Packaging Ancillary Health Insurance Products to Create Additional Value for Employers and Their Employees
Simply speaking, a customer is defined as someone who pays you. For a health plan, that means your customers are two-fold–employers pay you a premium for coverage, and their employees also pay for coverage through payroll deductions.
In order to successfully cross-sell ancillary health insurance products, you need to understand each of these groups and their motivations, as well as their relationship to each other.
The Employer-Employee Relationship Benefit-eligible employees typically fall into two different categories. Here’s the 10,000-foot view of each, along with their relationship with their employer:
- Transient: In general, employees in this group have a higher-than-normal turnover rate. However, they’re often quicker and easier to replace. While they can impact day to day. operations, they tend to have less impact on the long-term results of the business.
- Long-Term: Employees in this group have a normal turnover rate. They’re harder to replace because of their skill set, they take longer to recruit and can have a greater impact on the business’s long-term results.
Needless to say, the needs of each of these groups are very different.
- Transient: These employees are often living paycheck to paycheck, switch employers for nominal pay increases and often pay less attention to their benefits package.
- Long-Term: These employees are usually more experienced, in a higher income bracket, and are looking for a more comprehensive benefits package for themselves and their families.
Both play important roles in a business and will benefit from having a well thought out ancillary cross-selling strategy.
The Growth of Ancillary Health Care Products
The numbers show that employers are increasingly offering ancillary health care products to their employees–the market for these products is projected to grow at a compound annual growth rate of 9.2% between 2023 and 2028. And most are offering multiple products–everything from vision to pet to travel insurance.
This growth is driven by demand from both employees and employers–some of these products are designed to reduce employees’ out-of-pocket costs for medical care. Others have been shown to improve overall health as well as the outcome of chronic conditions like diabetes and high blood pressure. Needless to say, healthy employees save employers money regardless of whether they’re transient or long term.
Challenges with Offering Multiple Ancillary Products
It’s one thing for employers to offer these products to employees as part of a comprehensive benefits package, it’s another thing for them to have to juggle multiple standalone policies. Not only do employees have to remember all these different plans, it’s more time consuming and costly for employers, too. Specific challenges include:
- Inefficiencies like having multiple bills and points of contact for employers, and employees needing to remember that they even have these multiple policies.
- Employer priorities may be pitted against employee needs–while employees could potentially benefit from increased offerings, the ROI may not be evident to the employer.
- Minimal integration of benefits–there hasn’t been a real or perceived connection with core medical, which could not only lower overall costs but also make these policies more valuable to employees and improve their experience.
- Because these products are offered by multiple companies, there’s limited ability to take advantage of bundling discounts.
Understanding Employer Priorities
By cross-selling ancillary health insurance products, payers have the opportunity to increase their revenue while saving employers time and money. Understanding the different, sometimes competing, priorities that exist within the employer is key to meeting their needs:
- At the HR level: A main function of these staff members is filling open positions and retaining existing employees in order to keep the business running. Part of ensuring this happens is to offer competitive and comprehensive benefits packages.
- At the CEO and CFO level: These leaders want to make sure they’re receiving the appropriate value for money being spent on benefits, while ensuring costs don’t negatively impact the bottom line.
How to Add Additional Value for Employers
With these roles in mind, here are some steps you can take to get a better understanding of both your plan and your customer–which, in this case, are the employers.
- The first place to start is by taking an inventory of your and your customers’ ancillary offerings. It’s often easier to update an existing product than introduce a new one. Here are some questions to ask yourself:
a. Have your product offerings been successful? What is your measure of
success?
b. Are they “oh by the way” products, or are they part of your sales team’s
routine sales process?
c. If they are “oh by the way” products for your sales team, why is that? - Ask your customers what other products they’ve bought and how–are they employer
paid, voluntary, or both? Brokers and consultants can help you with this. - Now you have to narrow down what segments of the business you’re interested in
impacting. Use your current inventory and the marketplace feedback to prioritize where
to start. Remember that, while every segment will benefit from an ancillary offering,
some are more labor intensive than others. It’s hard to be “everything to everyone”. - Next, think about creating value for your customer. As you do, here are a couple of
rules:
a. Rule #1: Price is important but it’s not the only measure of value.
b. Rule #2: Your product may solve a need but your customers have many
needs.
c. Rule #3: Your perspective on what value is, while important, may not
necessarily align with that of your customers.
How Bundling Can Add Additional Value for Employers
Armed with this information, it’s time to start bundling your ancillary products in order to
create the biggest value for your customers, while setting up a big payoff for your organization.
Bundling is defined as: “The selling of different items together as a package” (This can also be referred to as “packaging.”) When it comes to cross-selling ancillary health insurance products, bundling can add value by saving employers time and money. Employees are on the lookout for bundles, too, thanks to the popularity of Flo from Progressive, who encourages viewers to “bundle and save.”
There are three main bundling strategies you should explore: Product, Pricing and Positioning. Here’s the breakdown of each:
Product: These products may share some obvious similarities, and/or have traditionally been
associated with each other. Examples include:
- life insurance, short-term disability and long-term disability, and
- medical, dental and vision insurance
- This is the easiest strategy, and doesn’t require a lot of planning or resources.
- However, by itself, it tends to create more value for the plan than the employer and
- employee.
Pricing: There are some obvious similarities between these products; however, you’re
leveraging the side of our human nature that loves a deal! It’s like Xfinity offering a discount to
customers who purchase Internet, cable and cell phone service. Examples include:
- Discounting the medical or dental if other lines are purchased
- High-deductible health plans along with free or discounted spendingaccounts–FSAs, HSAs and HRAs.
Positioning: There may not be many obvious similarities between these products; however,
more evidence is being released on the benefits of packaging products based on how together
they can improve overall health. Examples include:
- Oral health and its impact on overall health
- Vision exams and their ability to detect hypertension and diabetes
- The value of sharing information between disability and medical carriers
- This strategy can be the most difficult to implement, since it often requires operational buy-in, IT resources, and most importantly, support from your clinical staff.
- Done well, it will create value for you, the employer, and the employee!
A successful bundling strategy will incorporate a combination of all three of these strategies. To get more details on the “how tos” of implementation, watch my free webinar, “How to Create Value through Cross-Selling.”
