Confidential
A Product/Business Development
Case Study
‘Identifying Retiree Healthcare
Issues & Business Opportunities’
Presented by:
Westport Consulting Group, Inc.
140 Water Street
South Norwalk, Connecticut 06853
203-866-6200
www.westportconsulting.com
©2003Westport Consulting Group, Inc.
Workshop Objectives
 To outline a proven new business/product development
process.
 To illustrate this process using a real-life project study
from the healthcare industry.
 To demonstrate various research techniques that go
beyond the obvious.
©2003Westport Consulting Group, Inc.
Caveats
 We will protect the confidentiality of the client whose
work is being discussed today.
 We are not trying to force a point of view with the data,
but feel it is more useful to illustrate a process with real
observations, findings and conclusions that are relevant to
this conference.
 The facts and conclusions represented in this case study
are 4 years old and have not been updated.
 However, some of the observations, while widely
accepted today, were nascent concepts in 1998.
©2003Westport Consulting Group, Inc.
Important Takeaways From Today’s Workshop
 Focus Groups do not equal market research.
 There are few if any truly ‘proprietary’ ideas within healthcare and
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financial services…and if there are they are easily copied.
If you can observe something within the marketplace, so can your
competitors.
Don’t assume your competitors are any less competent than yourself.
A compartmentalized development process reduces risk as you go to
market.
Don’t be afraid to walk away from a good idea that can’t be
objectively validated.
If it was easy or ‘risk free’ everyone would have already done what it
is you’re thinking about doing.
Success requires both concept and execution.
Anything and everything can and should be ‘piloted’ before roll-out.
©2003Westport Consulting Group, Inc.
Case Study Project’s Objectives
 Examine current commercial retiree health benefit market.
 Dimension the commercial retiree health benefit decisionmaking process and purchase decision criteria.
 Identify opportunities to increase client’s share of and overall
effectiveness in the commercial retiree health benefit market.
 Recommend ways through which client may proceed… in a
controlled fashion… to leverage its brand and insure
profitability within the commercial retiree health benefit market
segment.
©2003Westport Consulting Group, Inc.
Start With A Project Plan
 Gets everyone on the same page.
 Manages expectations.
 Defines and compartmentalizes deliverables.
 Suggests proper sequencing.
 Avoids “research for research’s sake.”
Insist on multiple validation points.
Don’t be afraid to stop to measure progress.
©2003Westport Consulting Group, Inc.
Retiree Product Line Market Sizing &
Customer Analysis Project Plan
PROJECT
START
1. Extant scan
of all related
literature
client
documents &
research
2. Internal work
session with
client
Commercial
Retiree Team
5. Minimum of 4 focus groups
(designed to bracket relevant markets)
with senior HR and Benefits corporate
decision makers to explore decision
making process & behavior, exposing
and gaining insights into potential new
product, positioning, pricing and
promotional opportunities for client
2. Two days of
structured phone
interviews with
sample of current
client retiree
benefit sponsors
6. Refinement &
review of
potential client
program
opportunities
based on research
findings
Go/No
Go
7. Quantitative
research (projectible
to client corporate
market universe) to
validate key
marketing
assumptions
8. Analysis &
internal research to
validate key
operational
assumptions
3. Synthesis of all data
& creation of working
set of operating
hypotheses for client
Retiree sponsorship
Phase II 6 to 8
weeks
9. Creation of
comprehensive
spreadsheet model to
test all assumptions
against client ROI/ROE
objectives including the
sizing of the commercial
retiree market
Go/No
Go
10. Based on model, the
creation of formal
Business & Marketing
Implementation Plans
Phase III Task 11=
1-2 weeks
Phase I - 4 weeks
11. Creation of internal
capabilities, staffing,
training, legal and
operational requirements
12. Pilot to
test/validate
marketing plan and
operational
implementation
Phase IV
TBD
©2003Westport Consulting Group, Inc.
Go/No
Go
13. New Program
ROLL-OUT
Secondary Research Findings
©2003Westport Consulting Group, Inc.
Retiree Product Line Market Sizing &
Customer Analysis Project Plan
PROJECT
S TART
1. Extant scan
of all related
literature
client
documents &
research
2. Internal work
session with
client
Commercial
Retiree Team
5. M inimum of 4 focus groups
5. M inimum of 4 focus groups
(designed to bracket relevant markets)
(designed to bracket relevant markets)
with senior HR and Benefits corporate
with senior HR and Benefits corporate
decision makers to explore decision
decision makers to explore decision
making process & behavior, exposing
making process & behavior, exposing
and gaining insights into potential new
and gaining insights into potential new
product, positioning, pricing and
product, positioning, pricing and
promotional opportunities for client
promotional opportunities for client
2. Two days of
structured phone
interviews with
sample of
current client
retiree benefit
sponsors
6. Refinement &
review of
potential client
program
opportunities
based on
research findings
Go/No
Go
7. Quantitative
7. Quantitative
research (projectible
research (projectible
to client corporate
to client corporate
market universe) to
market universe) to
validate key
validate key
marketing
marketing
assumptions
assumptions
8. Analysis &
internal research to
validate key
operational
assumptions
3. Synthesis of all data
& creation of working
set of operating
hypotheses for client
Retiree sponsorship
Phase II 6 to 8
weeks
9. Creation of
9. Creation of
comprehensive
comprehensive
spreadsheet model to
spreadsheet model to
test all assumptions
test all assumptions
against client ROI/ROE
against client ROI/ROE
objectives including the
objectives including the
sizing of the
sizing of the
commercial retiree
commercial retiree
market
market
Go/No
Go
10. Based on model, the
10. Based on model, the
creation of formal
creation of formal
Business & M arketing
Business & M arketing
Implementation Plans
Implementation Plans
Phase III Task 11=
1-2 weeks
Phase I - 4 weeks
11. Creation of internal
capabilities, staffing,
training, legal and
operational requirements
12.
12.Pilot
Pilottoto
test/validate
test/validate
marketing
marketingplan
planand
and
operational
operational
implementation
implementation
Phase IV
TBD
Go/No
Go
13. New Program
13. New Program
ROLL-OUT
ROLL-OUT
PROJECT
START
1. Extant scan of all
related literature
client documents &
research
©2003Westport Consulting Group, Inc.
Why Did We Go To The Trouble Of Looking At
Stuff That Everyone ‘Knows’?
 It’s almost free.
 It’s typically well organized.
 It helps you focus.
 It keeps you from reinventing the wheel.
 It makes you smart enough to approach experts.
 It clarifies what you ‘don’t know’.
 It codifies ‘conventual wisdom’.
©2003Westport Consulting Group, Inc.
How Do You Properly Find & Obtain Secondary
Data?
 Turn your client inside/out.
 Web searches.
 Literature databases.
 Trade Associations.
 Governmental Bodies, Commissions,
Committees & Panels.
Secondary research searching and analysis is
a specialized skill.
©2003Westport Consulting Group, Inc.
