Infinia Group, LLC

Description

Healthcare in Transition: Reviewing 401(k) reform to gain insight into consumer and market patterns In the 1980s, the retirement planning industry transitioned from defined benefit plans to defined contribution plans - 401(k)s. This shift provides an excellent basis of comparison for the reforms presently occurring in healthcare. Working from several studies, especially DeCenzo and Fronstin's analysis, we compared the pre- and post-reform retirement planning markets to gain insights into potential future states for healthcare. We paid special attention to past solutions, as well as to areas of strength and weakness that may be applicable to healthcare. The healthcare and retirement industries share four key features, which are influential in driving consumer behavior: Both industries have multifaceted products and complex purchase and delivery systems, which risk leaving consumers overwhelmed with options and unable to choose. Both industries provide delayed-benefit products, which require immediate spending for long-term gain. Both industries must comply with strict federal and state regulations. Both industries place the burden of knowledge on the consumer, from purchase through service utilization. Market Segments The analysis was done with specific consideration given to some of the key market segments in the American healthcare community: the Medicare population (65+) and the typically younger, less-educated uninsured population. We highlighted any consumer behavior trends, such as option overload, that might be more pronounced within these demographics. In addition, we gave particular attention to any regulatory efforts, such as mandated insurance consumption, which might affect consumer or provider sentiments and purchasing patterns. Key Implications for Health Insurance Providers Early education is key As shown with retirement planning, consumers develop inertia once a product is selected and purchased, making it less likely that they will change products down the road. Still, providers must remain on guard against long-term dissatisfaction. Early education, new customer capture, and customer retention are vital for a successful and sustainable market expansion. Service selection process and product packaging must be simple This is particularly important given three factors: - - - As shown through 401(k) reform, if consumers are forced into purchasing, and are either unfamiliar with the system, or lack access to information through channels such as the Internet, they are more likely to feel unprepared and overwhelmed by the purchasing process. This inevitably leads to reduced satisfaction and increased consumer skepticism. This effect is amplified by the health insurance industry's historically poor reputation for customer service. Given that the uninsured and the elderly, despite their lower levels of education and information access, will be forced into obtaining healthcare through either need or law, there will likely be an exaggerated sense of consumer anxiety and dissatisfaction within these population segments.

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