Consumerism and Disruption: Lessons from Florida Blue

How a health insurer became consumer-friendly

By Ian Morrison

As we enter a new year, the healthcare industry is once again all atwitter about the megatrends of the year. Chief among them is the rise of consumerism. I’ve been in the health futures business for over 30 years; Dude, every year is the start of the rise in consumerism.  It’s been the future for a long time.

But there is some validity to the argument that we have reached a tipping point in the role of consumers in healthcare, not the least of which is the increasing responsibilities consumers have for selecting plans, providers and treatment options and more importantly in paying out of pocket for the privilege of choosing.

Consumer “empowerment” to make selection plan and provider decisions is a major shift that has occurred not just in ACA Marketplaces but in Medicare Advantage (which continues to grow rapidly and accounts for a third of all Medicare enrollees) in managed Medicaid where in many states enrollees must make choices, and in the employer-sponsored market where more of the decision-making and economic burden is placed on consumers through higher deductibles and copayments.

Some conservative observers say this latter trend toward rising out of pocket costs is overplayed and cite the fact that relative share of out-of-pocket expenditures as a total of national healthcare expenditures is actually going down over time not up).   Nevertheless, the prevailing sense in the marketplace is that consumers are paying more out-of-pocket in absolute terms and perceive themselves to be paying a bigger share of costs (certainly in the employer-sponsored market).  Consumers are increasingly responsible for choices and are often ill-equipped to make those choices in a way that best serves their health.  (For example, there is a massive body of evidence that now that supports the obvious that high deductible care is a blunt instrument that causes patients to forego both necessary and unnecessary care in almost equal measure).

All actors in the healthcare system are trying to deal with consumerism in their own way. With mega deals such as the CVS acquisition of Aetna being consummated and as healthcare stakeholders anxiously eye Amazon, Apple, Google and Facebook as they lurk on the edge of the healthcare system.  There is considerable anxiety in the healthcare ecosystem about consumerist led disruption of conventional healthcare.

What is Consumerism?

Consumerism means different things to different people. One angle is the increased use of transparency and consumer navigation tools to guide choices particularly when those choices have significant financial incentives attached such as in narrow networks, reference pricing, high deductible health plans, tiered benefit designs and so forth.

A second dimension of consumerism is the sheer importance of consumer experience to providers and plans both in terms of patient acquisition, retention and loyalty as well as patient satisfaction (which increasingly carries dollars with it in terms of patient experience measures in value-based payment under Medicare and in Medicare Advantage).

Third, consumerism in healthcare is seen as a strategic imperative of meeting consumers’ expectations (particularly tech-savvy millennials) who increasingly have ever higher expectations of service industries driven by their positive experience with high technology enabled consumer offerings such as Netflix, Amazon, Uber and Air BNB.

Fourth, is the notion that consumers need to be more proactive and engaged in their own health and wellness and take more personal responsibility for health and lifestyle choices.  As one doctor asked me recently “when are the patients going to be accountable?”

Finally, perhaps the most significant dimension of healthcare consumerism is the economic out-of-pocket costs burden being placed on consumers going forward and the battle that ensues for wallet share in the wellness, health and healthcare industries that are now colliding.

We will cover all five of these threads in this discussion but it is important to recognize that they are different and in some senses complementary.

Healthcare Stakeholders on the Consumerism Journey

Hospitals are behind the curve in their understanding of consumers.   (They are quite advanced in their understanding of patients but that isn’t always the same thing).   Most Americans don’t get admitted to hospital in a year (only about 14%) while 80% of Americans visit a doctor, 90% now have a health plan relationship and probably even higher percentage visit a retail facility with a pharmacy.  Hospitals should know the answer to the basic consumer questions: how many unique consumers do you touch, who are they, what do you do for them, and how is that working for them and you?  As hospitals integrate across the continuum of care, absorb more risk and pursue population health initiatives, these questions become increasingly important.

With close to 90% of Americans having some relationship with health insurers, health plans have made significant strides to be more consumer friendly by improving their navigation tools, their customer service and support functions and their outreach to consumers.   Let’s be clear, health insurers are coming from a difficult position at the bottom of the heap of consumer ratings.  Technology leaders like Apple and elite retail and fast food outlets enjoy Net Promoter Scores in the 70s which are considered world class (Net Promoter Score is a measure of consumer loyalty and willingness to recommend a product or service on a scale of plus 100 to minus 100, a high positive score is desirable, 70-80 is considered world class).  Most of healthcare ranks pretty low in net promoter scores but there are exceptions like Kaiser and the Mayo Clinic.  The health insurance industry generally has negative or low double digit net promoter scores (just ahead of Al Qaeda in their trustworthiness and popularity), but progress is being made and many large insurers now tie executive compensation partly to improvement in net promoter scores and other consumer measures (United, Aetna, And Anthem in particular).

