With the influx of millions of new individuals acquiring health coverage through exchanges, the expansion of Medicaid, and the rise in Consumer-Driven Health Care (CDHC), it’s clear that a member’s relationship with their health insurance plan is rapidly changing. This shift to consumerism is transforming the way health care insurance is purchased, how care is being consumed, and how members engage with their health plan. More than at any time in history, consumers are direct purchasers of the insurance they choose, and have more skin in the game than ever before.
What does this mean for health plans? It means consumers will need and want more information, tools, and resources to help them make informed decisions. In fact, consumers will expect health plans to provide detailed information on costs, providers, and treatments, as well as targeted programs to help members manage their health through incentives and rewards. Health plans with the ability to understand and implement a consumer mindset will have a significant competitive advantage over those who don’t. This requires health plans to understand consumer marketing and purchasing like those in other industries do every day to drive customer acquisition, retention and loyalty.
We are starting to understand how consumers feel about networks, pricing, and service. But how do consumers feel about rewards for healthy behavior and better health purchasing choices? We know a lot about consumer views when it comes to non-health reward programs. Rewards play a critical role in driving consumer behavior in virtually every consumer-focused industry. The research firm Colloquy estimated last year that the number of loyalty programs per U.S. household stands at 22. In the restaurant arena alone, consumers belong to almost 3 different programs and indicate that an appealing restaurant rewards programs increases their visit rate to a restaurant by an average of 35%. Although consumer wallets are bulging with plastic cards, 60 percent of consumers don’t mind carrying a membership card for a rewards program if it’s necessary. Consumers understand, like and expect loyalty programs from their consumer brands.
So we know that consumers want non-health reward programs. What about health reward programs? We certainly know that rewards for healthy behaviors have become popular with the health plans and employers that serve consumers. In 2012, Todd Park, CTO of the US health care effort, predicted that the two biggest health trends would be data liberation and incentive reform. The Patient Protection and Affordable Care Act (PPACA) increased the amount companies can spend on rewards from 20 to 30 (and in the case of smoking cessation) 50 percent of premium. Employers viewed this increase in allowable employee incentives as the most beneficial element of ObamaCare. Between 2009 and 2013, the per employee dollar value of rewards spent by large companies grew from $260 to $717 per employee.
But how do consumers view rewards in health care ? It is no surprise that consumers want rewards, but the extent to which they indicate it would drive their behavior given the personal and sensitive nature of health care is surprising.
- Consumers will take action for a reward. Consumers are open to various activities and data sharing in return for an incentive:
- 75% said they’d have a blood pressure check
- 68 % would undergo blood sugar or cholesterol tests
- 51% would have their lifestyle choices scrutinized
- 49% would undergo genetic tests
- 38% would follow a specific diet to help lower their blood pressure or cholesterol
- 28% would attend a health class or keep an online diet and exercise diary
- Consumers say they will change lifestyle for rewards. According to a Welltok survey, 96% of consumers would engage in healthier behaviors if rewarded. According to a 2012 survey by Phalanx Investment Partners LLC, 73 percent of consumers would try to lose weight if the government gave them an incentive of $500 or $1,000, and 51 percent said they would try really hard. http://www.forbes.com/sites/davidmaris/2012/05/07/cash-as-weapon-in-the-war-against-obesity/
- Consumers will respond differently toward their health plans. According to a Welltok survey, when asked “would you have a more positive opinion of your health plan if they sponsored an a program that rewards consumers for healthy behaviors? 75% of respondents agreed. Furthermore, 81% said that access to such a program positively influences their decision to renew with their current plan and
- Consumers will sacrifice some privacy for rewards. Although aware of pitfalls related to personal data, consumers will trade their data for value under specific conditions. Fifty percent of respondents lack confidence that the security of their personal data is protected on the Internet. However, more than half are willing to share personal data in exchange for a monetary reward as long as some basic rules apply. Seventy percent would share in exchange for a reward if their personal data got used only by their providers and 65 percent would share if the provider complies with data protection laws.
- Consumers are open to intrusive measures. The poll of more than 2,000 U.S. adults found that a majority would be “very willing” to have various tests and share the results with their health insurer — provided there was a financial incentive. Many consumers are open to intrusive measures. Just over half said they’d agree to let their health plan monitor any exercise regimen they were using to lose excess pounds or control diabetes. What’s more, nearly half said they’d undergo genetic tests to gauge their risks of “cancer or inherited medical conditions.”
