How do you manage Ms. Healthy Spender & Mr. Chronic Thrifty?

Member 0ADCF33F9A0F1642 (Ms. Healthy Spender) is a 40 year old healthy female whose annual health insurance payments total $67,742.  According to Kaiser Family Foundation the US per capita healthcare spend was $6,815 in 2009.  Upon further examination, Ms. Healthy Spender has no chronic conditions but complains of abdominal pain.  She has had one laparoscopic procedure performed on her and has medication spend of $63,561.  How do health insurance companies identify members like Ms. Healthy Spender and drive appropriate programs that will help her manage her health while reducing costs?

Member 0ADCF33F9A0F1642 Healthcare spend

Segmenting customers based on their behavior, understanding the needs of the various segments and then delivering programs to meet these needs has been the foundation of successful marketing strategy.  For health insurance customers, primary behavior is driven by the member’s health condition – whether they are healthy or have chronic conditions, the utilization of health services – the number of office visits, lab tests and hospitalization, and amount paid to consume these services – premiums, co-pays, out of pocket payments and claim payments.

Natural segments are members with multiple chronic conditions who are incurring high medical spend, healthy customers with low medical spend and members with life events (like pregnancy) who incur periodic medical spend.  From our analysis we have seen other segments like healthy members with high medical spend – like Ms. Healthy Spender above.  On the other hand are segments with members who have chronic conditions and low medical spend or utilization.  Member 0AC037393027DB82 (Mr. Chronic Thrifty) is a 58 year old male suffering from hypertension and cholesterol with annual spend of $303.

Member 0AC037393027DB82 Healthcare spend

Understanding behavior of unhealthy members with low spend is critical as they could develop complications over time resulting in higher spend.  Some common reasons for low spends have been lack of medication adherence, inadequate knowledge about their health conditions or financial condition.  Addressing these behaviors through care co-ordination, member education, care alerts/reminders or shifting to an appropriate plan might result in improved health outcomes.  Similarly healthy members with high medical spend could be due to undiagnosed or misdiagnosed health condition, member desire for periodic health check or possible waste and abuse.

Over time there has been a shift in responsibility to individual consumers for making decisions about their health and related spending.  Payers can help consumers in making these decisions by providing appropriate information.  More importantly decisions about health are prone to irrational behavior similar to what has been witnessed when consumers make decisions about their 401k or buying a car. Douglas Hough, a John Hopkins researcher, has conducted extensive research on anomalies around health behavior – why do patients insist on a prescription or having a procedure performed when visiting a doctor?  Patients do so because of an “action bias,” wherein people are predisposed to the idea that doing something is better than doing nothing, even though watchful waiting might be the most rational course. This is how patients with virus-based common colds end up with prescriptions for antibiotics that do nothing against viruses.

Behavioral segmentation is a powerful tool to understand customer behavior.  Understanding the possible psychology behind various behaviors and being able to develop programs that address customer needs is critical for delivering superior member experience.