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Monthly Affordable Care Act Cost Higher Than Americans Willing To Pay

Affordable Care Act Costs

On Wednesday, September 25, 2013, the federal government announced that Americans will pay an average premium of $328 monthly for a mid- tier health insurance plan when the Exchanges open tomorrow, October 1.

Many consumers will qualify for subsidies to offset this cost, which will be important for the millions of consumers who do not currently have health insurance due to financial issues. However, data from the c2b Consumer Diagnostic® show that Americans generally may not be ready for the “sticker shock” of health insurance premiums on the Exchanges.

The Research

The c2b Consumer Diagnostic® is a national, quantitative study of 4,878 consumers conducted by c2b solutions to determine Americans’ perceptions, attitudes, wants, needs, and motivations as they pertain to health and wellness.

Variables from the c2b Consumer Diagnostic® data can be chosen and combined to define a consumer type or target audience of interest, and analyze how this consumer answered any of nearly 400 questions in the research study. For example, analysis on health insurance pricing attitudes can be conducted for consumers who are:

  • Currently uninsured, on Medicaid, or a member of a given health plan
  • Employed at a company with <50, 100, 200, 500+ employees
  • Of any age group, gender, ethnicity, income level, etc.
  • Managing a specific chronic condition
  • Taking a certain prescription
  • One of five c2b Psychographic Segments
  • And many other variables

This is important, because different consumers have unique needs and motivations. A “one size fits all” approach will not work in healthcare, and a stakeholder making pricing or marketing decisions should do so based on deep consumer insight.

The c2b Consumer Diagnostic® used a Van Westendorp pricing analysis to examine pricing sensitivity for health insurance. The survey asked respondents the price points at which they felt a monthly health care insurance premium was:

  • So inexpensive that they doubted its quality and would not purchase it
  • So inexpensive that it they would consider it a bargain
  • Getting expensive
  • So expensive they would not purchase it

The Results

We found that specific consumer types have very different pricing sensitivities regarding health insurance. For this article, we will look specifically at respondent answers to the following statement:

The average price at which consumers consider health care insurance/coverage premium (monthly cost) so expensive they would not buy it.

The following provides the answers from a sample of consumer types that are possible from the study:

  • General Population:  $299.25
  • Annual Income  <$50K:  $200.08
  • Age 25-34: $263.78
  • “Self Achiever” c2b psychographic segment:  $343.12
  • Patient with Cancer:  $345.90 

Several consumer types are in the ballpark of the average monthly premium under the Affordable Care Act, but again, the amounts above represent prices that are so expensive they would not buy it.

Patients with cancer are understandably the least price sensitive of the consumer types listed above, and are willing to pay the highest prices in order to secure needed health insurance coverage. 

The “Self Achiever” (one of five c2b psychographic segments) is the segment most willing to pay higher prices. They are also the most proactive and wellness-oriented of the segments, but they only represent 18% of the U.S. population. The other examples offered above are far off the average Exchange price.

Important to keep in mind is that subsidies will offset the cost for many of these consumers. Also, consumers who have been covered by their employers probably do not have a full appreciation for what health insurance truly costs and the generous benefits granted by their employers. Thus, assumptions about fair pricing are likely skewed.

However, it is also important to keep in mind that the average cost cited by the federal government is a per-person monthly cost, not the cost to cover a family or household. Moreover, many employers may transition their employees to the Exchanges if the cost savings from ceasing coverage is too financially attractive (even if providing a defined contribution). Employees with salaries above the subsidy threshold may be in for a surprise.

How to Use the Data

This information can be valuable for health insurance companies looking to price their plans according to consumer preferences. It is also important for other healthcare stakeholders and providers to understand what consumers will be going through as they face this new era under the Affordable Care Act — some consumers will feel empowered, others may feel victimized, and there will certainly be confusion in the marketplace.

Making strategic and tactical decisions through a lens of consumer insights, and engaging consumers with a deep understanding of their perceptions and needs, is critical for the success of a healthcare organization in a growing wave of consumerism. 

c2b solutions’ mission is to help organizations succeed in a dynamic Healthcare Reform environment, leveraging consumer insights and business solutions to achieve superior results in a commodity marketplace. 

If you would like to learn more about the products and services c2b solutions offers, contact us.

Psychographic Segmentation and its Practical Application in Patient Engagement and Behavior Change

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