Workplace Dynamics First Drove Demand for
Retiree Health Coverage
1950’s – 70’s
 “Cradle-to-Grave” employment philosophy.
 “Fringe” benefits used to attract talent – “tax-effective
compensation.”
 Low cost of retiree health care.
 High “active-to-retiree” employment ratio.
 Comprehensive medical benefits offered to retirees.
 Primarily an indemnity health insurance model.
 Retiree health insurance cost expensed as incurred.
©2003Westport Consulting Group, Inc.
Changing Workplace Dynamics Have Now Altered the
Employer’s Response to Retiree Health Coverage
1980’s – 90’s
 Corporate downsizing takes hold – more expensive
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employees out placed and skewed to older employees.
Baby Boomers near retirement – accelerated by “rightsizing.”
Outsourcing as a workforce alternative grows to become an
acceptable labor management practice.
FASB 106 exposes exploding liability of retiree health
coverage cost for large employers.
Rapid acceleration of technology and processes designed to
increase productivity are introduced in a concerted effort to
reduce growth in FTE.
Migration toward managed care to contain rapid increase in
healthcare costs.
©2003Westport Consulting Group, Inc.
The Employer’s Paradigm Has Reserved Itself From The
“Cheap” People of the Past to “Expensive” People Today.
1950’s to Mid 1980’s
High
Technology
Cost to
Employer $
People
Low
High
People
Cost to
Employer $
Low
©2003Westport Consulting Group, Inc.
Mid 1980’s to Present
Technology
Most Active Employees Are Expected To
Contribute To Their Healthcare Coverage
Employee Pays All
2%
Company Pays All
Company Pays All
But Deductible
5%
10%
79%
Company
Subsidizes
% Distribution of Employer/Employee Health Cost Sharing
Source: WCG, Inc. Quantitative Survey of Retiree Health Benefit Decision Makers At Mid and Large Employers 3/98
©2003Westport Consulting Group, Inc.
Historically, Healthcare Cost Per Active Employee Grew
Until Retirement ...Then Diminished Substantially
Historical View
Employer
Cost $
Employer Sponsored
Health Coverage
Age 25
©2003Westport Consulting Group, Inc.
Age 65
“Normal Retirement”
Employer
Cost $
Medicare
Retiree:
MediGap Coverage
MediSup Coverage
However, Changing Workplace Practices Have Created A
“Second” More Expensive Phase of Healthcare Costs For
Those Individuals Who Have Left the Active Workforce But
Are Not Yet Medicare Eligible
Conceptual View
Age 25
Active
©2003Westport Consulting Group, Inc.
Typically About
Age 55
Retired NonMedicare
Eligible
Age 65
Medicare
Eligible
Concurrently, Employer Sponsored Costs For Retiree
Healthcare Coverage Have Also Continued to Rise
$3,131
$2,751
$3,182
$2,859
$2,548
1992
1993
1994
1995
Source: National Survey of Employer Sponsored Health Plans 1997, Forster Higgins & Co.
©2003Westport Consulting Group, Inc.
1996
And, Average Annual Costs Per Cobra Participant
Demonstrate That Employers Are Subsidizing The Claims
Costs Of Continued Coverage (Mostly For Older, NonMedicare Eligible Individuals) By An Average of 30%
$5,844
$5,703
$4,307
$4,206
$3,854
$3,903
$3,420
$2,769
1991
$5,399
$5,301
$3,710
$2,852
1992
1993
Active Employee
Source: Charles D. Spencer & Associates, Inc.
©2003Westport Consulting Group, Inc.
1994
1995
Cobra
1996
And, With An Ever Increasing Pool of Non-Medicare
Eligible Retirees, The Trend For Employer Funding
Of All Of These Benefits Is Declining
25
23
21
19
17
15
13
11
9
7
5
24%
20%
% of
Employers
Paying All
Benefits
18%
17%
17%
13%
16%
9%
6%
1988
1989
Employer Pays All < 65
Source:
19%
1991
1993
1995
Employer Pays All 65+
U.S. Department of Labor, Bureau of Labor Statistics, “Employee Benefits in Medium and Large Firms, 1988 and 1989,
“Employee Benefits in Medium and Large Private Establishments,” 1991, 1993 and 1995
©2003Westport Consulting Group, Inc.
Laying A Foundation
Creating A Working Hypotheses
©2003Westport Consulting Group, Inc.
Retiree Product Line Market Sizing &
Customer Analysis Project Plan
PROJECT
S TART
1. Extant scan
of all related
literature
client
documents &
research
2. Internal work
session with
client
Commercial
Retiree Team
5. M inimum of 4 focus groups
5. M inimum of 4 focus groups
(designed to bracket relevant markets)
(designed to bracket relevant markets)
with senior HR and Benefits corporate
with senior HR and Benefits corporate
decision makers to explore decision
decision makers to explore decision
making process & behavior, exposing
making process & behavior, exposing
and gaining insights into potential new
and gaining insights into potential new
product, positioning, pricing and
product, positioning, pricing and
promotional opportunities for client
promotional opportunities for client
2. Two days of
structured phone
interviews with
sample of
current client
retiree benefit
sponsors
6. Refinement &
review of
potential client
program
opportunities
based on
research findings
Go/No
Go
7. Quantitative
7. Quantitative
research (projectible
research (projectible
to client corporate
to client corporate
market universe) to
market universe) to
validate key
validate key
marketing
marketing
assumptions
assumptions
8. Analysis &
internal research to
validate key
operational
assumptions
3. Synthesis of all data
& creation of working
set of operating
hypotheses for client
Retiree sponsorship
Phase II 6 to 8
weeks
9. Creation of
9. Creation of
comprehensive
comprehensive
spreadsheet model to
spreadsheet model to
test all assumptions
test all assumptions
against client ROI/ROE
against client ROI/ROE
objectives including the
objectives including the
sizing of the
sizing of the
commercial retiree
commercial retiree
market
market
Go/No
Go
10. Based on model, the
10. Based on model, the
creation of formal
creation of formal
Business & M arketing
Business & M arketing
Implementation Plans
Implementation Plans
Phase III Task 11=
1-2 weeks
Phase I - 4 weeks
11. Creation of internal
capabilities, staffing,
training, legal and
operational requirements
12.
12.Pilot
Pilottoto
test/validate
test/validate
marketing
marketingplan
planand
and
operational
operational
implementation
implementation
Phase IV
TBD
Go/No
Go
13. New Program
13. New Program
ROLL-OUT
ROLL-OUT
2. Internal work
session with client
Commercial Retiree
Team
©2003Westport Consulting Group, Inc.
2. Two days of
structured phone
interviews with
sample of current
client retiree benefit
sponsors
Why Did We Conduct Interviews With Clients
First?
 Never trust the client.
 Don’t re-invent the wheel.
 Check to your secondary research observations.
 Understand client’s/market’s constraints early in the
process.
 Start with people who want to help you.
Never conduct an interview without a guide and a purpose.
Two people are always better than one.
©2003Westport Consulting Group, Inc.
