The Online Market for Health Insurance in Massachusetts and the US. Quarterly Online Insurance Index Winter 2010

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1 The Online Market for Health Insurance in Massachusetts and the US Quarterly Online Insurance Index Winter 2010

2 Executive Summary This is our third quarterly online insurance index from All Web Leads and our first to focus exclusively on the health insurance market. With the ongoing debate in Congress on health insurance reform, we can begin to identify future trends and assess their impact on insurance agents, brokers, and carriers. Massachusetts as a Bellwether As the only state with a requirement for mandatory coverage, Massachusetts is a bellwether for the nation. Not surprisingly, taking into account total state population, we find that Massachusetts tops the list of states with residents shopping for health insurance over the web. A universal mandate has its expected results people who don t have insurance go out and buy it. But age is also a factor. There is little change among people aged The real effects of a universal health care mandate begin when people enter their prime working years. The gap between Massachusetts residents and those in the rest of the country grows almost fourteen-fold -- from 2% for people aged to 27% for people over age 64. National Trends Overall, online consumers are largely uninsured and healthy 71% are uninsured and only 1 have a preexisting condition. A sizable group, 16%, is self-employed. However, there are important differences between men and women and among people of different age groups. Advice for Producers Thus producers will find that online health insurance leads are a promising source for new business, one that will undoubtedly grow with the advent of universal health insurance. But market dynamics will also change. In an online world, ongoing relationships often matter more than transactions. Top producers will have a good understanding of their customers and prospects, and know how best to communicate with them, and build an environment where doing business with customers is very very easy. 1

3 Identifying the Sources for Health Insurance Leads Transforming Health Insurance Leads into Market Intelligence Who is shopping for health insurance over the web? How will markets for health insurance change with the advent of universal coverage? What should producers do today to profit from the growing health insurance market? Through our capabilities as a premier source for capturing health insurance leads over the web, we at All Web Leads provide unique insights into the online market for health insurance across the United States. With our web-wide reach, we can suggest answers to these questions. All Web Leads collects and sells health insurance leads to top insurance producers across the United States. For insurance agents, brokers, and carriers, we elmininate much of the pain and expense of hunting for new customers. We accelerate business opportunities by helping entreprenurial producers to expand their sales pipeline in a cost-effective and efficient manner. We also deliver timely market intelligence about trends and directions for the online health insurance market. Our Third Quarterly Online Insurance Index This is the third report in our series Quarterly Online Insurance Index from All Web Leads, and our first to focus exclusively on the health insurance market. 1 With the ongoing debate in Congress this fall on health insurance reform, it is important to identify online trends, particularly those that smart producers can use to improve their productivity and profitability. In this report, we provide market intelligence about the future of health insurance for producers. We begin with the Massachusetts experience, and assess how trends from this state, with its universal health care mandate, might apply nationally with the advent of health insurance reform. We then highlight important national patterns. As we explain below, web leads are a promising source for health insurance agents, brokers, and carriers. Online consumers are largely uninsured and healthy, and a sizable group is self-employed. However, there are important differences between men and women and among people of different age groups. Equally important is the issue of volume. With a national health insurance mandate, the pool of online leads promises to grow as new legislation will shrink the ranks of the uninsured. 2

4 Consumers Shopping for Quotes over the Web First some background on the data behind this report. Who are our respondents and what can we determine from our available data about their backgrounds? Over the past five fiscal quarters, from April 2008 through June 2009, we received health insurance requests from just under 2 million consumers. These people are age 18 and above, located in all fifty states and the District of Columbia, who were looking for health insurance online, and who requested contact from an insurance agent in order to receive a quote for a policy. Among these consumers, just over 87 thousand were Massachusetts residents. Let s dig into the numbers, identify important market trends, and assess how producers will benefit from current trends and coming changes. The Effects of a Universal Health Insurance Mandate The Massachusetts Experience Beginning July 1, 2007, all Massachusetts residents are required to have health insurance. In the eighteen months since the law took effect, it is estimated that 340,000 of the state s 600,000 uninsured people have gained coverage. 2 The Massachusetts mandate changes market trends for health insurance in a number of ways. There are now more people online and shopping for insurance. But there are also notable age-related trends. If Congress adopts a universal health insurance mandate, as now seems likely, we will probably find these trends nationwide. Rank Ordering Coverage by State First, does a universal health insurance mandate change the online market dynamics and cause more consumers to search online for insurance? Let s rank order where most of our consumers are coming from, looking at the percentage of people: Uninsured Insured With a preexisting condition Self-employed 3

