Whether shopping for an airline ticket or a pair of shoes, consumers are making more purchases online. In the past, e-commerce for health insurance was confined to the individual market; private insurance exchanges, however, are bringing Internet shopping experiences to the broader health insurance industry.
And like e-commerce in other industries, helping consumers select products with confidence is a key factor for success. With more choice comes more responsibility, making it crucial for insurers to provide consumers with the tools they need to pick wisely and have confidence in their decisions in the long run.
But due to the complex nature of health insurance products and the low level of health insurance literacy, that decision support process can be more complicated for health insurance than other industries. Moreover, for most people, purchasing health insurance can be an overwhelming and stressful experience and one that they must face every year.
Building a successful private exchange requires insurers to blend multiple areas of expertise: psychology of consumer decision-making, current best practices for e-commerce shopping and subtle ways of educating consumers about health insurance to increase their overall comprehension.
When it comes to understanding consumer decision-making, research indicates that too many options – especially when presented without context or attention to what the customer finds appealing – actually inhibit decision-making and lead to lower confidence in the eventual decision. This is where decision support technology can help consumers understand and contextualize their options. A well-designed private exchange also turns complex numbers and terms into conversational language. It provides simple descriptions of the benefits offered and how the consumers will pay for the services they've selected.
For examples of e-commerce best practices, the industry need look no further than the queen of retail, Amazon.
The online retail giant has revolutionized the way the connected world shops by creating an intuitive self-service platform, offering ratings and reviews for those consumers who prefer more information to less, organizing products into categories to enable speed and efficiency in purchasing and anticipating customer needs based on shopper input and data. By adopting these characteristics, insurers will be more likely to offer the shopping experience consumers demand. While the "Amazon effect" analogy has become commonplace in the industry, it remains a relevant example. With more and more online retail experiences adopting Amazon best practices, consumers have high expectations for what an online retail experience should be, and those biases don't disappear when shopping for health insurance.
One year after the introduction of public exchanges through the Affordable Care Act, both public and private exchanges are on the rise. This is, in part, due to new levels of exchange literacy and demand from consumers. And as employers move to defined contribution plans and consumers become comfortable with taking a more active role in selecting and personalizing their health coverage, more Americans will buy their health insurance through a private exchange; it will become the new normal and replace top-down and paper-based processes.
Insurers have to become more consumer-centric than ever before. A successful private exchange, however, is not a panacea. There's more to building the shopping experience than digitizing existing plan materials and creating a user interface to present them.
Jonathan Rickert is the CEO of Array Health.