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You Think Researchers Have It Tough?

For the past few years MR blog posts have been dominated by posts questioning the future of Market Research or talking about just how tough it is to be a researcher in the new millennium. A recent discussion on Linkedin about the threat from DIY is a good example. If you read my blog frequently you know that I see the industry evolving, not going extinct. In any case, at TRC we do a great deal of research about Health Insurance and so I know that as challenging as research is, it is nothing compared to what the health insurance industry is going through.

First off, I'll ignore issues that have been with the industry for decades. More often than not they don't sell to the folks who use their products (most insurance comes through employers) and they often don't sell to the folks who pay the bills (a majority of insurance is sold through independent brokers). While some research clients don't expose us to their internal clients, we are nowhere near as separated from the folks who use our work as health insurance firms are.

As challenging as this is, right now the industry is facing major upheaval as a result of the healthcare bill passed into law in 2010. The law is being enacted between now and 2014 and it will fundamentally change the way the health insurance markets work. While we've faced legal and regulatory challenges over the years, by and large none have required us to do more than ESOMAR and CASRO standards already do.

On the one hand, the new law presents a great opportunity. It requires everyone to purchase health insurance. Imagine if the government required all companies to do market research! The problem is that it is unclear how well the law will do at compelling everyone to buy insurance. Some point out that the penalties for not buying are far lower than premiums and insurance companies are required to take on new customers, without consideration of pre-existing medical conditions, whenever a customer wants to sign up. This means that essentially there is no reason for anyone to have insurance till they need it, which  of course defeats the purpose of insurance (shared risk) and puts the insurance firms at great risk.

Perhaps an even bigger challenge is the potential that better brands will face. These firms have worked hard to create the best network of providers, outstanding customer service and so on. Doing this does not come cheap, but in the past they were able to charge a bit more to cover this cost. Employers were willing to pay this premium because the best employees (who were shielded from the cost of insurance) were attracted to firms with the best coverage...in other words the premium was well earned.

Under the law, however, more people will get their insurance through "exchanges" rather than from employers. A study last year by McKinsey and Company made it clear that many small employers will probably stop offering coverage (though it is hard to measure the total number who will actually stop). Some might choose to enter the exchange on behalf of their employees.

Insurance companies who enter the exchange will offer several levels of plans at a set price (regardless of your personal health history). Individuals will go to the exchange and select the plan that best fits their needs. Since most of us thankfully do not have major medical bills each year, it seems likely that most people will pick the company with the cheapest price. Folks who are less sure about their health (often because they have a pre-existing condition) will be more willing to pay a bit more to get the better coverage.

The net result is that firms with a strong brand name could have a far less healthy pool of customers (this is called a "risk pool" and the less healthy it is, the more expensive insuring it will be). Chances are they will have to keep increasing their prices to cover this expensive risk pool which in turn will lead their healthiest customers to consider other options. Ultimately this creates an unsustainable risk pool.

I can't see any situation in MR where a firm suffers as a result of a great brand image. Yet even with these challenges I believe the health insurance industry will adjust and thrive. Already new ideas are being tried such as private exchanges set up by employers. In the end the free enterprise system will do what it always does, find the best solution possible given market and regulatory conditions.    So if they can do it surely our challenges can be overcome.

Tagged in: Brand Market Research

President, TRC

Rich brings a passion for quantitative data and the use of choice to understand consumer behavior to his blog entries. His unique perspective has allowed him to muse on subjects as far afield as Dinosaurs and advanced technology with insight into what each can teach us about doing better research.  


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Guest Saturday, 24 October 2020

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