5 1. Uninsured 2. Insured MA 1.26% MA 0.52% RI 0.93% VT 0.44% FL 0.89% WY 0.42% WY 0.86% RI 0.41% NJ 0.82% ME 0.38% VT 0.8 KS 0.37% NV 0.79% NH 0.36% MS 0.76% ID 0.35% NY 0.76% MT 0.35% SC 0.75% ND 0.35% 3. Preexisting 4. Self-Employed MA 0.14% MA 0.27% WY 0.13% RI 0.25% RI 0.13% VT 0.24% KS 0.12% WY 0.24% DE 0.12% ME 0.22% FL 0.12% HI 0.22% AL 0.11% NH 0.2 VT 0.11% FL 0.2 TN 0.11% MT 0.2 ID 0.11% NJ 0.19% Tables 1-4 Rank order of consumers searching for health insurance online, relative to state population, with indicated criteria Taking into account total state population, Massachusetts is at the top of the list on all four criteria. 1.26% of people from Massachusetts are uninsured compared to.93% of people from Rhode Island an overall lead of.33% (see Table 1)..52% of people from Massachusetts are insured compared to.44% for people from Vermont an overall lead of.08%(see Table 2)..14% of people from Massachusetts with a preexisting condition are looking for health insurance online, compared to.13% for people from Wyoming an overall lead of.01% (see Table 3)..27% of people from Massachusetts are self-employed and looking for health insurance compared to.25% for people from Rhode Island an overall lead of.02% (see Table 4). It is not surprising that more Massachusetts residents are online and shopping for insurance. With universal coverage, after all, the uninsured are looking for a policy, while the insured are considering their alternatives and seeking a better policy. When it comes to preexisting conditions and being self-employed, Massachusetts residents are slightly more likely to be shopping online for a policy. Their increased participation is probably a direct effect of the state-wide health insurance requirement. But the.01% to.02% differences are modest and may imply that factors other than the universal health insurance mandate affect their interest in purchasing a policy. In short, a universal health insurance mandate will generate higher levels of online activity, particularly among the uninsured who are shopping for a policy in the first place. Age Differences The Massachusetts experience serves as a bellwether for another trend. With universal health insurance, age is a factor. Massachusetts residents in their prime working years and older consumers are more likely to already have insurance and are shopping for alternative coverage. Let s consider those who are uninsured. As shown in Figure 1, Massachusetts residents between the ages of 18 35, are comparable to consumers in the same age groups nationwide. But as Massachusetts residents enter their prime working years, a gap begins to grow. Proportionally fewer Massachusetts residents are uninsured and looking for a health insurance policy. 4

