“Within the Apple store, you get bombarded by the Apple experience and Apple products,” said Ashish Kaura, a partner at consulting firm Strategy&. “To me that's the analogy.”
Humana was one of the first to build into retail spaces several years ago. The insurer has 29 guidance centers across the country. These centers are in strip malls or inside Wal-Mart stores. Their aim is to help people learn about and possibly buy Humana plans. Its centers also offer services such as health and wellness classes.
UnitedHealthcare opened its first benefits storefront in late 2011 in Flushing, a neighborhood in the New York City borough of Queens near CitiFiweld where the New York Mets play their home games.
Kaiser Permanente, based in Oakland, Calif., has nine Shop KP stores and several mobile enrollment vehicles throughout northern California. Even Access Health CT, Connecticut's health insurance exchange, opened retail stores last year.
Retail stores have been especially popular among many state Blue Cross and Blue Shield plans. Florida Blue has 18 locations throughout the state and offers tai chi, yoga and smoking-cessation courses beyond its education of insurance plan options. Blue Cross and Blue Shield of North Carolina has seven stores, as well as some seasonal mall kiosks.
Most recently, Blue Cross and Blue Shield of Minnesota is setting up its first storefront in a mall. It will open Nov. 8—just in time for the 2015 open-enrollment period, which starts Nov. 15.
Monica Engel, BCBS of Minnesota's vice president of consumer markets, said the company has been watching other insurers try retail for “quite some time” and thought the time was right to get involved.
“When you look at the impact of the Affordable Care Act and all of the information that is out in the market today, consumers need that additional level of assistance now more than ever,” Engel said. Eight employees will staff BCBS of Minnesota's shop.
People may feel especially motivated to shop for health insurance this year, either in person or online, as the ACA will institute higher penalties under the individual mandate provision. Americans who don't purchase health insurance for 2015 will have to pay $325 per adult or 2% of income, whichever is higher. That's a sizable jump from the 2014 penalties, which ran $95 per person or 1% of income.
“We fully understand the products can be a bit confusing,” said Mike King, director of retail marketing at Highmark, a Pittsburgh-based Blue Cross insurer that operates 10 retail stores. Highmark is also branching into another area of retail, announcing that construction is underway for a store solely focused on helping people get better sleep.
“It helps to have someone sitting across the table from you … to help you make the right choices,” King said.
What is unclear is whether these shops are making financial sense for insurers. King said it costs Highmark about $500,000 to create a store and another half-million dollars annually to run it. Rental costs vary by geography, said Stephanie Perun, the retail sales and events manager at BCBS of North Carolina. BCBS of North Carolina's retail stores ultimately processed 7,000 applications in last year's open-enrollment period, and Perun predicts this season will be even busier.
But according Kaura, the move to retail is not about signing up people for health plans on the spot and immediately recouping an investment.
“It's a means to establish a community presence,” said Kaura, who has studied health insurers moving into the retail space. “I would think of it as a 70% branding and market strategy, and 30% sales strategy.”
Chad Pinnell, a managing director at real estate firm Jones Lang LaSalle, which has helped healthcare companies move into retail settings, agrees. “Payers are finding it necessary to understand the retail consumer model,” he said. “And that's why ROI might not be the important metric.”
Kaura said insurers are likely to ramp up investments in shopping centers, but the type of insurer matters. For example, he expects strong regional players in densely populated states, like the Blues plans, will continue to open more stores. Payers with large books of business in Medicare Advantage also may view retail stores as attractive, Kaura said, because seniors are generally more receptive to in-person counseling and seminars.
Donlan of ConnectedHealth said health insurance stores will ultimately be judged on whether they build long-term relationships with customers, much as banks have tried to do with their branches. People who sign up for a checking account, savings account and mortgage at the same bank are more likely to stay with that institution for a long time, he noted.
“The future will be focused on: What is the lifetime value of my customer?” Donlan said.
Follow Bob Herman on Twitter: @MHbherman