Preliminary Explorations With Current
Commercial Retiree Healthcare Clients
Introduction
Who we are
What we want
Understanding what you do
Tell me about your current products
What do you offer?
Why those?
How well do they work?
©2003Westport Consulting Group, Inc.
How is it that you became specifically involved with our
client?
• Tell me about your relationship with my client.
• How did you decide to become involved with this
healthcare firm?
• Walk me through the process, if you can
Who initiates?
Who is involved?
Who has what tasks?
Who is vital and who is just helpful?
Who does the real homework?
Who has the ability to say “no”?
Who can say “yes”?
©2003Westport Consulting Group, Inc.
Now that you have a vendor relationship with our
client, how do you go about evaluating new concepts
and products?
Please help me understand how you decide to become involved:
Who initiates?
Who is involved?
Who has what tasks?
Who is vital and who is just helpful?
Who does the real homework?
Who has the ability to say “no”?
Who can say “yes”?
©2003Westport Consulting Group, Inc.
Qualitative Research Findings
Building On Working Hypotheses
©2003Westport Consulting Group, Inc.
Retiree Product Line Market Sizing &
Customer Analysis Project Plan
PROJECT
S TART
1. Extant scan
of all related
literature
client
documents &
research
2. Internal work
session with
client
Commercial
Retiree Team
5. M inimum of 4 focus groups
5. M inimum of 4 focus groups
(designed to bracket relevant markets)
(designed to bracket relevant markets)
with senior HR and Benefits corporate
with senior HR and Benefits corporate
decision makers to explore decision
decision makers to explore decision
making process & behavior, exposing
making process & behavior, exposing
and gaining insights into potential new
and gaining insights into potential new
product, positioning, pricing and
product, positioning, pricing and
promotional opportunities for client
promotional opportunities for client
2. Two days of
structured phone
interviews with
sample of
current client
retiree benefit
sponsors
6. Refinement &
review of
potential client
program
opportunities
based on
research findings
Go/No
Go
7. Quantitative
7. Quantitative
research (projectible
research (projectible
to client corporate
to client corporate
market universe) to
market universe) to
validate key
validate key
marketing
marketing
assumptions
assumptions
8. Analysis &
internal research to
validate key
operational
assumptions
3. Synthesis of all data
& creation of working
set of operating
hypotheses for client
Retiree sponsorship
Phase II 6 to 8
weeks
9. Creation of
9. Creation of
comprehensive
comprehensive
spreadsheet model to
spreadsheet model to
test all assumptions
test all assumptions
against client ROI/ROE
against client ROI/ROE
objectives including the
objectives including the
sizing of the
sizing of the
commercial retiree
commercial retiree
market
market
Go/No
Go
10. Based on model, the
10. Based on model, the
creation of formal
creation of formal
Business & M arketing
Business & M arketing
Implementation Plans
Implementation Plans
Phase III Task 11=
1-2 weeks
Phase I - 4 weeks
11. Creation of internal
capabilities, staffing,
training, legal and
operational requirements
12.
12.Pilot
Pilottoto
test/validate
test/validate
marketing
marketingplan
planand
and
operational
operational
implementation
implementation
Phase IV
TBD
Go/No
Go
13. New Program
13. New Program
ROLL-OUT
ROLL-OUT
5. Minimum of 4 focus groups
(designed to bracket relevant markets)
with senior HR and Benefits corporate
decision makers to explore decision
making process & behavior, exposing
and gaining insights into potential new
product, positioning, pricing and
promotional opportunities for client
©2003Westport Consulting Group, Inc.
Why Did We Choose To Conduct Focus Groups?
 Fastest way to expand our view of the market.
 Power of a group to build upon preliminary ideas.
 Appropriate way to prioritize our observations through the eyes of
the market.
 Sharing information on retiree benefits among the respondents was
seen as a plus not a minus.
 In-depth probing not required.
Don’t use the session to gather data otherwise available.
Always remember that observations are directional not
projectable.
©2003Westport Consulting Group, Inc.
Other Qualitative Research Options
 In-depth personal interviews.
 In-depth telephone interviews.
 Dyads and Triads.
 Net Meetings.
Target your technique to your need, audience
and budget.
©2003Westport Consulting Group, Inc.
Discussion Guide:Focus Groups
Warm up (estimated time: 10 minutes)
Introduce selves: names, companies (if not by name then in-profile so participants can better frame
each other’s comments), titles, current and past experience with making health insurance decisions
Present overview of focus group: no right or wrong answers, please answer only for yourself not
for what "others" might think, no bad answers are possible, you are the expert on you, etc
Explain Committed Response procedure: write down number 1-10 on pad for each idea and a few
words to remind yourself of why you wrote that down; then we discuss your opinions
Topic being discussed: how you go about making decisions about health insurance for your retired
workers.
Understanding current coverage (estimated time: 20 minutes)
Please describe your current health care coverage for retirees.
Is it the same for all retirees? Is it the same for current employees?
If not, what are the differences?
Why are such differences put into place?
Relationships with the managed health care companies or insurance carriers who provide this care:
(Note: care will be taken to keep comments factual, preventing any individual company
“bashing.”)
Who provides care?
For how long have they been in place?
Who was there before?
Why current carrier/supplier?
Why did you change?
Are there some carriers/suppliers who seem better suited for this task than others? Which ones? Why?
©2003Westport Consulting Group, Inc.
Evaluating new concepts and products: the process (estimated time: 25 minutes)
(Note: Absent of any “new” concepts, the client’s current products can be introduced on a “noname/generic” basis to provide a starting point for the group’s consideration.)
Please think back as to the last time you considered this topic; it may be when you changed
coverage, decided not to change coverage, or might simply have been deciding whether to add or
drop coverage. Please walk me through the process:
How is the process initiated? Why is it initiated?
Which departments are involved?
Which areas do which tasks?
How long does this take?
How are key data obtained?
Are there any outside players? Who? What do they do?
What checks and controls exist?
What inputs are desirable? What ones are necessary?
What is the desired final result? Realistically, what is the usual result?
Is there any basis for establishing the cost? Relative to what measures?
Evaluating new concepts and products: the criteria (estimated time: 25 minutes)
We just discussed the process. But what are the criteria for judgment? How do you say that this is a
better than average or that a worse than average program?:
What are the key criteria?
What is also desirable but not key?
Help me build an “ideal” offering
That is the ideal; again, realistically, what is the usual product offering like? How far short of the
ideal does it fall?
©2003Westport Consulting Group, Inc.
Evaluating new concepts and products: the players (estimated time: 25 minutes)
That’s the process and the product. What about the people? In your organization, who gets
involved in the decision making?
Who initiates?
Who is involved?
Who has what tasks
Who is vital and who is just helpful?
Who does the real homework?
Who has the ability to say “no”?
Who can say “yes”?
Conclusion (estimated time: 10 minutes)
Thank you for your help.
Before we go...are there companies who you think are well suited to provide this type of
program? who? why them? who couldn’t or wouldn’t? why them?
Probes: Must they be national? multistate? offer any particular type of policies? why or why
not?