6 9 6 3 Entire US MA There is a difference of 2% for the age group. This gap grows to: 5% for the age group 4% for the 55 to 64 age group 27% for the over 64 age group. Compared to consumers in the US as a whole, fewer Massachusetts residents in these age groups are uninsured. Figure 1 Percentage uninsured searching for insurance online, US versus MA When it comes to preexisting conditions, there are small differences of 2% between Massachusetts residents and US consumers as a whole, for some groups, as shown in Figure 2. In general, slightly fewer Massachusetts residents are shopping for health insurance in part due to the fact that a greater proportion of state residents are looking for coverage. There is one notable 3 Entire US MA difference older Massachusetts residents, those age 65 and above, are 2% more likely to be searching for health insurance online than people in the US as a whole. 2 When it comes to the self-employed, again Massachusetts residents are very 1 similar to consumers in the US as a whole, with a few notable exceptions. As shown in Figure 3: Figure 2 Percentage with preexisting condition searching for insurance online, US versus MA Massachusetts residents age 45 to 54 are 2% more likely than US consumers to be self-employed. This gap grows to 5% for residents age 55 to 64. This suggests that with universal health insurance, the self-employed in Massachusetts are more likely to find an affordable policy. Advice for Agents 3 Entire US MA With universal health insurance, be prepared for market shifts. There will be more people online, looking for health insurance. The most notable changes will be among consumers in their prime working years, age 35 and above. Typically, 2 they will already have health insurance, and will shopping for a better policy. 1 Be prepared to understand what consumers want and help them evaluate their choices. Figure 3 Percentage selfemployed searching for insurance online, US versus MA 5

7 9 6 3 Figure 4 Percentage uninsured searching for health insurance online by age National Trends for Online Health Insurance Uninsured Consumers Now let s turn to the US market as a whole. What s happening to online consumers within the overall US health insurance market? To begin with, online consumers are 2.4 times more likely to be uninsured than insured. We find that 71% are uninsured people who do not have a health insurance policy and are looking for one over the Web. Only 29% are currently insured and are considering for an alterative. In all likelihood, they are looking to improve their current coverage. Notably, younger people looking for health insurance online are more likely to be uninsured. As shown in Figure 4: 8 of consumers aged are currently uninsured. The percentage of uninsured declines by 4% for each of the next two age groups. 76% of consumers aged and 72% of consumers aged are uninsured. The percentage of uninsured declines for the older age groups 67% for consumers age and 56% for consumers age For 65 and above, 46% are uninsured. More than half are insured and are looking to supplement or change their current coverage. These age-related trends suggest that shopping for and purchasing health insurance is associated with life stages. The youngest (and most web savvy) consumers are leaving school, establishing themselves as adults in the work force, and switching from their parents policies. We expect that people who grow up relying on the web as an everyday tool will want to go online to shop for insurance. Consumers aged 35 through 64 are in the midst of their careers and family life, and thus need coverage for their families. Consumers aged 65 and above are more concerned with issues related to retirement. They too are going to rely on the web as a resource but one where they are more likely to be shopping for alternative policies. Consumers with Preexisting Conditions Overall Trends Overall, consumers searching for health insurance over the web are a healthy group. Only one out of ten (or 1) have a preexisting health condition. 6

8 % 1 5% Figure 5 Percentage searching for health insurance online with preexisting condition by age Uninsured Figure 6 Percentage searching for health insurance online with preexisting condition, uninsured vs. insured Insured Not surprisingly, older consumers looking for health insurance online are more likely to have a preexisting condition. They are six times more likely to have a preexisting condition than the youngest age groups. As shown in Figure 5, 5% of online consumers age and 6% of consumers age have a preexisting condition. There is a slow but steady upward growth of 3% to 5% for people in their prime working years. 9% of online consumers age 35 44, 13% of consumers age 45 54, and 18% of consumers age have a preexisting condition. Among online consumers age 65 and above, 24% have a preexisting condition. In one respect, it is not surprising that younger consumers tend to be healthier and have fewer preexisting conditions. After all, many chronic diseases such as diabetes, arthritis, and various heart conditions are associated with age or other lifestyle-related factors; the incidence of these and other chronic diseases increases over time. Nevertheless, preexisting condition is an important factor in the market that affects some consumers of any age. Specific Trends with Preexisting Conditions Let s examine in more detail the 1 of consumers who report a preexisting condition and are shopping for health insurance. What are some of the notable differences among consumers and what impact do these trends have on the market for online health insurance? To begin with, we find that there s an 8% difference between consumers who are insured and shopping for another policy, and those who are just uninsured. As shown in Figure 6, comparing the uninsured and insured consumers, 8% of consumers who are not insured have a preexisting condition compared to 15% who are insured and have a preexisting condition. 8 53% 27% Figure 7 Percentage uninsured searching for health insurance online with preexisting condition by age In all likelihood, the uninsured are simply looking for coverage and perhaps are having difficulty finding a policy they can afford. By comparison, the currently insured are search for a better policy. Furthermore, people who are uninsured and have a preexisting condition are more likely to be among the younger age groups. This youngest group is twice the size of the oldest group. As shown in Figure 7: 71% of consumers with a preexisting condition aged year olds are uninsured. The proportion of consumers with a preexisting condition declines steadily by 4% 5% for the next three age groups. 67% of consumers aged 25 7

