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AIS's Health Business Daily
Featured Story November 13, 2008 Health Plans Set Sights on Individual Market as More Employees Lose Jobs and Benefits Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. By Steve Davis, Managing Editor, (sdavis@aispub.com) As the sinking economy prompts employers to cut staffing levels and to drop or reduce health benefits, growing numbers of people are hunting for their own policies. Health plans, which historically have placed little, if any, emphasis on the individual market, are launching new products — and tweaking existing ones — that cater to this growing market. And adding members on the individual side could help counter flat or declining group enrollment. Case in point: In its Oct. 22 third-quarter earnings conference call with investors, WellPoint, Inc. President and CEO Angela Braly said the company's SmartSense product, which was piloted in Georgia and California a year ago, is now generating more than half of the company's new sales in California. Premiums for the product, which is aimed at students, early retirees and the uninsured, range from $33 to $178 a month for a healthy adult male. On Oct. 20, the company said the product would be expanded to Colorado with effective dates beginning Nov. 15. "Historically, when the economy is in a place where jobs are being lost, the small-group business goes down a little and individual business goes up a bit," Mary Floyd, vice president of individual and senior sales at WellPoint, tells HPW. Ellen Laden, spokesperson for UnitedHealth Group's Golden Rule division, agrees. She also says fewer small businesses are offering health coverage to employees, and many employers that cover their workers no longer offer coverage to their dependents. Plus, an increasing number of baby boomers are retiring before they are eligible for Medicare. As the individual market expands, so does the number of competitors. "Larger carriers are in this space, which they abandoned years ago and have remained out of for quite some time," Laden says. "It's evidence that the market is an important one." Floyd agrees the individual market is becoming increasingly competitive. And some of the new entrants can price the products "aggressively" because they are underwriting a brand-new business segment, she adds. CIGNA Launches New Product Line CIGNA Corp. is the latest large health plan to expand its presence in the individual market. On Oct. 28, the insurer unveiled its strategy to roll out a new suite of health plans aimed at individuals and small employers. The products, which were introduced last month in Arizona and Texas, will be available to individuals and small groups in Tennessee and Florida — with individual plans being added in Colorado — before the end of the year. As a health plan that caters primarily to large employers, CIGNA says it has developed several features — such as wellness programs, a personalized Web site and a nurse help line — that have been incorporated into its individual and small-group products. The company also will rely on the experiences of Great-West Healthcare, which it acquired last spring to help broaden its range of products. "Enrollment on the commercial-group side is declining, due [in part] to the economy. And that's putting pressure on the group side. But there is an opportunity now to expand the individual segment of the business," says David Raccagni, vice president of marketing for CIGNA's individual and small-group segment. Raccagni spoke with HPW while traveling between Memphis and Knoxville, Tenn., to promote the new product line. "We think we'll do extremely well in Tennessee. We've always done well there," he says. He declines to offer specific projections. Policies Offer Some First-Dollar Benefits WellPoint's SmartSense product combines a deductible of between $500 and $5,000 with some limited first-dollar benefits. For a copayment, enrollees can have up to three office visits below the deductible. WellPoint says SmartSense is different from its low-premium, high-deductible TONIK product, which was introduced three years ago and marketed to young adults no longer covered by a parent's policy. "This is more of a mainstream product aimed at people who aren't looking for bare-bones, don't need maternity coverage and would like some first-dollar benefits." Unlike TONIK, SmartSense does not include dental or vision coverage. While Floyd declines to offer specific enrollment expectations, she predicts SmartSense will become a "top seller" in Colorado. Minnesota-based Medica left the individual market in the 1990s, but re-entered in 2003. Over the past two years, the company has introduced two new "personal health plans." Its newest product, Encore, was launched in August and targets early retirees, people who are going into business for themselves and those who have lost their job or their employer-based coverage. The high-deductible policy targets people who might have trouble finding coverage due to a pre-existing condition, the company says. After several years of slow and steady growth, Medica says enrollment in its individual products nearly doubled this year, from 8,500 to more than 15,000 lives expected by the end of 2008. "We're glad we got into this market when we did," says Craig Ashby, director of Medica's individual business. He tells HPW that enrollment could reach 25,000 by the end of next year. "We've found that with the economy…more and more people [in this age group] are finding themselves without health coverage," Ashby explains. "We designed this product [through underwriting] to accept people who present more risk to us, such as those with pre-existing conditions. The company's "Solo" product, which was inspired by WellPoint's TONIK product, is self-only coverage aimed at young adults no longer covered by a parent's policy. Premiums for the high-deductible (between $3,000 and $9,000 a year) product start at less than $100 a month for members in the target market and include some upfront but limited benefits such as preventive coverage and a $5 copayment for generic drugs. A health savings account (HSA)-qualified product, available since 2005, is the company's best-selling individual product. Ashby estimates that about 50% of enrollees open an account. United's Laden says affordability remains the top concern among people who seek coverage in the individual market. Plan designs, she explains, need to cater to a wide range of consumers. Young and healthy individuals, for example, typically want low-cost catastrophic coverage, while families with young children want coverage for office visits. People hunting for individual coverage, she says, are increasingly using the Internet to compare rates, she adds. "It's about giving consumers a range of choices and making it easy and convenient [by allowing them to enroll] over the Web, by phone, through brokers and through other channels." |
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