Any last thoughts? Good bye.
©2003Westport Consulting Group, Inc.
Top Line Findings & Observations
 There are strikingly significant differences in behavior between large and
small employers.
 Pre-Medicare eligible retirees are not recognized as a formal healthcare
benefit market segment and are most often perceived as an extension of a
company’s active population.
 There appears to be no formal set of pre-Medicare retirement healthcare rules
to follow, nor recognized “experts” for companies to turn to for guidance.
 Young companies and/or companies with high employee turnover simply do
not recognize having a retiree healthcare benefit issue.
 Apart from the obvious “cost” concerns associated with all benefits, retiree
healthcare is not yet a “balance sheet” issue with small to medium size
employers, despite FASB 106.
©2003Westport Consulting Group, Inc.
Differences Between Large and Small Employers
 Employer concern or focus on retiree healthcare issues is in direct
proportion to the actual number of retired employees they have.
 Despite the differences in organizational complexity between small and
medium size companies, the Human Resource professionals appear to be of
equal caliber.
 Managed Care is universally recognized as a key ingredient to retiree
healthcare cost containment.
 Frequently Consultants emerge as advisors to larger companies while
brokers appear to be the only outside influence for smaller employers.
 Retiree healthcare benefits do not currently have a ‘champion’ either inside
or outside most organizations.
©2003Westport Consulting Group, Inc.
Employers Mostly React To
Retiree Healthcare Benefits Issues
 Events driving retiree healthcare appear to be:
 Mergers and acquisitions
 Corporate downsizing
 Senior executive retirements
 First retirements for younger companies
 Competitive (benefit initiative) pressures
 The impact of changes in Medicare on retiree healthcare
benefits appears to be beyond the ability of small to medium
size companies to either plan for or predict.
©2003Westport Consulting Group, Inc.
In Most Cases, Pre-Medicare Eligible Retirees Are
Not Perceived As A Critical Employee Benefit Population
 Active employees are the most important healthcare benefit
segment, followed by Medicare-eligible retirees, with preMedicare-eligible individuals ranking a distant third.
 COBRA is widely viewed as the full extent of company healthcare
benefit obligation for involuntary pre-Medicare retirees.
 The prevailing trend for retirees appears to lean toward a
continuation of whatever healthcare benefits active employees are
offered.
 When a pre-Medicare healthcare benefit is offered, the company’s
financial contribution tends to be capped or reduced.
 Excepting some municipal retirees, companies appear to feel the
least amount of obligation to the pre-Medicare retired employee
population.
©2003Westport Consulting Group, Inc.
Formal Pre-Retirement Healthcare Practices Are Scant
 No Human Resource oriented set of guidelines, practices, or rules
appears to exist. Current employer behavior is almost entirely “ad
hoc.”
 Other than COBRA, there are no government regulations of any
import.
 No national benefits consulting firm identified with topic.
 With the possible exception of Kaiser, no managed care provider
appears to be focused on the topic.
 No public advocacy.
©2003Westport Consulting Group, Inc.
Cost Containment Initiatives Appear To Be More Focused
On Medicare Eligible Than Non-Medicare Eligible Retirees
 Medicare Eligible
Designation of working spouses as “prime” coverage.
Medicare coordinated “carve-outs” to reduce company benefits to
be equal to pre-Medicare levels.
 Non-Medicare Eligible
Increased employee contribution and/or capped employer
contribution.
Some recognition by employers and healthcare providers of age
appropriate underwriting/pricing with less subsidy by averaging in
younger active employees.
©2003Westport Consulting Group, Inc.
The Decision Making Process For Retiree Healthcare
Benefits Is Fairly Uniform
 Human Resource managers are both “gatekeepers” and
“influencers.”
 In all but the largest firms, CEO’s or boards/committees appear to be
the decision makers.
 Brokers and consultants only influence the healthcare suppliers, not
the decision.
 Healthcare companies are not sought out directly for any expertise
or advice on retiree topics.
©2003Westport Consulting Group, Inc.
Drivers In the Retiree Decision Making
Process Are Also Fairly Uniform
 Cost is always a prime consideration, but measured relative to active
employee benefits.
 Administration/paperwork issues rank a close second vis-à-vis retiree
healthcare.
“A good plan is one where no one ever calls me (Human Resources)
“I don’t want these people calling me”
“Retired people have a lot more time to focus on things like claims”
 Dislocating older retirees, from their doctors simply for costs savings,
is distasteful and a sensitive issue.
 Only major rate increases (>10+%) would cause companies to rebid
retiree healthcare contracts; there appears to be a lot of inertia in
keeping healthcare plans ‘status quo’.
©2003Westport Consulting Group, Inc.
Issues Surrounding Retiree Healthcare
Plan Design Are Universal
 Continuity of care.
 Good customer (retired employee) service.
 Portability of benefits ... preferably within coordinated managed care
networks for:
– Retirees who move
– Retirees who travel
 Easy to understand forms and claims procedures.
 Tighter coordination of benefits with Medicare.
 Age-specific benefits, e.g., wellness, geriatric.
 Simplified and unified (actives and retirees) account billing.
 However, small employers i.e., < 1000 employee and <100 retirees do
not constitute a serious marketing opportunity as the need for special
benefit attention is not perceived as compelling.
©2003Westport Consulting Group, Inc.
Retiree Healthcare Opportunities Are Real
 Ability to “position” client organization as proactive expert on topic.
 Ability to create a defined market segment between commercial and
Medicare/HMO
 Ability to provide value-added by relieving HR professionals of
responsibility and need to create “homegrown” solutions between
active and Medicare eligible retirees.
 Ability to segment down from strong Medicare/HMO position vs.
more generic commercial competitive frame.
 Ability to be preemptive in creating, underwriting, and pricing a pre-
Medicare retiree pool across company populations.
 A focus on pre-Medicare eligible retirees strengthens
Medicare/HMO’s new member pipeline.
 Targeting of “self-insured” companies to remove or contain
expanding retiree liability from their balance sheet.
©2003Westport Consulting Group, Inc.
Program Suggestions In Creating
The “Ideal” Retiree Health Plan
 Live person telephone assistance (i.e., no VRU or voice mail)
 Minimal or no paperwork for employee
 Eased access to key specialists
 Commitment to established quality service standards that are
measurable
 Wellness programs
 Enrollment exam and personalized healthcare program
 Other suggestions included:
Tie-in to long-term care
Tie-in to at-home care
Simplified Rx service
Hospice care
Hearing aid and vision care
©2003Westport Consulting Group, Inc.
Qualitative Group Exercise
 Pseudo-Conjoint
 Pseudo-Cluster
 Pseudo-MDS
Rules for Pseudo-MDS Exercise
“Characteristics of employee & retiree health plans”
Choose your own criteria for difference.
Work in as many dimensions as you like.
Use the entire room.
No two things are exactly the same or completely different.
©2003Westport Consulting Group, Inc.
Quantitative Research Findings
Dimensioning Market & Validating
and/or Refining Working Hypotheses
©2003Westport Consulting Group, Inc.
