People are buying online, now more than ever. An eMarket report estimated that e-Commerce sales were near $1.5 trillion in 2014. The combination of rising online purchasing confidence and passing of the Affordable Care Act (ACA) has created a foundation for a maturing landscape of healthcare e-Commerce.
As a method of adaptation, and to help facilitate purchasing processing, many industries are leaning on “exchanges” to assist buyers and promote choice (both of which are largely beneficial to the consumer). Exchanges are aggregators of information. The rise of online retailers such as Amazon and Zappos has been well-documented. They offer filtering capabilities to help consumers narrow down choices, as well as suggestions based on previous purchases. But retailers aren’t the only popular exchanges. Redfin and Trulia are popular Real Estate Exchanges, AutoTrader is an online marketplace for cars, Kayak aggregates flight information across carriers, and StubHub is an online marketplace for event tickets (sports, music, comedy, etc.). The list goes on and on.
From a technical perspective, healthcare is generally slower to adapt than industries like retail. As exchanges continue to promote consumer choice, healthcare exchanges have started to mature. Exchanges have proven that they can be avenues to reach new customers for many of our clients. This maturation process has given rise to various healthcare tools, and enabled more sound decision making capabilities. Insurers should recognize the different benefits, understand how their business strategies / business requirements are supported by the exchanges, and investigate the best options for execution.
To help de-mystify the three primary ways of purchasing healthcare, an outline of the different purchasing options can be found below.
Federally Facilitated Exchange:
Just like Amazon, President Obama’s Federally Facilitated Exchange (FFM) leads the way in terms of acceptance. In 2015, 6.5 million people enrolled in a health plan on ObamaCare’s Health Insurance Marketplace (HealthCare.Gov). This included 4.5 million renewals, and 2 million new enrollments. Because the Federal Exchange is king, the government determines the rules. Because of the various government mandates, insurers may find difficulty in filing and integrating their products with the exchange. We’ve also seen limitations with the Federal Exchange’s customer service capabilities, so we’ve helped clients find the best ways to interact with Healthcare.gov.
In addition to the Federal Exchange, insurance brokers / benefits consultants / insurers are offering private exchanges to facilitate the e-Commerce experience. According to Rich Birhanzel, these private exchanges enrolled 3 million people in 2014. As private exchanges grow in popularity, the tools and features of these exchanges will continue to grow, ultimately benefiting the healthcare consumer. From our experience, the benefits of private exchanges include robust comparison options, tools educating consumers on expected spend, and decision support benefits. For these reasons, private exchanges are appealing to both individual shoppers and employer groups.
For some health insurance companies, both public and private exchanges open the door to too many questions, back-office operational changes, and concerns around “control” of information and brand. While the strategic direction of the insurer may not be on the exchange, some companies have adapted to the rising trend in e-Commerce by allowing consumers to shop and purchase individual insurance on their website. Insurers in both small and large markets can sell their individual plans online to local markets, in addition to integrating with Healthcare.gov (if they choose). This route gives more control over options, plans, price changes, brand, educational content, and overall customer experience.
The presence of “exchanges” will continue to grow, as more people feel comfortable buying non-retail items online. As millennials (the highest percentage of online buyers) get older, the comfort level of purchasing will rise, making non-retail purchases such as healthcare and insurance increase. For our healthcare clients, it’s important to think strategically about the avenue in which you would like to offer products online. National plans looking for the most reach should consider Healthcare.gov, while smaller local firms may consider offering their individual plans online, while still controlling the shopping experience. While it may not be on a national scale, e-Commerce capabilities have enabled insurers to reach segments of the population that they may not have been able to previously reach. Regardless, the presence of exchanges ultimately benefits customers by empowering them with more tools and information to make the decision that is right for them.