The Internet pop-up advertisement reads, "Millions of people who've never set foot in a casino take a dangerous gamble every day-living without health insurance. You just can't afford not to have it."
The ad, for Mid-West National Life Insurance Company of Tennessee, goes on to offer affordable coverage options to the uninsured, specifically "the hardworking entrepreneur" and those employed by companies that don't provide benefits.
How times have changed.
A few years ago, health insurers would have been hard-pressed to dip into their advertising budgets to target the uninsured. Marketing insurance policies to the poor and unemployed-those long considered the bulk of the nation's uninsured-was viewed as the business equivalent of trying to squeeze blood from a stone.
But now, with the average income of the typical uninsured individual rising-and Congress considering a series of initiatives to expand coverage-health plans have begun to pursue this population with new vigor.
"It's a viable market, and insurers have known that," said Merrill Matthews Jr., director of the Alexandria, Va.-based Council for Affordable Health Insurance, which represents individual and small-group carriers. "But things are really heating up" in light of new efforts to broaden access.
The uninsured population certainly represents a large and growing market opportunity for health plans. In 2001, some 1.4 million people joined the ranks of the 41.2 million Americans who lack health coverage.
But far more compelling for insurers' marketing departments may be the changing economic profile of the typical uninsured individual: Rather than being from the very poor or unemployed, the largest group of the newly uninsured-some 811,000 people in 2001-had annual incomes in excess of $75,000.
And this shift isn't new. According to the National Center for Policy Analysis, a Washington-based think tank, the number of uninsured people with annual household incomes of more than $75,000 rose 77% from 1995 to 2001, while the number of uninsured within the $50,000 to $74,999 income bracket rose 47% (See chart, p. 9). By contrast, the number of uninsured with annual incomes of less than $25,000 fell 22% in the same period.
"It's a very common misconception that most of the uninsured simply can't afford the cost of health insurance," said center President John Goodman. "In fact, many of the newly uninsured are from moderate- to high-income families who are mainly uninsured by choice."
As with any product or service, buying health insurance has a great deal to do with personal priorities, Goodman said. Some 40% of the uninsured are from the ages of 18 to 34, a group that is typically in good health and, presumably, considers its money better spent elsewhere.
Many of the newly uninsured are not unemployed but employees who either work for small businesses that don't provide health benefits or who have declined employer-sponsored coverage as their companies have required them to pay a greater share of the costs, Goodman said.
The challenge for insurers has been to persuade these consumers to commit more of their discretionary income to health coverage. For many companies, that's meant launching new products tailored to the preferences and pocketbooks of the "working uninsured." For others, it's meant taking their message to the airwaves.
Humana, which entered the individual market only last year, is now targeting the working uninsured through a TV commercial emphasizing the sense of security that comes with owning health coverage.
"It's a `peace of mind' message," said Thomas Stoible, senior director of Humana's individual products segment. "It's for those who may be gambling (by going without coverage) when they don't need to."
The Louisville, Ky.-based insurer also is targeting the cream of the uninsured crop-the young and healthy-with temporary insurance policies designed specifically for graduating college students. Humana offers the plans-which provide coverage for up to six months while the graduate seeks employment-at a 38% discount to "make it worth their while," Stoible said.
Humana's ad budget for individual products has "grown significantly" and likely will double next year, Stoible said, though he declined to give specific figures.
Discount medical card provider Pinnacle Choice also has jumped into the fray. Last March, the Fairfield, N.J.-based company launched what it calls an "affordable alternative to insurance"-a type of healthcare membership card that, for about $250 a year, allows you to save 35% to 75% on out-of-pocket medical expenses. It also plans this year to roll out a low-cost, very high-deductible insurance product for use with the card.
Pinnacle makes no bones about targeting the roughly 12 million uninsured Americans with annual household incomes of $35,000 to $75,000, many of whom it says fear losing their homes or other assets in the event of a major medical problem.
"We originally targeted the uninsured poor, but they don't need this kind of thing because they already have their own government programs and (safety-net) clinics," said David Meredith, Pinnacle's senior vice president. "It's the middle class who most often end up falling through the cracks. They're the ones we're targeting."
The company also markets to the growing number of small businesses that can't afford to provide health coverage but still want to offer their employees good benefits to boost retention. The bulk of its cards-which are used by some 7,000 people-have been sold mostly to trade associations, including the National Elevator Operators Association and the New Jersey Restaurant Association.
Spreading the word
So far, Pinnacle's limited budget has relegated its advertising efforts largely to telemarketing, storefront displays and direct mailings that go out to 30,000 proprietors every week. But the company plans to launch TV and radio ads and hopes to land an established retail marketing partner, such as Wal-Mart Stores. "We've been a product development company; now we're turning into a marketing company," Meredith said.
It's far from alone. The health insurance industry as a whole spent $309 million on consumer advertising in the first 10 months of 2002, up 22% from the $253.4 million it spent through all of 2001, according to CMR/TNS Market Intelligence. And experts speculate that a growing share of these ad dollars will be spent on appealing to the uninsured now that expanding access once again has emerged as a dominant political theme.