The Case of Florida Blue

So insurers, like others in the health industry are trying hard to reach out to consumers in new ways to enhance the experience.  Perhaps one of the most interesting examples is from Florida Blue (the Blue Cross Blues Shield Plan of Florida) who have a strong consumer focus and indeed have built a significant retail presence over the last few years.

I reached out to Patrick Geraghty, Florida Blue CEO, who was kind enough to walk me through his perspectives on consumerism and disruption from a health insurance point of view.

By way of context, Florida Blue operates under the umbrella of GuideWell Mutual Holding company (that Geraghty also leads) whose combined businesses have a current run rate of $16 billion in revenue with Florida Blue comprising almost 90% of that revenue base.   They operate or joint venture in a number of related business entities in both the insurance space, (such as Florida True Health, a joint venture a Medicaid managed care organization) as well as a portfolio of direct healthcare delivery operations such as medical clinics and freestanding emergency services.

Over the last decade GuideWell built capabilities in consumer navigation and population health acquiring a number of businesses that they seek to expand nationally.  Indeed, despite their obvious focus on the Florida market with 5 million members (almost a third of all Floridians) many of their businesses operate nationwide or in multiple states.  For example, their traditional Medicare business is the fee-for-service Medicare administrator for Medicare jurisdictions which account for 11 states, the District of Columbia, the Indian Health Service at the VA thereby being the back-office processor for millions of Medicare recipients. GuideWell is interacting with millions of consumers in a lot of different ways.

Pat Geraghty who came to lead Florida Blue from Minnesota is an industry veteran with great experience and enthusiasm for the positive role consumerism can play in transforming healthcare. He was kind enough to share his insights about Florida Blues’ pioneering experience in opening retail outlets in support of the core health insurance function and how it relates to the consumerism agenda.

In the last few years Florida Blue has opened 20 retail centers around the state (providing access to 80% of the population of Florida within a 30-mile radius of the centers).   These retail centers are conceived much in the way as an Apple store supports Apple products not just as a sales channel but as a service center, brand presence and product support function.

Geraghty told me: “health care is a system, from coverage to care, and many consumers need support in navigating the system,” much in the way many of us Apple users struggle to get the most out of our seemingly simple devices.  In some sense the Florida Blue retail centers are the “Genius Bar of Health Insurance”.

In exploring the contribution that retail centers have made to Florida Blues strategy, Geraghty laid out the importance of complementing not cannibalizing existing distribution and service channels.   “These retail centers are just one of many channels that support our products and services” he said.

In particular, when the two pilot retail stores were opened some years ago, brokers reacted negatively to the potential of them cannibalizing or undercutting traditional distribution channels to individual and small group purchasers.  Since then, the retail centers were recast and repositioned to supplement and partner with brokers rather than to supplant them.

When I asked Geraghty how Florida Blue got into the retail business he pointed to their analysis of the Massachusetts market (the early pioneer of exchanges) as a harbinger of what might happen under the Affordable Care Act.  Florida Blue examined the experience with the Massachusetts Connector (the pioneering Romney Care Exchange) where consumers would go online to select insurance but many people needed support in making decisions and customizing their selections.   Selecting health insurance is a complex choice “it’s not like buying an appliance” Geraghty said, “there’s a lot of complexity to the product and it is highly personal.”

The Florida Blue retail centers were conceived as a place to help navigate health insurance and healthcare choices and answer customer questions, but increasingly the retail centers integrate and co-locate other health services such as physician groups and wellness.

The retail concept has met with considerable positive feedback from consumers.   In the last year, 300,000 unique customers have visited across the 20 retail sites with customer satisfaction scores of 92% overall and 97% where clinical services are co-located.

The stereotypical user is not a confused, less well-educated, older, non-tech savvy customer as you might imagine.  Florida Blue executives were pleasantly surprised to find that a wide cross section of consumers were using their retail facilities for sales, service and product support such as Florida Blue’s “know before you go” tools that they provide to consumers who are embarking on significant interactions with the medical care system.  Indeed, Geraghty told me that a significant segment of retail customers were younger couples just starting a family who were seriously engaging with health insurance for the first time.