Retiree Product Line Market Sizing &
Customer Analysis Project Plan
PROJECT
S TART
1. Extant scan
of all related
literature
client
documents &
research
2. Internal work
session with
client
Commercial
Retiree Team
5. M inimum of 4 focus groups
5. M inimum of 4 focus groups
(designed to bracket relevant markets)
(designed to bracket relevant markets)
with senior HR and Benefits corporate
with senior HR and Benefits corporate
decision makers to explore decision
decision makers to explore decision
making process & behavior, exposing
making process & behavior, exposing
and gaining insights into potential new
and gaining insights into potential new
product, positioning, pricing and
product, positioning, pricing and
promotional opportunities for client
promotional opportunities for client
2. Two days of
structured phone
interviews with
sample of
current client
retiree benefit
sponsors
6. Refinement &
review of
potential client
program
opportunities
based on
research findings
Go/No
Go
7. Quantitative
7. Quantitative
research (projectible
research (projectible
to client corporate
to client corporate
market universe) to
market universe) to
validate key
validate key
marketing
marketing
assumptions
assumptions
8. Analysis &
internal research to
validate key
operational
assumptions
3. Synthesis of all data
& creation of working
set of operating
hypotheses for client
Retiree sponsorship
Phase II 6 to 8
weeks
9. Creation of
9. Creation of
comprehensive
comprehensive
spreadsheet model to
spreadsheet model to
test all assumptions
test all assumptions
against client ROI/ROE
against client ROI/ROE
objectives including the
objectives including the
sizing of the
sizing of the
commercial retiree
commercial retiree
market
market
Go/No
Go
10. Based on model, the
10. Based on model, the
creation of formal
creation of formal
Business & M arketing
Business & M arketing
Implementation Plans
Implementation Plans
Phase III Task 11=
1-2 weeks
Phase I - 4 weeks
11. Creation of internal
capabilities, staffing,
training, legal and
operational requirements
12.
12.Pilot
Pilottoto
test/validate
test/validate
marketing
marketingplan
planand
and
operational
operational
implementation
implementation
Phase IV
TBD
©2003Westport Consulting Group, Inc.
Go/No
Go
13. New Program
13. New Program
ROLL-OUT
ROLL-OUT
7. Quantitative research
(projectible to client
corporate market
universe) to validate key
marketing assumptions
Why Did We Do Quantitative Research?
 Establish size of the market.
 Generate reliable measure of interest in concepts.
 Provide data for effective marketing projection.
Survey size is determined by survey objectives.
Choosing the “best” product is easy.
Determining “how good” is much harder.
©2003Westport Consulting Group, Inc.
Questionnaire
BEGIN HERE: Ask to speak with whomever in the company “has senior responsibility for determining where and from whom health insurance is
purchased.”
A
Hello, my name is [____________] from [____________], a market research company. We’re trying to understand how companies like yours
handle health insurance for their retirees. This is purely a research study; I assure you, we are not selling anything.
Could you please tell me if, other than Medicare, your company has a health insurance program for retirees, either those over 65 or those
under 65?
Yes, has program for those under 65...
Yes, has program for those 65 or older...
Yes, has both...
No, has neither…
Don’t know...
B.
Is your company currently actively and aggressively planning to offer such insurance to your retirees in 1998? (If “yes,” probe for which
kind:) Is that for retirees under 65, 65 or older, or both?
Yes, for those under 65...
Yes, for those 65 or older...
Yes, for both over and under 65...
No...
DK...
C.
1 (Skip to QC)
2 (Skip to QC)
3 (Skip to QC)
4
5 (Ask who would know and restart)
1
2
3
4 (Terminate)
5 (Terminate)
Are you the person in your company who has primary responsibility for determining what kinds of health insurance are offered to your
retirees?
Yes, am senior person responsible...
1 (Continue)
No, but have major inputs...
2 (Check quota)
No, somebody else...
3 Ask for referral and restart
DK/not sure...
4 Probe/Re-ask question
Very roughly, about how many retirees does your company now have?
Very roughly, about how many retirees does your company now have?
©2003Westport Consulting Group, Inc.
1.
To begin, would you please tell me a few things about the health insurance that is currently provided for active employees. Which, if any,
of these types of coverage do you offer? (READ LIST.)
2.
Traditional indemnity insurance, with or without deductibles,sometimes called 80/20 insurance...
HMOs...
PPOs (Preferred Provider networks)...
POS (Point of Service networks)...
(Do not read:) Other (specify:)__________________
Who pays for that coverage? Would you say that... (READ LIST.)
3.
Company pays for all...
Company pays for all, except for deductibles and co-payments...
Company subsidizes employees but employees pay part...
Company provides plan but employee pays for all of it...
(Do not read:) Other (explain:)___________________________
IF RESPONDENT OFFERS COVERAGE TO RETIREES UNDER 65, ASK THE FOLLOWING
TO Q. 11.
Would you say that the coverage you offer your under-65 retirees is...
1
2
3
4.
Same health benefits as current active employees...
Slightly different health benefits as compared to employees...
Different health plan benefits than for current employees...
Who pays the premiums for the these retirees’ health care?
1
2
3
4
5.
Company pays for all...
Company pays for all, except for deductibles and co-payments...
Company subsidizes employees but employees pay part...
Company provides plan but employee pays for all of it...
(Do not read:) Other (explain:)___________________________
Which, if any, of these types of coverage do you offer your under-65 retirees? (READ LIST.)
T
traditional indemnity insurance, with or without deductibles...
HMOs...
PPOs...
POS...
(Do not read:) Other (specify:)
©2003Westport Consulting Group, Inc.
1
2
3
4
1
2
3
4
QUESTIONS. OTHERWISE, SKIP
1
2
3
4
Would you say that these retirees...
Pay the same amount as current active employees...
Pay somewhat less than active employees
Pay somewhat more of their costs than active employees
1
2
3
7.Do Does the policy allow these retirees to cover their dependents as well?
Yes...
No...
8.
Who pays the premiums for these dependents?
Company pays for all...
Company pays for all, except for deductibles and co-payments...
Company subsidizes employees but employees pay part...
Company provides plan but employee pays for all of it...
(Do not read:) Other (explain:)___________________________
9.
About how many retirees under the age of 65 do you have in your company?_____
10.
Would you say this number is...
or
11.
1
2 (Skip to Q.9)
1
2
3
4
Growing very rapidly...
1
Growing, but not rapidly...
2
Growing slowly...
3
Staying about the same...
4
Declining...
5
DK...
x
Is the coverage you offer retirees under 65 the same or different from that offered those 65 and older?
Same...
Different...
©2003Westport Consulting Group, Inc.
1 (Skip to Q.13)
2
12.
In what way is it different?
Those over 65 are covered by Medicare alone...
1
Over 65 get insurance that is coordinated with get more benefits than Medicare...
2
Plan is unique to 65+ retirees and is something other than just a Medicare program…
3
There are out-of-pocket and other costs associated with Medicare and any other health insurance program for those 65 and older. Who
pays those costs for your 65+ retirees?
