This is a guest post by Christina LaMontagne
Last week, the government released figures for the first month of health insurance open enrollment under the Affordable Care Act. The initial results of the marketplace launch offer digital health entrepreneurs new insights into managing their businesses.
Lesson 1: Health consumers will use the Internet for much more than looking up symptoms
A combined 27 million people logged on to federal and state health insurance marketplace websites in October. Healthcare.gov, the federal site covering 36 states, was quickly minted the world’s largest digital health website with 19.5 million unique visitors in October. In comparison, the well-established WebMD sees 15.3 million visitors each month.
What a user does on the marketplace websites is complex and engaging. Among other activities, the average user must set up an account, enter personal information, make a complicated financial assessment, choose a health insurance plan, and complete a transaction. High levels of traffic to the government sites bode well for innovative services eager to engage customers in new levels of service.
Lesson 2: Just as in other industries, self-serve Internet services can disrupt labor-intensive offline processes in healthcare
In the past, most people have arranged health insurance through their office HR teams or through a trusted independent health insurance broker. But in October, despite a broken website, people swarmed new Internet services: 93 percent of applications submitted to state sites were submitted electronically. Government data show that customers were nine times more likely to look up health insurance information online (even considering the glitch-prone healthcare.gov site) than to pick up the phone to gather information from a live representative. Compared to the 27 million online visitors, the government’s free 1-800 number received only 3 million calls.
People bypassed live agents, government funded “Navigators” and phone agents to complete their applications. This is a strong signal for disruptive businesses that remove excess time, friction, and expense from doctors, receptionists, billers, and other healthcare systems. Recent reports from McKinsey, Dartmouth research, and the CMS agreed that nearly one-third of our nation’s health expenses are wasted — dollars spent that lead to no better clinical outcomes. The initial experience with marketplaces suggests consumers are empowered to start managing their own health concerns online.
Lesson 3: Healthcare is a hyper local business
While the Affordable Care Act is a national policy affecting all Americans, many distinctions appear on a state level – and health insurance pricing and plan availability varies by zip code. Each state is segmented into multiple territories, and health insurance pricing and networks are established locally.
In fact, there is evidence that taking the local approach is best. State-based marketplace websites were twice as successful (compared to the federal site) in attracting uninsured to apply for insurance. While most founders will aspire to build a national brand, don’t forget that key stakeholders and customers – patients, doctors, hospitals, and insurance companies – are operating at a local level.
Customers of the exchange are female and both better off and younger than you might expect
According to data released by Kentucky, 59 percent of enrollees in that state are women and 40 percent are under 35. HHS confirmed that only 30 percent of applicants qualified for subsidies, implying that the majority of applicants in the first month earned over $46,000 as an individual or $94,000 as a family of four. Despite bargain rate pricing for many Bronze plans, these plans were the least popular. Entrepreneurs with concierge and high value service offerings will note that applicants traded up for better coverage at higher monthly premium prices.
Lesson 5: Consumer confusion and indecision hurts monetization and growth
State-run marketplaces were significantly more successful in signing up customers for new health insurance plans. In the 14 states with state-run sites, 4.4 percent of visitors submitted applications compared with 2.7 percent at the federal site.
However, only 1 in 12 eligible applicants nationwide enrolled in a plan in the first month. Forty-six percent of visitors to a marketplace said they had not enrolled yet because they were still deciding which plan to choose. Indecision and confusion is just as much a barrier to enrollment as is price. Great entrepreneurs bear in mind that for the majority of Americans, nearly all health-related online activities are new and complex. For the good of our businesses and our users, we must build decision-support tools to help our users make choices simply and with confidence.
Christina LaMontagne is a VP at NerdWallet and founder of the NerdWallet Health division.
Previously, she was a Principal evaluating digital health investments at Physic Ventures. Follow her on Twitter @lamontagne_c.
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