Florida is a particularly interesting state in terms of providing retail choice to individual health insurance consumers because it is home to the largest individual market in the country as measured by exchange enrollment.   Approximately 1.7 million Floridians have signed up for exchanges in 2018 according to CMS, and although, final numbers aren’t yet verified for Florida Blue, a good estimate is that one million members will be enrolled with Florida Blue through the exchange. With this scale and good operational discipline Geraghty told me with regard to the individual market: “we operate in the black”.

In the last year, the entire health insurance industry has experienced the roller coaster of withdrawal of Cost-Sharing Reduction (CSR) support causing strategic chaos and impairing the finances of most insurers in the individual market and accelerating exit from state markets by national players such as United and Anthem for 2018.  Removing CSR funding late in 2017 resulted in 15-30% increase in rates for 2018 in many states.  This is ameliorated for those lower income exchange customers (some 87% of people buying on the exchanges) who are getting some form of subsidy that insulates them from these rate increases (but doesn’t insulate the government from paying even more in premium subsidies).  Perversely, the withdrawal of CSR support in many states has led to bronze plans being even cheaper than 2017 for the lowest income consumers.

For non-subsidy consumers (those over 400% of FPL) rates have increased on average by 30% in Florida as in many states as the elimination of CSRs are priced in for 2018, and similar effects will be likely in 2019 as the repeal of the individual mandate takes effect.

The gap between the subsidy population and non-subsidy consumers will continue to widen in terms of what consumers actually pay with younger, lower income consumers getting plans that are almost free to them while upper and middle income older consumers in the non-subsidized individual market paying more than $1,500 per month (as I was going to do this year in California before getting on full blown fee for service Medicare at about a third of the cost, Yay!   Another column for another time).

The rules of engagement in the individual market must be resolved one way or another politically and economically in the twenty four months preferably to the benefit of all consumers and taxpayers.  The lack of clarity is frustrating health insurance industry leaders and making the lives of actuaries increasingly difficult.  As one CEO of a major national insurer told me recently: “This industry can change dramatically with just one stroke of a pen in Washington”.  The ultimate disruption.

No matter what the political and policy rollercoaster, part of the success Florida Blue has experienced in enrollment is the ability for these retail outlets to provide consumers of all types with an opportunity to truly understand the product and engage with confidence in their choices.

Sparked by the ACA and the rise of individual market Florida Blue deems their retail initiative a success and a key part all of an overall strategy of assisting all consumers in making informed choices. Recently, these retail centers have been expanded to include other services such as health risk appraisals, on site clinical services co-located with partners, and even providing consumers access to “test drives” and advice on selection of “wellness wearables” such as Fit Bits and smart watches.  Florida Blue continues the path of integrating complementary clinical services as their consumer facing strategy develops.

While focused on individual market consumers, members in other lines of business particularly the small group market also make use of these retail centers even though they may have a relationship with agents and brokers but use the retail center to complement the advice.  (Most of their self-insured employer customers have their internal employee benefit tools and navigation aids that are complementary).

Geraghty also told me of a recent acquisition PopHealthCare, a Nashville based company with presence in multiple states.  Geraghty sees this new asset as an exciting opportunity to expand the retail platform to help identify chronically patients in need of clinical services who could potentially have them delivered and managed through a combination of retail clinical offerings and home-based services. This is not dissimilar to the vision that CVS and Aetna’s merger hopes to yield by combining a physical retail presence locally with a sophisticated set of relationships and data analytics tools to identify high-cost populations that may be better treated with chronic care services in the retail and home-based setting.

It is important to point out that retail strategy is by no means the only method of communication with consumers.  Florida Blue (like most insurers) have extremely sophisticated in-bound and outbound call center operations, web-based solutions and digital outreach using multiple technology platforms, all supported by data analytics to help engage with consumers in all of their lines of business from Medicare to the individual market.

Dealing with Disruption

When I asked Geraghty about what keeps him up at night in terms of disruption and where that disruption may come from whether it be Silicon Valley, retail giants like CVS or Amazon or some other weird new upstarts, he adroitly pointed out: “anyone who isn’t paranoid isn’t paying attention.”