9 Men Figure 8 Percentage men and women searching for insurance online with preexisting condition, by age Women 3 34, 62% of consumers aged 25 44, and 57% of consumers aged are uninsured. Less than half of older consumers with a preexisting condition are likely to be uninsured. There s a 9% drop to consumers aged 55 64, where 48% are uninsured and a 12% drop to consumers age 65 and above, where only 36% are uninsured. This trend suggests many more of the younger people with preexisting conditions will be uninsured and looking for an initial policy. Relatively speaking, older consumers are already insured, and probably looking to improve their coverage or reduce their costs. In all likelihood, younger people with preexisting conditions face the greatest difficulty finding health insurance that they can afford. Finally, let s consider the impact of gender and age among consumers with a preexisting condition who are looking for a health insurance policy over the web. Except for people aged 65 and above, women with preexisting conditions are more likely to be looking for health insurance online than men. As shown in Figure 8: Among consumers age with a preexisting condition, there s a 36% difference. 68% of consumers are women compared to 32% men. Among consumers age with a preexisting condition, there is a slight shift to a 1 difference 55% of consumers are women compared to 45% men. Finally, among consumers 65 and above with a preexisting condition, there s a reversal of differences. Men are 6% more likely to be shopping for health insurance than women. Only 47% of consumers are women, compared to 53% men. Why are younger women with preexisting conditions more likely than men to be searching for health insurance? Perhaps women in these younger age groups are more concerned about fertility, parenting, their own health, and wellness, and thus are more likely to be looking for a policy that meets their needs Figure 9 Percentage self-employed searching for health insurance online by age Self-employed Consumers Among consumers looking for health insurance over the web, 16% are selfemployed. This is a substantial number of people who do not have automatic access to a group health insurance plan offered through their employer or educational institution, or as part of a retirement benefit. The self-employed are in the health insurance market looking for coverage for themselves and their families. Thus the self-employed seeking a health insurance policy over the web are particularly likely to be in their prime working years age 35 to 54. As shown in Figure 9, the proportion of self-employed looking for health insurance online increases steadily from to age groups, and then declines. 8

