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Summary
Green Health, a large national health insurance company, has decided to drop a number of its insurance products for small organizations in the state of Virginia. The firm has explained that this decision was made because of the financial losses that these products brought to the business. Initially, Green Health was planning to discontinue these plans immediately. However, the company has now agreed to support its customers until the renewal dates for the plans because of complications that could arise in the calculation of deductibles. The products for small groups that the business will continue to offer include more expensive plans with less attractive benefits. Paul, the vice president of Small Group Products, understands the risks of dropping the most popular programs in the state and notes that the losses for the business may be more significant than estimated. However, he anticipates that a substantial portion of customers will choose other plans, and Green Health will not lose a considerable amount of money and will recover financially in the long run.
Problems
The case of Green Health presents a number of issues. First, the company is dropping a range of products having the most competitive potential on the market. Small businesses do not have many options to choose from in the state of Virginia, and small-group products are in high demand among the consumers there. Moreover, Green Health is discontinuing its most popular plan, Work Health EPO. Therefore, many clients of this business may find themselves having to adjust their budgets and search for a different product. This shift may lead to the firm losing a significant number of customers. It may also be a good idea to consider the issue of customer trust in this situation. Many clients may be reluctant to switch to a different product offered by this company due to uncertainty. According to Cowley (2013), small firms do not have many employees and thus are often more flexible in their operations, making it possible for them to devote more time to choosing individual plans.
Second, the remaining products that the company will offer are not as attractive to the consumers as those that were cheaper. Thus, it is possible that some clients will not choose the new plans and will prefer to work with other insurance companies or purchase individual plans instead. While the market for small-group products does not have many competitors, the losses to Green Health may still be substantial. The competitiveness of the remaining products will be even less favorable than before. The owners of small businesses are more likely to focus on getting the most economically advantageous option without losing their employees. Therefore, the remaining plans that the company chooses to offer may be not as popular as their other products.
The issue of new plans being less favorable may be more problematic than one might think. Paul admits that these products are not as popular as those the company is dropping. Thus, the risk of Green Health not being able to boost its profits is considerable. Loewenstein et al. (2013) argued that customers tend to lack necessary knowledge about the products they are purchasing. Therefore, the price of insurance may become a product’s most appealing feature for many individuals. While the fact that clients can be persuaded to buy other plans due to their lack of knowledge may positively impact the profits of the company, the negative perception of customers toward the discontinued products may be followed by an adverse reaction.
Finally, the market for small-group insurance products is continuously developing. The changes brought by the PPACA may impact the future of the business and its profits. Furthermore, the current losses of the organization may be exacerbated by the fact that some plans offered by other firms will be more advantageous to customers than the remaining Green Health products. The impact of the ACA also puts the company at risk of higher losses. For instance, Cowley (2013) has noted that some employees themselves discover that individual plans may be better for their small businesses and fellow employees. Therefore, while Green Health is planning for the future with a positive outlook, it is necessary to consider that the market changes and keep some possible adverse outcomes in mind. The factor of potential uncertainty connected to the ACA should be explored by the company, as well.
Alternative Solutions
Green Health can consider a number of alternative solutions to the defined problems. First, the company can choose to focus on its most popular plans and reassess them to increase their profitability. According to the information from the case, the remaining products offered by Green Health have higher premiums and lower benefits. The organization risks losing many clients who will not choose to purchase any other presented options. Thus, focusing on the most popular plans and finding a way to make them more profitable may lead to the company retaining some of its clientele. As Corlette, Hoadley, Lucia, and Palanker (2017) have stated, many small businesses may go back and forth between individual and small-group plans to find the best coverage. Therefore, it is vital to attract the attention of these clients with lower premiums and stable provider networks. The company’s place in the market and its gathered partnerships should not be discarded.
Second, the process of marketing the company’s less-attractive plans may also bring some beneficial changes to the company’s current state. For example, a successful marketing campaign that will raise awareness about the products’ existence and explain their possible benefits may positively affect existing customers and allow them to feel more secure in their decision. Furthermore, the rate of customer retention should be examined to create potential loyalty benefits and advantages, which may also help in retaining clients. As Green Health may suffer significant losses from dropping its most popular products, the business will need to focus on consumer retention and ensure customer satisfaction to remain competitive in the market.
Finally, the company’s management can consider shifting its priorities toward products for other groups of businesses. As small firms move away from purchasing group insurance for their employees, Green Health may choose to pursue other opportunities that are more competitive in the market. While this option is somewhat dangerous, it presents a viable solution for the company’s future. On the other hand, choosing to market products for specific tiers of small businesses is also an option. For instance, Corlette et al. (2017) have suggested creating small-group products for healthier individuals. While the authors admit that this choice may significantly affect the market and create a disparity between different groups in terms of risk, they agree that such an approach may result in a higher number of new customers. In part because Green Health may lose more money than has been currently estimated, it will be necessary to consider options for bringing new customers to the company.
Recommended Solutions
The problem of discontinuing the most competitive products can be resolved by reassessing the company’s existing plans and making them more attractive to customers. For example, reducing benefits while keeping the costs at the same level may appear to be a better option for employers who are willing to continue working with the company. This decision may also bring new customers to Green Health. According to Dafny, Gruber, and Ody (2015), consumers often do not know which particular aspects of the products drive their decision to make a purchase. Thus, appealing to the visual simplicity of a plan and promoting a stable price may assure people of its viability.
Second, the company may deal with the issue of having many unsuccessful plans by redistributing their efforts and moving to target bigger businesses. Larger firms have more predictable risk levels and fewer fluctuations in employee health. Thus, it can be easier to assess the future of the market and create a plan that will help the company to reduce its losses. Baker and Logue (2017) have noted that the differences between these two types of organizations often prompt insurance sellers to move from the small-group market toward larger businesses. While the outcomes of this recommendation are somewhat unstable, it offers a solution that is not directly connected to the future of the small-group market.
Finally, while the changes that the ACA is bringing significantly affect the state of the market, they are unpredictable. Thus, a decision to wait and observe the situation as customers move from one plan to another may offer more insight and provide an opportunity for the company to gather more information about the future of the small-group market. According to Lucia, Corlette, Ahn, and Clemans-Cope (2015), many employers choose to stay in plans that are not compliant with ACA regulations. Thus, the process of waiting may grant the business a better understanding regarding whether their products are more attractive to clients than those offered by their competitors.
References
Baker, T., & Logue, K. D. (2017). Insurance law and policy: Cases and materials (4th ed.). New York, NY: Wolters Kluwer Law & Business.
Corlette, S., Hoadley, J., Lucia, K., & Palanker, D. (2017). Small business health insurance and the ACA: Views from the market 2017.Web.
Cowley, S. (2013). Dropping health plans, to pick better coverage.The New York Times. Web.
Dafny, L., Gruber, J., & Ody, C. (2015). More insurers lower premiums: Evidence from initial pricing in the health insurance marketplaces. American Journal of Health Economics, 1 (1), 53-81.
Loewenstein, G., Friedman, J. Y., McGill, B., Ahmad, S., Linck, S., Sinkula, S.,… Madrian, B. C. (2013). Consumers’ misunderstanding of health insurance. Journal of Health Economics, 32(5), 850-862.
Lucia, K., Corlette, S., Ahn, S., & Clemans-Cope, L. (2015). Post–Affordable Care Act trends in health coverage for small businesses. Web.
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