurance, we anticipate that a significant number in this group will opt to pay the penalty rather than purchase the coverage.
OnlineAdviser suggests those in this category may be more satisfied with traditional full-coverage health insurance like the co-pay plans from UnitedHealthcare.
The final group were "hapless heavyweights". They were lowest on the financial scale and had the lowest concern about fitness. They resist help and feel helpless to help themselves. The survey reported that 78% in this category were overweight.
These individuals may express distain at health plans that decline to assume the expenses of their higher-than-average medical costs. They may say that they are not eligible for health insurance. They are most likely to consider health care to be a human right rather than a economically bargained transaction. In the past they might have been excluded from some commercial health plans. Now that they are guaranteed enrollment under government-paid pre-existing condition insurance plans they may still object to paying a portion of the cost. In North Dakota, for example, a state with alarming levels of uninsured residents, obesity and diabetes, only 11 people opted to enroll in the government-paid health insurance program for those with pre-existing medical conditions over the past year. We see our primary role as preventing individuals in this category from these. These individuals will need the financial incentives and financial penalties built into the federal health reform laws to change behavior. These individuals may experience the most discomfort in the transitions of Medicare and Medicaid plans from a public entitlement programs to the commercial-type platforms. Examples of this tension are reported in news headlines across the nation ever more frequently as the new health reform measures gain momentum.
Those in this group are least likely to benefit from online resources (like this article) or the health insurance exchanges and therefore least likely to be served by (or to request help from) agents or navigators. If you fall into this category and need health insurance, consider one of the short term medical insurance plans listed on the exchanges. You may find that the fast self-serve online offerings are surprisingly easy to understand and more affordable than you expected.
At Freedom Benefits, we see individuals that exhibit the behaviors of members of each category on a daily basis. We are committed to helping each individual make the best decision possible given their health condition, financial resources, and outlook on their health care and insurance. We know that decisions about health care (whether by direct action or indirect due to lack of affirmative action) are ultimately made by the individual and not controlled by a government or health insurance plan. Those decisions vary widely and health reform laws will not change the range of variability in individual consumer behaviors.
In the end, serving each consumer's individual needs and matching them with the health insurance plan that best suits those unique needs creates value for the entire health care delivery system and will prove to be a key factor in the overall acceptance and public satisfaction with our nation's health reform measures. We will see insurance companies continue to develop more innovative ways to identify, segregate and provide for the diverse needs of their customers as the demands of health reform initiatives take effect2.
1 Caroline Calkins and John Sviokla, "What Health Consumers Want", Harvard Business Review, December 2007.
2 See the article "Health Reform Timeline" for the effective date of various measures that impact individual and group insurance policies.
This web site is independently owned and managed by Tony Novak operating under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator". Opinions expressed are the sole responsibility of the author and do not represent the opinion of any other person, company or entity mentioned. Tony Novak is not an agent, broker, producer or navigator for any federal or state health insurance exchange but may provide uncompensated advice, reviews and referrals to these official resources. Novak is compensated as an accountant, adviser, affiliate consultant, marketer, reviewer, endorser, producer, lead generator or referrer to some of the other commercial companies listed on this site. Information is from sources believed to be reliable but cannot be guaranteed.