TRENDS&ANALYSIS. Insurance Markets Purchasing Health Insurance Online. December 2002

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1 Insurance Markets Purchasing Health Insurance Online Introduction Large companies have the resources to sort through the complex health insurance choices that they and their employees face. Individuals and small businesses, by contrast, are often poorly informed about their health insurance options. Though information may be available through brokers or health plans, the process of researching options, making product comparisons, and implementing a decision can be arduous. With online research and purchasing, individuals and small businesses can more easily shop for health insurance in California. Consumers using the Internet can learn about health insurance options from the comfort of their homes or offices and on their own schedules with no pressure to buy. The Internet has the potential to increase health plan enrollment among consumers who previously abandoned their search for health insurance because of the time and hassle, as well as those uncomfortable purchasing through a broker or health plan sales representative. Of course, shopping online will not be the answer for all consumers; some will continue to prefer the more personalized offline services available from brokers and health plan representatives. Recognizing the Internet s potential role in health insurance purchasing, the California HealthCare December 2002 Foundation (CHCF) published a study of online health insurance sites in June At that time, few sites provided online quoting for health plans selling insurance in California. Product comparison and online application capabilities were limited. Site shortcomings included questionable privacy policies and practices, and the absence of product selection tools and quality information. Recently the number of consumers using the Internet to research or purchase health insurance has increased dramatically from 2.2 million in 2001 to 9.7 million in In 2002, ten percent of the 96.7 million active online adults (defined as those who are online at least monthly) in the U.S. obtained a health insurance quote or researched policy information online, up from three percent in Figure 1. Adults Researching Health Insurance Quotes or Policy Information Online (in Millions) Source: Manhattan Research LLC. 9.7 TRENDS&ANALYSIS

2 This surge in online activity, as well as the accompanying proliferation of online sites offering an increasing array of health insurance products, led CHCF to commission a second study of health insurance Web sites in the spring of Results from the 2002 study are summarized here; more detail is provided in a full report available at Results indicate that while existing Web sites have much to offer consumers shopping for health insurance, the sites have not yet achieved their full potential to streamline health insurance research and purchasing. Sites Studied In spring 2002, eight broker sites, six health plan sites, and two small group purchasing alliance sites were selected to represent the types of sites California consumers would likely encounter when shopping online for individual (non-group), small group, and Medicare health insurance. 2 Broker site selection criteria included the ability to provide real-time quotes and to access an application online. Of the larger health plans serving California, those with a substantial presence in the individual, small group, and/or Medicare markets and corresponding online product information were included in the study. We also reviewed California s two major purchasing alliances. Table 1 provides a full list of study sites. 3 Sites Offer Expanded Capabilities, Fill Different Roles Three types of Web sites provide information to consumers shopping for health insurance: broker sites, health plan sites, and small group purchasing alliance sites. Broker Sites In the traditional health insurance market, consumers (individuals or employers) retain brokers to look for insurance on the consumer s behalf. The broker s compensation is generally paid through commissions that are included in the insurance premiums and, in the case of employers, may be supplemented by fees charged directly to the employer. Brokers typically do business with many insurers. At present there are hundreds of broker-sponsored Web sites aimed at consumers shopping for health insurance in California. Broker sites fall into two categories: those sponsored by independent brokers whose primary interaction with clients is offline, and those operated by relatively new companies that specialize in selling insurance online. The majority of broker sites fall into the first category. Among these, some have sites that carry their name but are powered by one of a few software vendors serving this market. Others have established an online presence through a Table 1. Sites Studied BROKERS HEALTH PLANS PURCHASING ALLIANCES (Quotit s Commerce product, a quoting engine used at many broker sites) (Blue Cross of California) (Blue Shield of California) (Health Net) (Kaiser Permanente) (PacifiCare) (Secure Horizons, PacifiCare s Medicare HMO) CALIFORNIA HEALTHCARE FOUNDATION