“Our goal is to try and disrupt ourselves”, he said which I think is wise advice.  I wrote a book The Second Curve more than 20 years ago about change in business generally (the first curve being the incumbent the second curve being the disruptor).  Great companies that endure like IBM have been successful in disrupting themselves but it is not an easy thing to do.  Certainly other leaders in healthcare such as Providence-St Joseph and Kaiser are pursuing a strategy of self-disruption as a motivation for their teams to continuously innovate.   See a previous column

As Geraghty told me, while healthcare seems ripe for disruption it is not necessarily true that everyone wants to be an insurance company. I’ve described before what I call the mutual disrespect problem within healthcare: everybody thinks everybody else’s job is easy and anyone can do what an insurance company does.  It turns out it’s not that easy to be an insurer as provider sponsored health plans and venture capital backed insurance upstarts alike are finding out.

The real growth and potential disruption is in adjacent services.  A good example is the rapid growth of the Optum division of United Health.   Optum now has annual revenues in excess of $80 billion much of it related to PBM activity.  Similarly, the CVS-Aetna deal is spun around at its core a massive PBM operation.   Incumbents such as Optum, Anthem, Aetna, Cambia and other insurers have significant service and technology businesses and population health offerings.  At the same time, there are a myriad of health 2.0. offerings being developed to compete in these adjacent services.  Geraghty argues that the more intense disruptive activity will occur among these related service offerings beyond traditional insurance.

It makes sense to anticipate that the core health insurance functions of claims processing, network development and customer service and support and so forth will see continue consolidation with more horizontal rather than vertical integration to the degree that regulators allow it.  At the same time, we will see increased competition and disruption and a great sorting out of all of the peripheral service businesses to health insurance.  But no matter what, as we have argued in these columns before, innovation by itself is not enough, Innovation at scale is required.

Lessons Learned

The case for Florida Blue provides insights on the rapidly changing field of consumerism in health.  It also spurred me to think about where we are headed with consumerism in health.  My takeaways:

Meet people in their lives. Florida Blue is meeting people in their lives, in retail environments and on-line with services and support, and navigation tools that enhance the overall healthcare consumer experience.

Make the Complex Simple.  Healthcare is complex it needs to be made more simple and even if we have simpler designs we need to build better support tools for consumers that may involve more retail handholding and decision support.  Health insurance is a complex product and even tech savvy millennials struggle with it, indeed in a recent Aon Consumer Survey found 41% of Millennials say:  “I have stopped trying to figure out what I should pay for medical services and just pay the bill when it comes.”

Scale and Local Market Penetration Matter.  Insurers with significant market share in local markets such as regional Blues plans can have significant influence on provider systems and population health in their geography.  Powerful local plans have an opportunity to set the standards and change the rules of engagement for the entire local health system.

Use Multiple Channels.  Consumers, even millennials are not all digital all the time, sometimes we need a little real help, face to face.

Technology and Policy will expand Digital Consumer Facing Services.  Recent policy and technology changes such as Fast Healthcare Interoperability Resource standards (FHIR), Open Application Programming Interfaces (APIs) and Blockchain tools are all likely to promote inter-operability and create a rich and rapidly evolving environment of consumer facing digital offerings.  This new frontier is not without challenges such as cyber security, data privacy, and fraud and abuse potential, but overall we will see an acceleration in the number, range and hopefully the quality of digitally enabled, consumer facing solutions.  Expect continued competition and disruption in this space.

Navigation tools need work.  In the early 2000s we asked a series of questions in Harris Interactive Surveys about consumers use of report cards on health plans, hospitals, and doctors.  We asked are you aware of them, do you ever use the report card, and did you actually make a change on the basis of the report card.   We did the surveys every year for 10 years and the square root of zero humans ever changed a decision-based on the report card (actually 1%).  I am sure it’s better now (we’ll check this year).   Consumers do want information to make comparisons on cost and quality of plans, providers and treatment options, but we need to get better in consumer decision support.

Free. Great consumer service brands such as Google and Facebook are popular partly because they are free.  (Actually not really free since we users are getting bombarded with commercial messages as you surf, post and like).  In health insurance, there are actually some free or close to free offerings such as Medicaid, zero premium Medicare Advantage and highly subsidized exchange offerings, but generally health insurance carries a consumer cost that is more visible and economically painful every year.  We may not all get to free, but the ultimate goal is to get health insurance and healthcare affordable for all concerned.  Let’s work on that.