- Consumers expect rewards from pharma. When asked “which of the following services would you like to receive from your pharmaceutical company?” rewards programs topped the list at 63 percent followed by product information (53%), financial assistance (51%) and Measuring and tracking alerts (35%). While 63 percent of the patients surveyed say they want to participate in customer rewards programs, only 10 percent say they have been offered the opportunity to do so.http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Great-Expectations-Why-Pharma-Companies-Cant-Ignore-Patient-Services-Survey.pdf
- All consumer groups want rewards. In a survey conducted by Trizetto of several different demographic consumer groups – general population, needy family, young invincible, unhealthy well, heavy utilizer and silver sneaker – one key finding across all segments was a strong desire for rewards programs. Every demographic group listed “Being rewarded for making good health choices that lower my health risks and following my doctor’s recommendations” as one of the most critical benefits a health plan can provide.
- Consumers would track vital signs if you gave them a reward. 82 percent of Americans think tracking vital signs at home is important, but very few track them seriously unless you provide an incentive. 75 percent of those surveyed said they’d check vitals if it helped them save money on insurance premiums.
- Rewards can help consumers with health costs. Health rewards is one way consumers can deal with burdensome health care costs.
It is clear that consumers like, want and can use rewards. In addition, the dollars available to consumers in health rewards program are actually much larger than in other industries. For example, in a credit card loyalty program, consumers might earn a one-time acquisition rewards (e.g., $100 to $250 for opening a bank account or trying a new credit card) and then might earn much smaller rewards over the course of a year (such as on percent back on all purchases). In health care , the dollars are much larger. Consider:
- PPACA’s limit of 30 to 50 percent can amount to several thousand dollars per year. We have a few clients that offer $4,000 per year in rewards.
- The average large employer spent $717 per employee on rewards in 2013.
- The cost savings associated with driving important health behaviors is significant. Some examples include:
- Emergency Room Use. Prevent one emergency room visit by shifting to a primary care doctor or alternative treatment facility and the savings can be $1,500 per incident.
- Lower Cost Imaging. Savings between the lower cost and higher cost MRI in the same market can be as much as $2,000 per test.
- Lifestyle is estimated to account for 75 of total health care cost so am impact on smoking, exercise, nutrition, weight and other lifestyle factors an have large impact.
Lots of dollars are at stake for consumers and this is expected to continue to grow.
Consumers want them, and the dollars are growing. Where do we expect this to lead? A few observations:
- Despite this consumer perspective, rewards in health care are still not in the consumers mainstream. While it is common to read an article or two each day in a major publication about wellness programs and rewards, health reward programs are now just starting to be in purview of consumers.
- Most consumers would want to take advantage of reward program if they were aware of them. As noted above, 63 percent would prefer rewards from their pharmaceutical company but only 10 percent were given the opportunity.
The race is on for health plans. The health plans that lead the pack in aligning reward programs to being a member will have a competitive advantage. Those that don’t will be competing on factors that have become harder to differentiate. A few predictions:
- The next arms race in health plans is reward programs. http://welltok.com/blog/article_TheComingArmsRaceinHealth care .html
- It is just a matter of time before every health plan has a rewards program for members just like every credit card, airlines, hotel and retailer has a rewards program.
- The standard for health reward programs will be set not by health care , but by non-health care reward programs.
- The type of personalization of rewards that is table stakes in other industries will be required in health care . Health plan reward programs will need to be able to reward based on your specific health conditions, biometrics, life stage, health plan product and coverage type.
- The health plan reward programs will have to match the reward levels available in our non-health care life as well as those being offering by employers. If employers are offering $717 and some offering several thousand dollars, and a bank offers $250 for opening a bank account or $600 for switching your 401(k) management, it will be hard to ask consumers to change their BMI for $250.
- Rewarding a consumer for a single event (e.g., complete a health risk assessment) is fine, but consumers will expect a comprehensive approach. Consider Citibank Thank You Rewards. Ten years ago, Citibank’s reward program resembled others – a series a random disjointed rewards, incentives and promotions for using various products and services. A gift card for a new bank account, a debit card for sitting down with a loan officer, and a percent back on your credit card. Now there is Citibank Thank You Rewards. Starting in 2006, Citibank integrated all these rewards into a single brand and program.
- Exchanges will start to “rate” health plans with one of the criteria being their health reward offering.
The great thing about health reward is that everyone wins. Consumers win by earning financial incentives for being healthy in ways that improve health and offset the growing cost of health care . Health plans win by reducing the cost of the individuals they insure.
The health care industry continues to tell the consumers how we want them to act. Be healthier. Make better provider decisions. Choose lower cost options. But soon, it is likely that the term consumerism won’t just apply to how we want consumers to be more accountable for their health care , but what the consumer demands of their health plans.