14.
15.
.
Company pays all costs...
1
Company pays part, retiree pays part...
2
Retiree pays all...
3
Which, if any, of the following non-Medicare benefits does your company offer its 65+ retirees? (RECORD ANSWER IN FIRST
COLUMN. CIRCLE AS MANY AS APPLY.)
Which one or two of these is the most important? (CIRCLE ANSWER IN SECOND COLUMN.)
Prescription plan...
Vision plan...
Dental plan...
Chiropractic plan...
“Wellness” care...
Exercise plan...
Psychiatric plan...
Acupuncture/alternative medicine...
(DO NOT READ:) None...
Would you say that these 65+retirees...
Includes
1
2
3
4
5
6
7
8
9
Pay the same amount as current active employees...
Pay somewhat less than active employees
Pay somewhat more of their costs than active employees
16.
Most important
1
2
3
4
5
6
7
8
9
1
2
3
Does the policy allow these 65+ retirees to cover their dependents as well?
Yes...
No...
©2003Westport Consulting Group, Inc.
1
2 (Skip to Q.18)
17.
Who pays the premiums for these dependents?
18.
Company pays for all...
Company pays for all, except for deductibles and co-payments...
Company subsidizes employees but employees pay part...
Company provides plan but employee pays for all of it...
(Do not read:) Other (explain:)___________________________
About how many retirees 65 or older do you have in your company?_____
1
2
3
4
Would you say this number is...
or
20.
Growing very rapidly...
Growing, but not rapidly...
Growing slowly...
Staying about the same...
Declining...
DK...
1
2
3
4
5
x
From whom do you get information about health care coverage, benefits, and issues relating to retirees? (CIRCLE AS MANY AS APPLY IN
FIRST COLUMN.)
Who is most influential in assisting you in making your selection of a health care company for your retirees? (CIRCLE ONE IN SECOND
COLUMN. READ LIST IF NECESSARY.)
Brokers...
Consultants...
Insurance companies...
Internal peers and associates...
People with your job in other companies...
Professional organizations...
Government agencies...
Coalition members...
Industry trade journal and newsletters...
Your legal department or counsel...
Others (specify:)_____________________
©2003Westport Consulting Group, Inc.
Source
1
2
3
4
5
6
7
8
9
0
Most
1
2
3
4
5
6
7
8
9
0
Compared to all your other benefit decisions, such as other health insurance, 401(k), disability, and so on, how important do you feel is the
issue of retiree health care for your organization? Please use a 10-point scale, in which 10 is “the most important issue” and 1 is “not really
important at all.” _______
Some organizations prefer to let their health insurance carrier do all the work in delivering information to retirees, from setting up meetings to
discussing options, to responding to questions. Others prefer to let the insurance company just pay the claims and have their own people do
that work. What is your company’s preference, where 1 means you prefer a total “turn key” operation with the insurance company doing as
much as possible and 10 means you prefer to do as much of the hands-on work yourself as possible? ______
23.
24.
Who in your organization makes the final decision regarding whether health care coverage will be provided to retirees and, if so, which
coverage will be offered?
VP of Human Resources...
1
President/CEO...
2
Benefits Committee, or similar committee...
3
Board of Directors...
4
CFO/Controller/Finance officer...
5
Other (specify:)___________
Would you say your company considers its role in its retirees’ health care to be...
Becoming critically important...
1
Very important...
2
Important...
3
Not very important...
4
Not important at all...
5
DK...
x
In making decisions about the health care program for your company’s retirees, which of the following do you feel are critical and which are
very important, or somewhat important, or not important at all? (READ LIST.)
Cost containment...
Portability of medical care and benefits...
Availability of non-Medicare coverage....
Quality of health care providers...
Costs to retiree...
Range and scope of provider network...
Employee dependent insurance...
Ability of retiree to keep current physician...
©2003Westport Consulting Group, Inc.
Critical
1
1
1
1
1
1
1
1
Very
2
2
2
2
2
2
2
2
Some
3
3
3
3
3
3
3
3
Not
4
4
4
4
4
4
4
4
DK
x
x
x
x
x
x
x
26.
Finally, to help us classify your replies, please tell us a little about your company. How many years has it been in business? _______
27.
What is its annual revenue, approximately? $_________million
28.
What kind of business is it? (READ LIST.)
Manufacturing...
Sales...
Marketing/advertising...
Service...
Retail....
That completes our interview. Thank you for your help.
©2003Westport Consulting Group, Inc.
1
2
3
4
5
What We Learned From the Quantitative Study
 Is this a business?
 How big is it?
 Is there anything we can do to make it better?
Data are developed only to make actionable
(and imperfect) decisions.
“Perfect and ‘nice to know’” data will always take too long
and be too expensive.
©2003Westport Consulting Group, Inc.
Respondent Demographics And Observations
 “Small” companies are defined as having employees between 1,000
and 5,000. “Large” companies are defined as having 5,000 or more
employees. All companies had a minimum of 100 retirees.
 There were no significant differences between the small and large
company responses except as explicitly noted in the report.
 There were no significant differences observed between responses by
type of business (e.g., manufacturing vs. services).
 There also appears to be no difference in company behavior by the
number of retirees.
 The range of companies included in the survey was from $200MM to
$2.8B in annual revenues.
 The median size respondent had $850MM in annual revenue. “Small”
company median revenue was $480MM and large company median
revenue was $1.2B.
©2003Westport Consulting Group, Inc.
Respondents Represented Middle-Market
to Large Corporate Employers
More than 20,000
16%
1,000-5,000
52%
33%
% Distribution of Survey Respondents
by Number of Active Employees
©2003Westport Consulting Group, Inc.
5,000-20,000
Demographic Profile of Survey Respondent Employers
Refused
2%
Other
22%
Marketing
3%
Sales
2%
Retail
6%
©2003Westport Consulting Group, Inc.
Manufacturing
42%
Services
21%
Respondents All Had Significant
Numbers of Retired Employees
500-1,000
Retirees
More than 1,000
Retirees
16%
40%
7%
400-500 Retirees
11%
300-400 Retirees
200-300 Retirees
10%
16%
100-200 Retirees
% Distribution of the Number of Retirees
Among Survey Respondent Corporations
©2003Westport Consulting Group, Inc.
And A Significant Number of the
Retiree Population Was Under Age 65
% of Companies
20%
23%
17%
15%
16%
9%
<50
50-100
100-200
200-500
500-1000
Number of Retirees Under Age 65
©2003Westport Consulting Group, Inc.
>1000
Retirees Today Receive Similar Benefits ... Although
They Pay More For Them Than Active Employees
Receive Different
Healthcare Benefits
Pays Less
Than Active
9%
25%
Receive Same
Healthcare
Benefits
65%
Pays Same
As Active
16%
28%
Pays More
Than Active
53%
Receive
Slightly
Different
Healthcare
Benefits
Comparison of Retiree
Healthcare Benefits to
Active Employees
Comparison of Retiree
Healthcare Costs to
Active Employees
Source: WCG, Inc. Quantitative Survey of Retiree Health Benefit Decision Makers At Mid and Large Employers 3/98
©2003Westport Consulting Group, Inc.
