A New Approach to
Segmentation for the Changing
Insurance Industry
By Mark Carr and Amy Modini
The passage of the Patient Protection and Affordable Care Act has initiated a profound transformation of the national healthcare market. Over time, health reform promises to shift a significant portion of the insurance market
from a wholesale to a retail market.
Traditional methods for “segmenting” the consumer market such as demographics (e.g., age, life stage) and
source of health insurance (e.g., individual or direct, employer sponsored) do not offer insight into what is driving
healthcare decisions. In static markets with little competition, these methods were sufficient, but the shift to a
more consumer centric model will make these traditional approaches less effective in part because they offer
little ability for insurers to differentiate themselves from competitors. Insurers must derive new marketing and
branding strategies that speak to the value that consumers demand from their health insurer. Using the results of
a national consumer study, this article shows how insurers might uncover superior insights and develop stronger
strategies using more sophisticated segmentation techniques to view the market.
The Traditional Market View
Demographic segments such as age have historically provided some directional guidance for insurers (see Figure
1). For example, young consumers (age 18 – 29) are more likely to be in transition compared to their older counterparts. Perhaps short-term policies would be appealing to this group as they transition off their parents policies
and/or move into the real world. Likewise, those moving into retirement have different needs so policies that
supplement Medicare offerings may be more attractive to this older group.
Figure 1
Respondents by Age
Consumers:
Age 60 and older
Consumers:
Age 18 to 29
22%
24%
Consumers:
Age 50 to 59
17%
18%
19%
Consumers:
Age 40 to 49
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Consumers:
Age 30 to 39
A Better Way to Look at the Market
However, traditional ways of looking at consumers don’t offer insight into consumers’ goals and decision-making
processes related to healthcare. We offer one alternative approach by looking at the appeal of different health
insurance plan features. The most important plan features for the market as a whole are: coverage regardless of
network status, knowing and trusting the insurer, easy access anywhere in the US, and cost (see Figure 2).
Figure 2
Insurance Features &Services (% selected)
71
Covers services from any physician whether or not they are in my network
Coverage is provided by a company I know and trust
62
Makes getting health care easy anywhere in the country
61
Core
Features
& Services
58
Has the lowest cost
55
Guarantees I will not have to switch primary care doctors
40
Provides financial rewards for activities that improve my health
Offers easy-to-use online services
36
Offers many programs to help me maintain and improve my health
36
25
Provides a health care advocate to help me
17
Offers premium service
13
Offers E-visits as well as in-person appointments
Offers online or in-person sharing communities
5
None of these
4
0%
25%
50%
75%
100%
By segmenting the market based on plan features, five distinct segments of the population emerge, all of varying
sizes and with varying preferences and levels of interest for coverage, cost, technology, health and wellness, and
preventative care (see Figure 3).
Figure 3
Segmentation by Plan & Service Attributes
Segment 5:
The Disconnected
Segment 4:
The Unswayable
4%
Segment 1:
The Traditionalists
16%
34%
Segment 3:
The e-Patients
20%
26%
Segment 2:
The Easy-Does-Its
179 South Street, Boston, Massachusetts 02111
The Traditionalists: are the largest segment and desire full coverage at a low cost. They want coverage from outof-network providers and easy access throughout the country. Unrealistically, they are a group most concerned
about cost, but also the most interested in premium services and having a healthcare advocate. Despite concerns
about costs, they are NOT willing to participate in health activities or doctors’ visits for financial incentives.
The Easy-Does-Its: want coverage from out-of-network providers and easy access when traveling. They are
willing to have annual physicals, participate in activities to improve heath to save money, and are somewhat
willing to switch primary care providers. About one-in-three would like a healthcare advocate to help with
reimbursements, scheduling and complexities. They do NOT care at all about online access or tools.
The e-Patients: are all about technology. They want to manage healthcare online and are open to e-visits. Outof-network coverage, knowing and trusting the insurer and low costs are also important. They have weak loyalty
as they are completely willing to switch primary care providers for these other benefits. Not surprisingly, this
segment is younger, with a large portion under 40 years old.
The Unswayable: want to manage healthcare online but will NOT switch primary care providers. Despite
proclivity to online healthcare management, they are not interested in e-visits. This group is least concerned
about costs and also least inclined to want an advocate.
The Disconnected: only a small portion of the population, and is completely unengaged with healthcare
insurance and related decisions. They are more likely to be uninsured, skew male, are the least educated, and
have the lowest income.
In Summary
This approach offers just one way for insurers to consider looking at the consumer marketplace in addition
to traditional ways. It presents insurers with an opportunity to target consumers with distinct plans and
supplemental offerings while using messages that are appealing to them.
One of the keys to success in the new market landscape will likely be clarity and focus around which consumer
segments to target. Insurers who have strong offerings that speak to the unique needs and goals of consumer
segments have the greatest opportunity for differentiation and success in a post-reform environment.
Mark Carr is Managing Partner at South Street Strategy Group. He can be reached at
[email protected].
Amy Modini is the Account Director of the Healthcare practice at Chadwick Martin Bailey. She can be reached at
[email protected].
179 South Street, Boston, Massachusetts 02111