3 site co-branded with a health plan. Although sites in the second category, those dedicated to the online channel, are fewer in number, they may offer broader online capabilities and attract greater traffic than independent broker sites. While these sites aim to have most consumer interactions occur online, they also offer centralized telephonic customer service to augment online services. The number of health plans and products offered on broker Web sites has increased substantially since At many sites, consumers now have online access to information about virtually all individual and small group options, as well as many Medicare supplemental health plans and products. In one Northern California zip code analyzed for this study, broker sites offered an average of 39 individual and 81 small group products from between two and 16 health plans. Obtaining a quote is easy at broker sites, typically requiring only a few clicks by a consumer seeking individual coverage. 4 Consumers can perform side-byside comparisons of rates and benefits for specific products. In contrast to the 2000 findings, benefit comparisons, provider directory links, glossaries, and downloadable applications are now standard features on broker sites. However, applications that can be completed and submitted online continue to be available at only a few broker sites. A number of broker sites now enable users to ask questions online and get an immediate response using an online chat service. Health Plan Sites Health plans are in the business of providing coverage to consumers. Traditionally, their channels for selling coverage have included working with brokers and selling direct to consumers through telephone-based, in-house sales representatives. The major health plans that we reviewed use their Web sites to provide information for prospective members and to conduct or support sales transactions. Health plan sites also offer services and information for existing members. Health plan sites excel at providing accurate, detailed information about their own products. Consumers can check rates and benefits, including copayments, covered services, and exclusions and limitations. Searchable provider directories and drug formularies are also standard features at health plan sites. Some health plans have added medical group quality information and referrals to local brokers. In the last 18 months, most health plan sites have added applications that can be submitted online by consumers seeking individual coverage. Small Business Purchasing Alliance Sites Purchasing alliances allow groups of small businesses to band together to purchase health coverage. They enable even the smallest firms to offer their employees the opportunity to choose among a wide range of different health plans and products. Purchasing alliances also provide administrative support, handling many service issues for covered businesses. CaliforniaChoice and PacAdvantage are two California purchasing alliances for small employers. Each alliance s Web site supports the brokers who sell its products, as well as employers who have already bought health insurance through the programs. Neither site focuses on serving small businesses not yet participating in the purchasing alliances. Prospective customers are encouraged to contact a broker to assist them in Insurance Markets: Purchasing Health Insurance Online 3

4 purchasing coverage through these programs. Because purchasing alliances online capabilities are limited, the Findings and Recommendations section of this analysis does not include these sites. Table 2 describes the features typically offered by each type of site to each of the market segments studied (individual, small group, and Medicare). Additional detail is available in the full report available at Table 2. Site Features by California Market Segment for Broker, Health Plan, and Small Business Purchasing Alliance Sites, as of Spring 2002 MARKET SEGMENT Broker Sites Health PlansSites Purchasing Alliance Sites Individual Market Product Comparisons Almost all sites allow comparisons; Some; sites compare only their Not applicable sites vary in the number of products own products and health plans they include Detailed Benefits Sometimes incomplete All Not applicable and/or inaccurate Quotes All All Not applicable Submit Application Online Some Most Not applicable Small Group Market Product Comparisons Almost all sites allow comparisons; None All sites vary in the number of products and health plans they include Detailed Benefits Sometimes incomplete Most All and/or inaccurate Quotes All One (Kaiser) None Submit Application Online One (ehealthinsurance.com) None None Medicare Market 5 Product Comparisons Some (limited) One (Blue Shield site offers Not applicable comparisons of its own products only) Detailed Benefits Some (limited) Most Not applicable Quotes Some Most Not applicable Submit Application Online One (ehealthinsurance.com) None Not applicable General Features Provider Directories All (links to health plan Web sites) All Not applicable Drug Formularies None All Not applicable 4 CALIFORNIA HEALTHCARE FOUNDATION

