Consumer Data Can Help Health Plans Navigate Changing Markets

By Kurt Waltenbaugh, CEO, Carrot Health
Twitter: @Carrot_Health

Thanks to the digital age and the ever-growing use of consumer data, marketing strategies keep getting smarter and more specific. Companies in every industry, from online retailers to office software suppliers, can zero in on their target audience and customize a message that will resonate with individuals. Technologies that facilitate these types of highly-informed decisions not only help companies large and small grow their business, but also react to changing regulatory and competitive environments. For health insurance providers, these tools can fundamentally alter how they engage with consumers.

The regulatory environment around Medicare remains in a constant state of flux, with requirements and rules changing every few years. Consider the 2015 Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which amended the requirements for selling Medicare Reasonable Cost Plans (Cost Plans). Beginning on January 1, 2019, health plans may no longer sell Cost Plans in service areas in which two or more competing local or regional Medicare Advantage plans meet the minimum requirements for enrollment.

For many payer organizations, this change will affect only a minor portion of their bottom line, as Cost Plans represent a mere 1 percent of Medicare enrollees nationwide. In Minnesota, however, Cost Plans account for 42 percent of the state’s Medicare members, causing some insurers to scramble to change their business and marketing strategies. Such was the case for Medica, a nonprofit health insurance company headquartered in Minnesota that insures 1.2 million members across seven states in the Midwest. Of Medica’s entire Medicare enrolled book of business, 75 percent will be affected by the new Cost Plans regulations.

A disruption this large posed a significant risk to the health plan’s financial future. However, as of January, Medica had actually grown its share of Minnesota’s Medicare market. Here’s how they did it.

Consumer Segmentation
With a short window of opportunity to respond to the looming change, Medica developed a strategy that would allow it to retain and grow its Medicare population and transition its enormous base of Cost Plan members to Medicare Advantage plans beginning with the 2018 annual enrollment period (AEP). For this plan to work, the insurer needed greater insights into its current and potential customer base than traditional segmentation models couldn’t provide. The solution: develop a consumer segmentation framework, incorporating individually identified consumer data, social determinants of health (SDoH) and predictive modeling.

Consumer Data Used to Develop Segmentation:

  • Demographics
  • Lifestyles, Attitudes, Preferences
  • Social Risk
  • Purchasing Behavior
  • Population Density
  • Household Composition
  • Socioeconomic Status
  • Environmental Risk
  • Healthcare Utilization Projections
  • Health Engagement
  • Clinical Risk and Spend Projections
  • Disease Projections
  • Plan Choice Projections

Combining consumer information with its own membership claims data, Medica’s proprietary consumer segmentation model gave the insurer a deeper understanding of current and potential Medicare members throughout Minnesota. The health plan then used this information to create custom predictive models that forecasted specific consumer choices and behaviors. Two of these models focused specifically on those most likely to choose Medicare Advantage or Medicare Supplement plans following the phase out of Cost Plans.

Following the completion of the segmentation analysis, Medica’s marketing team identified seven distinct consumer segments, four of which it deemed highly desirable based on the percentage of the population enrolled with Medica and the likelihood of choosing a Medicare Advantage or Supplement plan. Segment 3—a target group where Medica held less than one percent of market share—stood out in particular as an opportunity for growth as 55 percent of the population was likely to choose a Medicare Advantage plan.

Moving from Analysis to Action
With segmentation information in hand, Medica took the next step from quantitative to qualitative research. The marketing team conducted a series of focus groups for the four primary segments to gain insight into consumers’ attitudes and preferences towards pricing, value, access to care, primary care loyalty, specialty care and health plan add-ons. Researchers also examined the people and media most likely to influence each segment’s decisions, such as friends and family, the Internet, workshops and direct mail brochures.

The insights gleaned from qualitative research drove the decision-making process for the design and execution of an omnichannel marketing campaign for the 2018 annual enrollment period. The campaign incorporated a direct mail component as well as television, print, and digital media, which were prioritized based on the preferences of each segment. Ultimately, the work that went into research and analysis paid off.

Medica’s targeted outreach led to a 31 percent response boost above the National Medicare Responder Index and a 59 percent lift over untargeted outreach. When the health plan examined the predictive modeling and response rates of all seven segments, the top consumer decile deemed most likely to respond to the messaging showed a response rate more than six times higher than that of the bottom decile.

As of January 2018, consumer segments one through four – those Medica classified as the most desirable – represented 80.5 percent of new members. A month earlier, those same segments were 73.6 percent of its existing membership base, representing a successful Medicare market share growth. Segment three, identified as a key growth opportunity, alone represented 7.8 percent of new members as compared to a mere 0.8 percent of prior members.

Preparing for Future Change
Medica’s successful campaign is not only a story about responding to regulatory challenges; it is also one of reinventing how it engages with its customers. The well of consumer data runs deep and holds insights that can inform business decisions beyond marketing, including product development and channel management.

By tapping into this wealth of knowledge, payer organizations can position themselves to accurately respond to market changes, better serve their members and uncover new opportunities to grow their market share.