By Published On: July 15th, 2013Categories: SCIO

SCIO’s CEO was quoted in WSJ article focusing on the marketing tools employed by insurers under new health laws.

Insurers Seek Right Balance of Risk, Reward

In the insurance business, some customers are more desirable than others—and insurers will be seeking to woo them in preparation for the health law’s new marketplaces.

Customers not only bring revenue in the form of the premiums they pay. They also come with costs, since the insurer will be on the hook for medical expenses. Traditionally, that has made healthier people the best insurance risk. Insurers often could decline to sell plans to people with health problems, or charge them more.

Now, the health law is changing the rules of the game. Under its requirements, insurers must sell plans to all comers, and the rates can’t be tied to customers’ health. Less obviously, the law includes mechanisms that are designed to ensure that individual companies aren’t punished if they draw a mix of sicker consumers.

“What is up is down. What was north is south,” said Jaime Estupiñán, a partner at consulting firm Booz & Co.
Young and healthy people will still be needed to help balance out the costs of sicker customers. But, in addition, some people who weren’t sought after in the past may become profitable because of the law’s payment structure. Among them: people who have chronic conditions such as diabetes, but who can keep their diseases managed and avoid big costs such as hospital visits, said Shubham Singhal, a director at consulting firm McKinsey & Co. That is because insurers can be paid more to cover consumers based on their diagnoses.

Since insurers can no longer pick and choose their customers, they will employ a range of subtler tools, including marketing campaigns and carefully designed plans aimed at the customers the insurers most want.

“They want to attract the right risk,” said Siva Namasivayam, chief executive of SCIO Health Analytics Inc. His firm helps insurers identify customer types, such as “entry-level singles” and “healthy baby boomers,” each with projections on likely costs. The firm pinpoints, by ZIP Code, where the different types tend to live, so the insurer can target its marketing geographically.

Highmark Inc., a Pittsburgh, insurer, said it has around 100 targeted campaigns aimed at particular types of consumers, including recent college graduates and retirees not yet eligible for Medicare. It sends walk-in tractor-trailers to college campuses and sets up booths at community events such as charity walks. “We have to be more one-to-one than we were historically,” said Steven Nelson, a senior vice president at Highmark.

Blue Cross & Blue Shield of Rhode Island also plans to aim at certain populations, including young men. Last year, the insurer promoted one of its low-cost plans with a campaign that included posters on the walls of men’s bathrooms in bars. “You don’t need beer goggles to fall in love with this health plan,” one slogan said.

Write to Anna Wilde Mathews at

A version of this article appeared July 15, 2013, on page B5 in the U.S. edition of The Wall Street Journal, with the headline: Insurers Seek Right Balance Of Risk, Reward.

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