5 Findings and Recommendations Our analysis of online health insurance Web sites highlighted opportunities for improvement in the areas of quality, accuracy, convenience, privacy, and information requests. FINDING 1: Information on quality is limited or absent Consumers interested in incorporating quality information into health plan selection benefit from both consumer experience ratings (such as ease of obtaining specialist referrals) and clinical outcome measures (such as immunization rates and asthma-related hospitalizations). While this kind of information is available for many health plans in California, only two broker sites reviewed include information about health plan quality. ehealthinsurance.com includes a list of articles and offline resources on quality compiled by the federal Agency for Healthcare Research and Quality. Californiahealthinsurance.org provides links to Pacific Business Group on Health s HealthScope site, which offers comparative quality information for California health plans, hospitals, and medical groups. Most health plan sites display their accreditation rating from the National Committee for Quality Assurance (NCQA), an independent organization that assesses health plans based on their performance, but none provide specific information about the health plan s performance on consumer ratings or clinical outcomes measurements. RECOMMENDATION 1: Sites should add links to quality information Links to existing online resources (such as the National Committee for Quality Assurance at and the California Office of the Patient Advocate at would provide valuable resources for consumers who want to consider quality when selecting a health plan. FINDING 2: Broker sites often lack clear and comprehensive descriptions of health plan benefits To determine the accuracy and comprehensiveness of broker site benefit information, each broker site s customized benefit chart was compared with the benefit chart available at the health plan s Web site for three products: the individual market Blue Cross PPO Share 2500 plan, the small group Blue Cross PPO $40 Copay plan, and the small group Kaiser Permanente Northern California $20 Traditional HMO. 6 All of the broker site benefit charts studied omit important information. Coverage information for commonly used services such as routine annual physical exams for adults, OB/GYN exams, and well-baby visits is frequently missing. Other important details are often omitted, including any additional co-payments required for maternity care (which can be as high as $1,000) and deductible and out-of-pocket maximums for a policy with two or more people (many charts only list per person values). Among products with different benefits within and outside of the health plan network, information on out-of-network coverage is sometimes entirely absent. Outright errors, such as incorrect outof-pocket maximum or coinsurance level, are much less common but are also present at some broker sites. Obscure abbreviations such as cpy for copay and vst mx for maximum number of visits may also be confusing to consumers. Insurance Markets: Purchasing Health Insurance Online 5

6 RECOMMENDATION 2: Broker sites should improve individual and small group benefit information An important feature for many consumers is the availability of side-by-side product comparisons. But the value of these comparisons is limited if benefits are inaccurate or incomplete. At present, we recommend that consumers visit broker sites to make product comparisons, but confirm benefit details at health plan sites before making a final decision. 7 In the future, consumers will be better served if broker sites either provide more accurate and complete information themselves, or link directly to the benefit charts available at health plan sites. FINDING 3: Online applications are not widely available and can be difficult to use Online applications are available at only a few sites, for only a few health plans. Only one broker site, ehealthinsurance.com, includes applications for Medicare supplemental and small group products. During our study, many of the online applications were frequently unavailable and froze up mid-session. Poor user interface design, including hard-to-read fonts, little upfront explanation of the process, and difficult navigation, makes most of the current applications cumbersome to use. RECOMMENDATION 3: Sites should improve and expand online applications Consumers used to buying books or ordering clothing online expect to complete a transaction during one session. Expanded, reliable application capabilities would likely increase consumer interest in and use of the online channel. FINDING 4: Privacy policies are not comprehensive Most privacy policies explain what information is collected, when and how that information is collected, and site security measures. The privacy policies at many study sites, however, are missing information about the right of consumers to: opt in or out of uses or disclosures of their information; inspect, correct, and delete their information; receive an explanation of privacy policy enforcement; be informed about the treatment of their information if the privacy policy changes; and/or know what third parties have access to their information. None of the sites privacy policies give individuals the right to receive an accounting of actual disclosures of their information to other parties. RECOMMENDATION 4: Sites should enhance privacy policies With the compliance date of the HIPAA privacy regulation approaching in April 2003, health plan sites may need to modify their privacy policies with respect to the use and disclosure of personal health information to meet the tougher new standards. 8 To the extent that brokers act on behalf of or perform services for health plans, they may also need to modify their privacy policies to comply with privacy requirements imposed on them contractually by the health plans. Ensuring that all of the topics listed above are fully addressed is likely to build consumer confidence in the online channel. 6 CALIFORNIA HEALTHCARE FOUNDATION

