How Health Plans Make Money (2+2 =12?)

What if you and your husband each bought an iPad this year?  You bought yours for $499 from the Apple store on Michigan Avenue, and he bought his from an Apple store in the suburbs, also for $499. Now look forward to next year.  You both decide to buy new iPads, but this time you go to the Michigan Avenue store to buy them together.  Imagine getting to the register and the cashier saying, “For you Miss, it will be $499.  However if you want to add on your husband’s iPad on to your bill, it will be a total of $3500.”  You would think he made a mistake, or his quantity button was stuck — something was obviously wrong.

But this scenario describes the new math behind how health plans make money.  It’s almost counter-intuitive.  The more people they enroll in their plan, the more it costs you. Now I understand “risk assessment” and “pools” and all the other terms actuaries use to defend their position.  But I think they are the big winners with an increase in unemployment.  Especially in families that have gone from two working people, no children (formally called DINKs) and separate policies, to one combined policy.  They are also the big winners with the new health care legislation.  Interesting how they increased your policy costs in anticipation of something happening.  I guess they consider the health legislation like an impending storm and they’re creating a run on health care benefits.  But it’s not like you can store up a benefit.  You pay for it, and if you don’t use it, you lose it!  At least you can use all that salt for next year’s snowstorm.

So what does this have to do with marketing communications?  Everything!  When I pay more for electronic equipment, they tell me it has faster RAM speeds, it has dual processors at 2.66GHz, and it can store 512GB of data, etc.  Even if I don’t understand what all that means, I feel like I’ve purchased something of value.  I’m getting something for my money.  Health plans should take a few plays from this playbook.  Show me how I’m getting more than last year’s benefit.  Show me how I get better services when I file a claim.  How about not even requiring me to file a claim? Send me coupons in the mail for food in the produce aisle, an encourage me to eat healthier.  Do something!  Don’t just email me a link to a tool that compares me to your competition.  You’re all part of the same association, remember?

Marketing communications is all about creating a demand for your product or service.  I guess in a market where the demand is so high, no marketing is needed.  Well, health plans sure have that part analyzed.  I guess that’s what happens when your marketing department is made up of actuaries.