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Tuesday, February 10, 2009

Striving towards Flavored Coffee drinks: the Individual Insurance journey

In a previous post, I described my path towards better understanding how individuals purchase health insurance. At my company, we launched an individual health plan just over 3 years ago. Our higher end plan makes up most of our business while our other plans would require an additional Y axis to show up on the same graph. We've done great with one segment but are struggling with the others.

Initially, we were using more of a consumer product approach and following the "long tail" philosophy of trying to develop a niche for each type of a consumer. There would be the Struggling Musician Plan that included additional benefits for Ear Nose and Throat doctors or the Home Gardener Plan with additional benefits for allergy medication. The main progress that we've made towards those efforts involves me using the term "long tail" in a blog. I've seen many other bloggers drop the term and my next step is to use it at a work meeting with a straight face. Nothing against the term "long tail" but just my natural backlack towards business jargon that uses oblique, imaginary words when a concise description is sufficient.

Actually, the biggest progress that I've made is realizing that the individual health insurance market is still in the basic segmentation platform that coffee was in the pre-Starbucks days. We have small, medium, and large as you can buy a little bit of health insurance for a lower price to occasionally taste or you can get a Big Gulp size and dive into the buffet. My company really only has a Big Gulp plan and my next step is to move into small, medium, and large.

Other companies, mainly the Blue Cross plans are getting into the flavored coffee part of the individual market and whip up some sugary goodness for $6 or a $1 herbal tea for those who like the natural stuff. This includes individual insurance plans that offer predictable costs such as having everything in the form of a copay such as you pay $50 rather than a co-insurance such asyou pay 20% (of what?). There's also the young adult plans which are marketed like Ipods with seizure-inducing graphics and offer a low cost with just the basics for that 25 year old guy who still needs his pediatrician to sign waiver forms since he hasn't seen any other kind of doctor.

One thing that I noticed is that the more affordable plans do not cover maternity care. My state of Oregon mandates maternity coverage and I can't decide if that is a good idea or not. I am typically a Big D-democrat with regulation. As a result of the mandatory maternity coverage, non-child bearing individuals subsidize those of us who bear children. The result of not subsidizing future mothers could be more affordable health insurance which could be answered by looking at the insurance rate in states that mandate maternity coverage. Oregon's uninsured rate is on the high side. Ultimately, I think that the ROI on pre-natal care and a healthy child birthing process (at least in terms of cost avoidance of a high risk pregnancy) is high enough to justify the subsidization.

Back to the topic on hand, my product work is now focused on making sure we have enough different size cups of coffee for our individual health plan and I can stay away from any flavored syrups. We'll make sufficient gains with a better developed small, medium, and large platform than we would by targeting niche segments (niche segments is just a clearer way of saying "long tail" in my opinion).

Speaking of size, coffee, and syrups, why do they only sell flavored syrups in liters? At home, we don't need enough syrup to feed the week's morning rush so why don't they sell smaller sizes of flavored syrup for those of who will get sick of it after a few cups? This segmentation by size may travel even farther than I thought.

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