7 FINDING 5: Some broker sites ask for nonessential personal information Some broker site privacy policies do not provide enough detail to explain why certain potentially sensitive information is being requested and how it will be used. Some sites request non-essential personal information such as Social Security number, driver s license number, and mother s maiden name without clearly indicating whether providing the information is required in order to proceed through the site. RECOMMENDATION 5: Broker sites should re-examine the information they collect Brokers could increase user trust in their sites by removing requests for non-essential information, by clearly marking which information is required versus optional, and by asking permission before sending marketing solicitations. Broader Issues Even if sites respond to all of these recommendations, some fundamental problems facing consumers seeking individual, small group, and Medicare coverage will remain. First, health insurance products are complex. With the recent introduction of features such as brand name drug deductibles and multiple levels of hospital copayments, individual and small group health insurance has become increasingly difficult to understand. 9 Whether offline or online, it is nearly impossible to describe product features in a concise and easy-tounderstand way. benefit design, provider network, and quality ratings can be overwhelming. The few decision-support tools available to consumers buying individual, small group, and Medicare products today do not incorporate all of these product dimensions and thus are limited in their usefulness. 10 Creating a tool robust enough to meet these needs would be costly and might not provide a positive return on investment. Finally, prices for individual, small group, and Medicare insurance have risen in recent years and are expected to continue to rise. While the Internet can help consumers research and compare health plans, some will ultimately find that they are unable to afford coverage. Conclusion Online health insurance sites hold promise as a way for individuals and small businesses to easily compare health plan options and conveniently purchase coverage. As consumers become more sophisticated about using the Internet, they are likely to demand more from health insurance Web sites. If sites can quickly adapt to consumer needs and respond to consumer concerns about privacy and use of personal information, they are likely to play a growing and significant role in the procurement of health insurance. A related issue is decision support. Most consumers must choose from more than 30 different products. Making tradeoffs between each product s premium, Insurance Markets: Purchasing Health Insurance Online 7

8 ENDNOTES 1. Manhattan Research LLC, Cybercitizen Health v2.0, October Throughout this report, Medicare insurance refers to the privately purchased insurance options available as a supplement to traditional Medicare coverage. These include both Medicare supplement (or Medi- Gap ) and Medicare HMO (or Medicare Choice ) options. 3. Site visits to assess features, information collection practices and privacy policies took place between May and July 2002, with a final site visit occurring in the last two weeks of July Small businesses must enter demographic information for each employee (known as a census ), making the process of obtaining a quote somewhat more complex. 5. Medicare supplemental products are offered at most broker and health plan sites. Medicare HMO products are available only at health plan sites. 6. Products analyzed represent those most commonly offered by the broker sites reviewed. The benefit analysis took place between July 15 and July 22, 2002 using an effective date of September 1, Additional recommendations for consumers are offered in Buying Health Insurance Online: Consumer Tips, available at 8. The federal health privacy regulation issued by the U.S. Department of Health and Human Services (HHS) pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). 9. Insurance Markets: Small Businesses and Individuals Face Greater Cost Sharing and Complexity, California HealthCare Foundation (April 2002). 10. The Pac Plan Chooser decision-support tool from PacAdvantage helps users compare products across many dimensions, but is designed for employees of small groups that have already purchased health coverage through PacAdvantage. RESEARCH TEAM Research was conducted by Kali L. Taylor, an independent consultant, and the Health Privacy Project of Georgetown University. DISCLAIMER The online world is changing rapidly. The analysis upon which this report is based was completed between May and July 2002, but existing sites change often and new sites emerge frequently. Although some of the details presented here will quickly become outdated, the issues we highlight will be of ongoing relevance. The information in this brief is not intended as an endorsement or recommendation of any specific site, and the omission of sites from this study does not imply anything about their quality. As with all Web sites, consumers should carefully read and evaluate site information before making purchases online. Future Trends and Analysis in Insurance Markets will identify trends in California s insurance markets, analyze regulatory and policy issues, and provide industry updates. Analyses will be posted as they become available at the California HealthCare Foundation s Web site at The California Healthcare Foundation s program area on Health Insurance Markets and the Uninsured seeks to improve the functioning of California s health insurance markets, particularly the small group and individual markets, and to expand coverage to the uninsured. For information on the work of Health Insurance Markets and the Uninsured, contact us at insurance@chcf.org. CALIFORNIA HEALTHCARE FOUNDATION 476 Ninth Street, Oakland, CA tel: fax: