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Principle #3: Provide Meaningful Choice

Just like any other store, an online benefits store needs to have the right range of products and prices, the right brands, and options that are appealing to a broad range of people. By incorporating mechanisms (such as a recommendation engine for decision support) for understanding what people want and need, a marketplace can provide the appropriate levels of customization, information, and choice. The resulting buying patterns can yield much more effective information over time than the annual “guess the spread” exercise so many brokers undertake with their spreadsheets each year, which ultimately is like trying to guess the stock market. When you continually refine and hone your store offerings based on actual usage patterns, you operate more like Amazon and Zappos in stocking inventory than you do a financial advisor trying to predict the market.

When consumers are given the right amount of choice and can spend their own allocation of money, they seek the best value for their dollars. This economic principle works for both the supply- and demand-side actors in the health care benefits transaction. Employers can save time because they make one big decision—how much money to allocate to employees—and then let their employees do the rest. Companies do this in other ways; for example, they pay their employees a salary, which the employees may use to buy their own homes, cars, and TVs as well as choose their own investments, including complicated financial products such as 401(k)s. Employees make big decisions with high price tags every day, and no one says they’re not qualified to make these decisions if that’s what they choose to do with their money.

By having employees self–select their own insurance and other products, the supply side is incentivized to become more competitive and agile to adapt to these preferences and encourage higher adoption by offering more of what people want. Because employees can use any remaining funds from their employer’s defined contribution or supplement with their own money to ensure that they have the right protection in place for their needs, insurance carriers can create innovative products, such as hospital indemnity insurance or accident insurance, to meet particular needs. And it stands to reason that in spending these dollars, people are going to be very smart because they’re not only allocating a fixed amount from their employer but potentially spending their own money. They’re going to ask questions and make decisions that work for them, and they’re going to be more engaged in these decisions.

For example, a young, single shopper may choose a health plan with a lower premium and higher deductible, along with a health savings account (HSA) to help save for qualifying expenses with tax-free funds. (Data based on actual usage from Liazon exchanges show that 4% more Generation Xers and 8% more Millennials buy HSA-qualified plans than Baby Boomers.)10 Those who are healthy and free of chronic medical conditions are more likely to choose a narrower network of doctors. A married employee with four children may choose a dental plan that covers orthodontia. Another employee may need a personal health coach to help him quit smoking. This variety of needs calls for a store that presents a number of different options.

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