Indeed, the stakes may be rising for health insurers. President Bush has proposed spending $89 billion during the next 10 years on tax credits designed to help low- and middle-income people buy health coverage-a plan that, if approved, could potentially bring insurers a windfall of new customers (Feb. 17, p. 6).
Meanwhile, Sen. Jim Talent (R-Mo.) and Rep. Calvin Dooley (D-Calif.) have sponsored a bill that would give small businesses and the self-employed expanded opportunities to band together to buy coverage through trade associations. These association health plans, or AHPs, would be exempt from state regulation (See editorial, p. 22).
One company trying to capitalize on this momentum is Dallas-based UICI, which owns Mid-West National and several other health insurers that target individuals, micro-businesses and associations. The company's fourth-quarter revenue jumped 44% to $428.1 million from the year-ago period, largely thanks to increased membership in its "self-employed" division.
In addition to direct, online and print advertising, UICI also markets its policies through associations with which it has close links. The Dallas-based National Association for the Self Employed, for instance, runs radio ads offering low-cost health insurance underwritten by UICI's Mega Life and Health Insurance Co. subsidiary.
These links give UICI a marketing advantage, experts said, because consumers typically respond better to enrollment pitches from a familiar trade association than from an unknown insurance company. About two-thirds of the NASE's 250,000 members have bought UICI coverage.
UICI declined repeated requests for an interview. NASE officials did not return calls seeking comment.
Competition heats up
AHPs are not as highly regulated as the individual and small-group market, which faces a myriad of mandates governing what services must be covered and how rates can be set. Because of this, AHPs have been able to more readily offer the types of low-cost, bare-bones policies that tend to appeal to the budget-conscious.
"Individual insurers have been forced to offer Cadillac policies loaded with options," said Matthews, whose group represents individual and small-group carriers. "They're nervous because (AHPs) have been able to come along and offer the Chevy model, which doesn't have all the bells and whistles but is a whole lot more affordable."
Faced with the threat of losing market share, traditional insurers are not only challenging the proposed AHP legislation, but also are trying to show that they too can compete on price. "We need to communicate better that individual policies are more affordable and more flexible than people might think," said Larry Akey, spokesman for the Health Insurance Association of America.
Blue Shield of California is doing just that. The state's second-largest provider of individual policies recently aired a monthlong TV campaign emphasizing a wide range of coverage options for the uninsured. The ad-which featured a man shedding his tie as he escapes the corporate world to become self-employed-aired through Feb. 14 with the tagline "Affordable healthcare coverage that suits your lifestyle."
"For folks who are self-employed, health insurance becomes a monthly budget item, just like their grocery bills or car payment," said Lisa Rubino, senior vice president of Blue Shield's individual and government business unit. "We've tried to make this budget item more manageable by offering the broadest possible array of products."
Blue Shield offers about 20 plans that balance monthly premiums with annual deductibles, she said. For example, someone under age 34 with few medical needs could buy a policy with a $2,400 deductible for about $89 per month.
Blue Shield also is among the growing number of health plans tapping the uninsured market with temporary policies designed for people who are, for example, between jobs or graduating from school. "With the economy as soft as it is and with more people getting laid off from work, the temporary market has become real interesting," Rubino said.
Indeed, studies show that 60% of the uninsured are without coverage for nine months or less, and 45% attain coverage in less than four months, the National Center for Policy Analysis said. In 2001, only 14.6 million Americans, or 35% of the uninsured population, had no coverage at all during the year.
Currently, people who lose their jobs can retain their health coverage for up to 18 months under COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, by paying 102% of the premium. But because COBRA is so expensive, four out of five newly unemployed people choose to take their chances without it, experts said.
Providers seem to be viewing insurers' new marketing efforts with cautious optimism. In theory, if more people became insured, the less need there would be for charity care, an expense that is straining many hospitals' budgets. According to the American Hospital Association, the nation's acute-care hospitals spent $21.5 billion, or 5.6% of their total expenses, on uncompensated care in 2001 (Feb. 17, p. 4).
"Certainly, we're supportive of efforts to expand access and coverage for those without insurance," said AHA spokeswoman Amy Lee.
Watchdog groups, however, caution that many companies may be going too far to attract the uninsured. Some have designed individual plans with such high deductibles that policyholders have no access to routine preventive care. Others have enticed customers with cheap rates only to slap them with dramatic premium increases soon after enrollment.
In August 2002, two New York-based medical discount card providers, U.S. HealthCard and MediSavers, both agreed to pay $77,000 in fines and to change their advertising practices after an investigation by New York State Attorney General Eliot Spitzer determined that the companies had used deceptive marketing tactics.
Even more disturbing is the rash of fly-by-night insurance operations that have preyed in recent years on the growing ranks of the uninsured, said James Quiggle, a director for the Coalition Against Insurance Fraud, Washington. Most of these bogus health plans lure customers with cheap rates, collect premiums, pay few if any claims and then skip town.
"The shaky economy combined with the sharp spike in premiums has created a perfect environment for shady health insurers to defraud unsuspecting individuals and small businesses," Quiggle said.
The U.S. Labor Department has more than 100 civil and criminal investigations pending involving insurers that have withheld claims payments, Quiggle said, adding "and it's likely to get worse before it gets better."
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