Medicare Advantage

Health Net Says Medicare Stores Build Local Presence and Traffic Flow

Reprinted from the February 22, 2007, issue of MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs.

By setting up retail Medicare and Medicaid storefronts in locations where people "shop, work and socialize" — with its fourth and most recent store opening Jan. 30 in Modesto, Calif. — Health Net describes itself as "providing a face" for the company at a time of dramatic change for the Medicare program. Company officials assert that the initiative that began last spring has met expectations both with respect to establishing a presence in the community and to creating customer traffic for government-programs products — and supplements Health Net's other insurance marketing efforts.

"We want to be seen as part of the community, not just calling an '800' [toll-free telephone] number. This creates a face and a visible presence for Health Net in the community," Mark El-Tawil, president of Health Net's senior products division, tells MAN. El-Tawil began full-time in his new position a few weeks ago; previously, he was president of Health Net's Arizona business unit.

El-Tawil describes Health Net's Medicare stores as part of a larger commitment to "keeping things simple" for Medicare consumers. Toward this end, he says Health Net also is looking at expanding and revamping its group retiree products for 2008. (Insurers must submit applications for 2008 Medicare products to CMS by March 12.) He says Health Net's current group retiree business is strong in California, "but not so much elsewhere."

Health Net is on track with its enrollment guidance, and expects its Medicare Advantage (MA) membership to increase by a net 10% this year to around 220,000 by the end of 2007, El-Tawil says. Its stand-alone Prescription Drug Plan (PDP) enrollment, which was around 300,000 as of last December, is expected to increase by 15% to 20% this year, he says.

"Clearly, with this [Medicare consumer] segment, any time you can establish a physical presence somewhere where you can present your plan, good things can come of that," says consultant John Gorman, president and CEO of Gorman Health Group, LLC in Washington, D.C. "This is certainly the time for innovation" in Medicare marketing, he says, although it remains to be seen how well such a storefront approach will work over time.

When Health Net began planning for impending changes to Medicare a couple of years ago — including implementation of the Part D prescription drug benefit program in January 2006 and introduction of new products such as MA regional PPOs, El-Tawil says the company decided to try to "simplify everything" for 2006. Health Net apparently is the only major MA player with its own storefronts.

"We were looking at how to make it easier for people to understand options, and make it a less threatening and intimidating process," he says. After observing that some seniors enjoy walking at malls in the early-morning hours, and people go to malls anyway to shop and feel comfortable in that environment, Health Net decided to put two Medicare stores in malls in Arizona and Connecticut. As part of an outreach effort to lower-income communities, he says, Health Net also decided to open stores that focus on Medi-Cal (California's Medicaid program), the State Children's Health Insurance Program (SCHIP) and the uninsured in East Los Angeles and Modesto, Calif.

Health Net's first store opened in April 2006 in a mall in Mesa, Ariz., El-Tawil says, describing it as a good pilot location with a diverse community "where Health Net had strong products and services." Seven days a week, Health Net's "Medicare store" in Mesa opens at 7 a.m. and stays open until the mall closes, El-Tawil says. Such an approach helps "to meet customers on their terms, which has gotten noticed in the community..

Even doctors and brokers think that sets us apart," he asserts.

"Our first sale in a store was PDP only, and happened on the store's first [i.e., opening] day," El-Tawil notes. He would not provide numbers on sales in stores to date, but describes store sales as meeting expectations. He also says Health Net does not release a public figure on its overall Medicare marketing spending.

El-Tawil says the cost of Health Net's four retail stores varies by location and includes setup, lease and staffing expenditures. "In the Medicare stores, we have done a good job of working with community agents to help supplement internal staffing to help with cost-effectiveness while still providing a good in-store experience," he says.

According to El-Tawil:

-- Health Net is constantly evaluating opportunities for Medicare stores, but it is not an easy proposition to get a store up and running. In addition to finding a good location, Health Net must find "an open-minded landlord willing to try something different in their mall," he says. "So it's not as easy as you think it would be." Despite the challenges, he says Health Net is eyeing a couple of other locations, which he declined to identify, to open new stores later in 2007. But he says nothing is imminent.

-- Health Net's Medicare stores are seen as supplementing its other Medicare sales and marketing efforts. While there is always the possibility that forces beyond Health Net's control will force it to close stores or prevent the opening of new stores, Health Net has "a long-term commitment to this approach because it puts us out there in the community, which we just don't see anyone else doing," he asserts.

Aside from its own stores, Health Net now has "a variety of relationships with pharmacies beyond just the usual network/provider relationship," El-Tawil says. He says the insurer "prefers value-added relationships" with pharmacies, such as flu clinics and health fairs, and works to implement such relationships whenever possible. For example, he says Health Net has a national marketing contract with Rite Aid for all states where

Rite Aid is located, as well as a California-specific partnership.

Health Net also has a regional partnership with Kroger grocery stores in Arizona, Oregon and Washington state that includes flu-clinic sponsorships and in-store advertising, El-Tawil says, and an Arizona-specific partnership with Safeway grocery stores that includes in-store marketing, flu-clinic sponsorships and Health Net representation at health fairs.

Other than these specific activities, there is no Health Net presence or staffing in any of these stores, he notes.

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