Consumer Strategies Report February 2005/Management

Consider that in a recent study of consumers' perceptions to their insurance benefits, 73% of consumers in the U.S. claim to have insurance benefits; of this, 69% feel they're useful. Based on no other figures, this number illustrates why our nation's healthcare costs are skyrocketing, when so many people are taking advantage of their benefits. But in fact, just 45% of consumers from another worker sentiment study conducted by this firm (1) claim to actually use their benefits, leading any casual observer to speculate on why on earth a company would want to pay double-digit annual increases to offer benefits to any employee that won't actually use them.

Herein lies the dilemma faced by every employer: as long as consumers expect benefits to be given to them, they'll never acquire a proper value for them, using them negligently. This fact is even more apparent when consumers are asked about the companies through which they receive benefits, to which just 90% know the company (keeping in mind that 25-30% of employee income goes to health benefits, what's surprising is that this number didn't reach 100%). Another 62% don't remember, notice, or care for ads about their insurers (again, an unexpected revelation for a society so adamant about choice). Of the remaining, 19% claimed they didn't like the ads they did encounter or that ads didn't have any impact on their utilization decisions.

I was recently reviewing a plan by Oxford Healthcare, where they ask subscribers from a small fashion apparel company to pick amongst 3 choices: Freedom Upsell (the top), Freedom Base (the middle), and Liberty Base (the lowest). Putting all the plans side-by-side, Freedom Base and Liberty Base offered identical services, but Freedom Base required a larger monthly fee (~15% more). Freedom Upsell was ~30% more expensive than Liberty Base, and the only perceivable difference was a reduced co-pay (half off the other plans). Both Freedom and Liberty had the same identical list of providers in their networks, but in different colored directories. Without knowing anything else, why would any relatively healthy subscriber choose anything other than Liberty Base? And more importantly, how would a subscriber evaluate these plans without the benefit of real-life scenarios or a degree in actuary?

Oxford is owned by UnitedHealth Group, a monstrous provider of benefits to 55 million people. At a recent UBS Healthcare Conference (hosted at the always spectacular Plaza Hotel here in NY), Chairman/CEO, William McGuire, MD simply revealed that they intend to get bigger, offer every conceivable delivery of their programs (old and new), but most importantly, will probably not be making any attempts to simplify the way consumers understand their product. (A total of 14% of our survey's population receive benefits from a UnitedHealth company.)

There's a debate on how to offer insurance to 45 million U.S. consumers without it. Given such an apparent disconnect between information and selection, selection and choice, one can speculate that our society feels culturally entitled to insurance, and employers must provide it for no other reason than peace of mind. (No longer surprising, a full 100% of survey respondents expressed moderately favorable opinions of their benefits). As a result, there doesn't appear to be any incentive for subscribers to want to make the current delivery model more efficient for themselves. And without their support, there isn't any incentive for providers to do it either. Based on this analysis, the answers to our current healthcare challenges are dreadfully hard to come by.

Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.

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