Almost All Survey Respondents Were Offering Health
Insurance Benefits to their Retirees.
Pre-Medicare Retirees Appear To Receive More
Benefits Than Those Medicare Eligible Individuals
Planning to Offer
Only Offered to
Under 65
2%
21%
75%
2%
Only Offered to
Over 65
% Distribution of Health Benefits
By Age of Employee
©2003Westport Consulting Group, Inc.
Offered to Over &
Under 65 Retirees
As A Result, The Majority Of Corporate Benefit
Decision-Makers See Retiree Healthcare As An
Important Topic Relative To Other Benefit Programs
% of Respondents
Rating Importance
of Retiree
Healthcare Benefits
Relative to Other
Benefit Decisions
40%
20%
16%
12%
4%
1-2
Not
Important
9%
3-4
Less
Important
5-8
Somewhat
Important
7-8
Important
Important
9
Very
Important
Source: WCG, Inc. Quantitative Survey of Retiree Health Benefit Decision Makers At Mid and Large Employers 3/98
©2003Westport Consulting Group, Inc.
10
Vital
Despite the Much Heralded Need to Reduce Costs, All
Respondents Offer Their Active Employees An Indemnity
Plan Option. Most Offer HMO and Half Offer a PPO Option
% of Employers
Offering
Employees
Health Plan 100%
Option
77%
52%
19%
1%
Indemnity
©2003Westport Consulting Group, Inc.
HMO
PPO
POS
Other
And, Not Surprisingly, An Indemnity Plan Option
Was Less Prevalent For Retirees Compared With
Their Active Counterparts
% of Employers
Offering
Retirees
Health Plan
Option
70%
63%
34%
11%
Indemnity
©2003Westport Consulting Group, Inc.
HMO
PPO
POS
Employers Were Less Likely To Cover The Costs Of
Retirees Under Age 65 or 65+ Retiree Dependents
Pre-65
Post-65
3%
3%
9%
6%
28%
59%
27%
58%
% Distribution of Pre- and Post-65 Retiree Cost Sharing For Dependent Coverage
Company Subsidizes
Retiree Dependent
Coverage
©2003Westport Consulting Group, Inc.
Retiree Pays
All
Company Pays
All Dependent
Coverage
Company Pays
All But Deductible
Growth of Pre-65 Retiree Population Is Rising
At A Faster Rate Than Post 65 Retirees
Employer
Perception of
Retiree
Growing Rapidly
Population
Growth
12%
5%
39%
Not Growing Very Rapidly
23%
31%
Growing Slowly
36%
Staying About The
Same or Declining
Pre-65 Retirees
©2003Westport Consulting Group, Inc.
27%
25%
Post-65 Retirees
Medicare Is Clearly Factored Into Older Retiree Benefits
Pre-65
Post-65
Different Healthcare
Benefits
48%
Medicare Only
Unique Plan
4%
Independent of
Medicare
25%
52%
Same
Healthcare
Benefits
Pre- & Post-65 Retiree Healthcare Benefits
©2003Westport Consulting Group, Inc.
Coordinated
with Medicare
as Primary
69%
Surprisingly, Employers Are Willing to Share
Medicare Out-of-Pocket Expenses With More
Than Half of Their Older Retirees
Company Pays All
5%
48%
46%
Retiree
Pays All
% of Company Participation in Cost Sharing
of Medicare Out-of-Pocket Expenses
©2003Westport Consulting Group, Inc.
Company
Pays Some
Almost All Respondents Offer Prescription Services to
Their Medicare Eligible Retirees.Vision and Dental Care
Are Offered in More Than Half of the Plans Surveyed
94%
Prescription Service
61%
Vision Care
47%
Dental Care
Chiropractic
33%
Wellness
Exercise
17%
6%
Psychiatric Care
3%
Acupuncture
1%
% of Companies Offering Ancillary Healthcare Benefits
©2003Westport Consulting Group, Inc.
Corporate Retiree Healthcare Decision-Makers
Rely On A Number Of Sources of Information.
Consultants Are Clearly the Most Important Source Today
81%
Consultants
42%
75%
Insurance Co.’s
Professional Organizations
People with Same
Job In Other Co.’s
Coalition Members
15%
61%
2%
59%
1%
54%
2%
51%
Internal Peers & Associates
Government Agencies
11%
42%
1%
40%
Brokers
Legal Department
Industry Trade Journals
9%
Uses Source
Best Source
39%
2%
1%
15%
Not surprisingly, larger companies rely more on consultants and
smaller companies rely disproportionately on brokers
©2003Westport Consulting Group, Inc.
The Majority of Corporate Benefit Decision-Makers
See Retiree Healthcare As An Important Topic
Relative to other Benefit Programs
% of Respondents
Rating Importance
of Retiree
Healthcare Benefits
Relative to Other
Benefit Decisions
40%
20%
16%
9%
12%
4%
1-2
3-4 Less
5-6
7-8
9 Very
Important Important Somewhat Important Important
Important
©2003Westport Consulting Group, Inc.
10 Vital
Corporations, Regardless of Size, Appear to Want A
“Turnkey Solution” Relative to Retiree Healthcare
Benefit Plans
% of Respondents
Rating Importance
Degree of
Involvement With
Retiree Healthcare
Administration
25%
28%
18%
16%
10%
1-2
Wants Hand
On Involvement
©2003Westport Consulting Group, Inc.
3-4
5-6
7-8
9-10
Wants Turnkey
Solutions
Cost and Quality of Provider, Lead the Decision-Making
Criteria When Selecting Retiree Healthcare Benefits
Not
Not
Important
Very
At All
Important
Cost to Company
1
Provider Quality
Cost to Retirees
2
3
Network Range/Scope 6
Availability of Non10
Medicare Coverage
Retiree Keeps
Current Physician 10
Dependent
6
Coverage
©2003Westport Consulting Group, Inc.
Very
Important
Important
12
58
28
12
61
23
30
50
30
50
32
44
37
42
38
46
14
12
9
8
7
Observations & Recommendations For Next Steps
Committing to a Course of Action
Creating Metrics by Which to
Measure Success Factors
©2003Westport Consulting Group, Inc.