10 3 2 1 Women Figure 10 Percentage of selfemployed searching for health insurance online by gender Men The number of self-employed seeking health insurance increases by 7% 8% for young adults and early middle-aged. 7% of online consumers age are self-employed, rising to 14% for online consumers age and 22% for online consumers age The proportion of online consumers peaks among those % of people in this age group looking for health insurance are self-employed. For older consumers, the proportion of self-employed declines substantially. 2 of consumers aged and 7% of consumers 65 and above are self-employed. Thus, being self-employed and looking for health insurance is associated with age and life stage. It s altogether likely that the self-employed in their prime working years, age are supporting families and especially concerned about health care, and thus are considering their health insurance options. Family security also appears to be a factor from another perspective. There s an 8% difference between men and women. As shown in Figure 10, 21% of men looking for health insurance online are self-employed, compared to 13% of women. When we focus on the self-employed, and then consider the differences 7 6 Men Women between men and women, we find there is a notable trend by age. For the selfemployed age 35 and above, men are 1 to 33% more likely than women to be looking for health insurance online. For the self-employed 18 34, there is a larger percentage of women than men looking for health insurance. Specifically, as shown in Figure 11, among the self-employed looking for health insurance: Figure 11 Percentage selfemployed men and women searching for insurance online by age 62% of the age group are women compared to 38% men. 51% of the age group are women, compared to 49% men. 33% of the 65 and above age group are women, compared to 67% men. While there are differences between self-employed men and women when shopping for health insurance, younger women may have special concerns. Advice to Health Insurance Agents Be prepared to sell to different groups of consumers with varied needs. There are three distinct groups looking for health insurance online younger consumers, those between the ages of 18 to 34; consumers in their prime working years, between the ages of 35 and 64; and older consumers, age 65 and above. Younger consumers are more likely to be uninsured and first time buyers, less likely to have a preexisting condition, and less likely to be selfemployed. There are also more women than men in this group. 9

11 Consumers in their prime working years are more likely to be selfemployed, will sometimes have preexisting condition, and often be uninsured. Older consumers are most likely to have preexisting conditions, are often already insured and shopping for another policy, and are relatively unlikely to be self-employed. Producers should consider how best to approach and relate to these different groups. Consider your communication methods and how best to approach various consumer segments. Younger consumers are often most comfortable doing business over the web and rely on . Consumers in their prime working years may be living hectic lives and welcome scheduled phone calls. Older consumers may instinctively welcome phone calls and the personal touch. Be sure to pay attention to your multiple communication channels and choose the one that your customers will find most convenient. Remember, you want to make it easy for your customers to do business with you. Then quickly determine what customers want and how you can best satisfy them. For younger consumers, there are the basics of a health insurance policy. For people in their prime working years, there are the family benefits and the costs for the self-employed to consider. For older consumers, focus on the advantages of switching from one plan to another, for covering preexisting conditions, or for finding the right Medicare supplement. In short consumers are naturally drawn towards people who they like and who understand their needs. Be sure to address their concerns. Serving Health Insurance Consumers over the Web Growing and Changing Markets If there s one thing that s going to be a constant in the online health insurance market, it s the change factor. Not only is the online market is growing, but it is also changing. If the Massachusetts experience is any indicator, universal health 10

12 insurance will bring more people into the market and make the web channel even more valuable. Younger people are those who especially need health insurance, and they are much more likely to want to do business online. Consequently, producers should to adapt their sales and marketing efforts to capture the increasing numbers of consumers who expect to do business over the web. Producers should adjust their marketing strategies to address the needs of both younger and older consumers, as well as differences between men and women. Sales enablement requires customer insights. Producers need to be aware that there are different ways to sell to different groups of people. Building Customer Relationships Successful producers get to know their consumers what they want, what they need, and how they can best be served. There are multiple aspects to the health insurance market. Producers should consider their approach to sales enablement. The challenge facing producers is how they can best enable their sales efforts. Web-based leads are a promising source of new business. As health insurance sales make the transition to the web, there may be an ever-growing pool of leads. Producers need to learn how to make the most of this increasingly profitable sales channel. The future belongs to the sales enablement activities that support building effective customer relationships. Nevertheless, online leads are just the beginning. Producers need to realize that selling insurance is not just a transaction, but also the beginning of a relationship. Satisfied customers engage, interact, and tell their friends. To profit from the growing health insurance market, it is essential to get to know the customer and to build ongoing relationships when doing business over the web. About All Web Leads All Web Leads is a leading online sales lead provider for the US insurance industry. We deliver real- <me, targeted, high quality sales leads to top insurance producers. Our advanced technologies are able to bring agents together with qualified customers that are ac<vely searching for insurance products. Based in Aus<n, Texas since 2005, we are dedicated to delivering the highest levels of service and sa<sfac<on to insurance consumers and salespeople. 11

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