Retiree Product Line Market Sizing &
Customer Analysis Project Plan
PROJECT
S TART
1. Extant scan
of all related
literature
client
documents &
research
2. Internal work
session with
client
Commercial
Retiree Team
5. M inimum of 4 focus groups
5. M inimum of 4 focus groups
(designed to bracket relevant markets)
(designed to bracket relevant markets)
with senior HR and Benefits corporate
with senior HR and Benefits corporate
decision makers to explore decision
decision makers to explore decision
making process & behavior, exposing
making process & behavior, exposing
and gaining insights into potential new
and gaining insights into potential new
product, positioning, pricing and
product, positioning, pricing and
promotional opportunities for client
promotional opportunities for client
2. Two days of
structured phone
interviews with
sample of
current client
retiree benefit
sponsors
6. Refinement &
review of
potential client
program
opportunities
based on
research findings
Go/No
Go
7. Quantitative
7. Quantitative
research (projectible
research (projectible
to client corporate
to client corporate
market universe) to
market universe) to
validate key
validate key
marketing
marketing
assumptions
assumptions
8. Analysis &
internal research to
validate key
operational
assumptions
3. Synthesis of all data
& creation of working
set of operating
hypotheses for client
Retiree sponsorship
Phase II 6 to 8
weeks
9. Creation of
9. Creation of
comprehensive
comprehensive
spreadsheet model to
spreadsheet model to
test all assumptions
test all assumptions
against client ROI/ROE
against client ROI/ROE
objectives including the
objectives including the
sizing of the
sizing of the
commercial retiree
commercial retiree
market
market
Go/No
Go
10. Based on model, the
10. Based on model, the
creation of formal
creation of formal
Business & M arketing
Business & M arketing
Implementation Plans
Implementation Plans
Phase III Task 11=
1-2 weeks
Phase I - 4 weeks
11. Creation of internal
capabilities, staffing,
training, legal and
operational requirements
12.
12.Pilot
Pilottoto
test/validate
test/validate
marketing
marketingplan
planand
and
operational
operational
implementation
implementation
Phase IV
TBD
Go/No
Go
13. New Program
13. New Program
ROLL-OUT
ROLL-OUT
9. Creation of comprehensive
spreadsheet model to test all
assumptions against client
ROI/ROE objectives including
the sizing of the commercial
retiree market
©2003Westport Consulting Group, Inc.
What We Learned From Modeling Our Options?
 There are alternatives to ‘business as usual’.
 Drivers to changing behavior involve both HR & Finance
Decision Makers.
 Change of this magnitude requires market leadership.
 No one wants to be first.
 Business realities will conflict with being popular.
Modeling alone cannot overcome fear of change nor
identify all risks involved.
Piloting is key to gaining both experience and acceptance
with change.
©2003Westport Consulting Group, Inc.
Today’s Practice Of Co-Marketing
With Commercial
Priced
Separately
Medicare/HMO
Pre-Medicare
Retirees
Underwritten
Together
Commercial
Plan
Sponsor
Benefits
Plan
Sponsor
Constraints
©2003Westport Consulting Group, Inc.
• Permits easier administration for employers
• Minimizes any ‘negative’ impact on migrating pre-Medicare
retiree employees
• Permits wider employee choice under multi-plan situations
• Raises true cost of active employee coverage
• Continues financial exposure to growing pre-Medicare retiree
population
Combined With Medicare/HMO
Medicare/HMO
Underwritten
Together
Pre-Medicare
Retirees
Underwritten
Separately
Plan
Sponsor
Benefits
Plan
Sponsor
Constraints
©2003Westport Consulting Group, Inc.
Vertically Integrated Downward
From A Successful Brand
Commercial
• Completely eliminates employers’ responsibility for transitioning
retirees
• Carves pre-Medicare retirees out of active population, thereby
reducing costs for active employees
• Minimizes retiree network dislocation
• Permits client Medicare HMO acquisition costs savings to
subsidize pre-retiree costs over and above active employees
• All or nothing enrollment
• Out-of-network coverage
• Change from current extension of active coverage
Promoted As A Standalone Retiree Program
Priced
Separately
Medicare/HMO
e.g.,
Underwritten
“Medicare/HMO
Separately
Lite”
Underwritten
Separately
A program separate
from both commercial
& Medicare/HMO
Lines
Commercial
Plan
Sponsor
Benefits
• Carves pre-Medicare retiree costs out of active population,
reducing actives’ cost
• Permits more aggressive employer stance on retiree copayment and/or cost cap
• Reduces financial exposure to growth in pre-Medicare retiree
population
Plan
Sponsor
Constraints
• Raises pre-Medicare retiree cost
• Change from current extension of active coverage
• Adds administrative layer
©2003Westport Consulting Group, Inc.
Program Suggestions To Create
The “Ideal” Retiree Health Plan
 Live person telephone assistance (i.e., no VRU or voice mail)
 Minimal or no paperwork for employee
 Eased access to key specialists
 Commitment to established quality service standards that are
measurable
 Wellness programs
 Enrollment exam and personalized healthcare program
 Other suggestions included:
Tie-in to long-term care
Tie-in to at-home care
Simplified Rx service
Hospice care
Hearing aid and vision care
Source: WCG Commercial Employer Retiree Health Focus Groups
©2003Westport Consulting Group, Inc.
Of Paramount Importance In Moving Ahead Is The Need
To Re-Examine Client’s Retiree Underwriting Criteria
As a Medicare/HMO coordinated initiative ... to achieve:
 Avoiding adverse selection by promulgating an “all retiree or nothing” policy.
 Creating a competitive price which is less than what the pre-Medicare eligible
employee could source independently.
 Demonstrating how the employers’ “active” costs can go down.
 Providing the employer with a range of co-pay options.
 Demonstrating continuity of quality care within Medicare/HMO.
As a Standalone Health Benefit initiative ... to achieve:
 Avoiding adverse selection by promulgating an “all or nothing” posture with
commercial pre-Medicare retirees.
 Possible creation of a cross-employer or pool of pre-Medicare retirees.
 Price point competitive with individual pre-Medicare retiree options independent of
employer subsidy.
 A range of employer subsidy/co-pay options.
 Clear demonstration of how retiree “carve out” reduces active costs.
 Demonstration of how XYZ Healthcare ease transition into superior Medicare
HMO
©2003Westport Consulting Group, Inc.
The Number of Employees of Mid to Large Size Companies
Appears To Be A Better Leading Indicator for a Retiree Healthcare
Sales Opportunity, than Annual Revenues of Those Companies
# of Retirees
# of Employees
<500
500-1,000
>1,000
1,000-5,000
71
23
26
5,000-10,000
26
7
43
>10,000
5
7
25
Number of Respondent Companies Arrayed by
Active vs. Retired Employee Populations
©2003Westport Consulting Group, Inc.
Next Development Steps Hold Little Risk And Should Be
Pursued
Create
Underwriting
Model(s)
Package
Concept
Program
Underwriting
Finance
Marketing
Marketing
Identify
Select Group of
Target Commercial
Employers and
Consulting Firms
Sales
Primary
Resources
Required
©2003Westport Consulting Group, Inc.
Expose
Concept
Sales
Refine
As Appropriate
Or Terminate
Initiative
Underwriting
Marketing
Finance
What We Learned From Our Development Process?
 Our circa 1998 observations regarding the retiree
healthcare marketplace came true in most cases.
 These data were all available to anyone willing to look
for them…and without much trouble.
 Despite much angst about healthcare costs today, no one
has provided leadership in this space.
Success requires both concept and execution.
©2003Westport Consulting Group, Inc.