Blue Shield of California is in trouble, though it might not look it from the outside. They have strong revenue. They are a recognizable name. They are a member of one of the nation’s largest health insurance associations, and are one of the three largest health insurance providers in California. But despite all that, they are positioned disastrously in the market, in a way that makes them seem primed for failure.
What follows is a very in-depth look at Blue Shield of California’s brand and the problems it faces. It is more information than I would provide if I were to actually present my findings to a live audience, like during a pitch, but I thought it would be worth expressing my thought process here in full. If you would rather skip to a summary of my brand audit, click here.
In the past, health insurance was an intimidating and complex category. Even if people didn’t buy the insurance themselves, they still had to understand how it functioned for everything from yearly check-ups to emergency surgeries. Not an easy task. Each plan had its own set of economic factors: premiums, deductibles, co-pays, emergency payment limits, and so on. Then there was the matter of PPOs, HMOs, HRAs, and all the other three-letter acronyms. Each one has different strengths and weaknesses that had to be puzzled out to make sure care was appropriately covered. There were also factors like coverage for preexisting conditions, coverage for family, and many others that made health insurance frustrating for many Americans.
The Patient Protection and Affordable Care Act (PPACA) changed a big part of that. Most importantly, it reduced the economic complexity of the purchasing decision. Now, by law, everything is grouped into tiers (bronze, silver, gold, and platinum). These tiers fix the percentage of health costs paid by the insurance. With a bronze plan, for example, the insurance company pays 60% and the individual pays 40%. This is true no matter the provider. A brief search through Covered California reveals that this has resulted in the providers offering plans with basically identical economic factors: the deductibles, co-copays, etc. In other words, the cheapest bronze plan from Aetna and from Cigna are nearly identical, despite being from different providers. The premiums, on the other hand, remain unfixed. This means that, when doing side by side comparisons, in theory buyers only have to decide which metal level they want, and then see which of the providers offers that plan at the best rate.
Except it isn’t that simple. For the sake of understanding the complexity of the health insurance category, let’s break it apart into two ideas, which I will refer to as the “plan” and the “service.” The plan is the insurance policy, which is defined by all the things now fixed by metal tier. The PPACA mandates that all plans offered by insurance companies must be essentially identical. The service side of health insurance is made up of what John Madden calls intangibles: things that statistics can’t “measure” but still give one player an edge over another. Here are three I’ve found that top most people’s lists:
- 1) The insurance covers a wide variety of doctors and hospitals, so the insured person has flexibility in selecting physicians and facilities.
2) The insurance company has a lot of tools, like a website and a customer service hot-line, that are helpful and convenient to use, so finding and paying for care isn’t a hassle.
3) The company willingly pays for care and does so in a timely manner.
These factors may explain why two providers can offer the same plan while asking for different premiums.
How does all of this relate back to Blue Shield of California? They are positioned disastrously in the market. They don’t compete on price. They ask more in premiums than either of their two largest competitors: Kaiser Permanente and Anthem. They don’t compete on plan. Since the PPACA requires all insurers conform to the metal tiers, their plans are identical. They don’t compete on quality, either. The NCQA ranks all the health insurers in the country based on a number of things, including the intangibles I mentioned earlier, and Blue Shield of California loses to Anthem and can’t even come close to Kaiser. Kaiser has separate entities for northern and southern California, and both make the top 15 rated providers in the whole country. As you might imagine, this makes Kaiser the number one provider in the state.
With cheaper rates, a better rating, and identical plans, it’s a not surprising that so many people go with Kaiser. According to the California Healthcare Foundation (CHCF) website, using data from 2013, Kaiser has 5.8 million people in total enrollment (individual, small, and large group plans), which is more than the next two closest rivals, Blue Shield and Anthem, combined. Blue Shield sits in third, with 2.1 million, which, considering they offer what appears to be an inferior quality product at higher premiums, is a miracle. So while the brand hasn’t fallen yet, it is easy to see how it might be poised on a cliff, about to go over.
If we can’t change the premiums, and there is no way to jump to the top of the NCQA standings overnight, what can we do to start building a better Blue Shield of California for the future? Since the PPACA made it a legal requirement for every adult to be insured, the health insurance industry is very much a zero sum game. Every customer you gain is one you had to steal from someone else. This should heavily inform our strategy. We have to look at the numbers and figure out who is strong, who is weak, and who Blue Shield is best positioned to fight with over customers.
Again, calling upon the CHCF numbers, the vast majority of Kaiser’s business is in large and small group plans. In other words, companies and non-profits that are large enough to be required to provide health insurance to their employees go with Kaiser most of the time. By contrast, in the individual plans, Kaiser is much weaker. In individual enrollment, Kaiser and Blue Shield are comparable in numbers, around 250k, and it is Anthem that leads the way, with over 700k.
While it may be tempting to take from Kaiser, since they have the biggest piece of the pie, they beat Blue Shield in basically every objective category so trying to do so would likely be unsuccessful. It also means that shaking lose customers from the other providers in Kaiser’s most dominant area, small and large group enrollment, will see Kaiser scooping them up instead of Blue Shield. Blue Shield needs to fight on more even ground. Somewhere where there are great gains to be made, but without the looming threat of Kaiser’s total superiority. That place is in individual enrollments. While one can easily make the case that Kaiser has the business market well under its control, the market for individual plans is much more open. Anthem has large numbers there. They lead the sub-category right now, well ahead of Blue Shield, but not in the same dominant fashion that Kasier leads small and large business enrollment. Blue Shield can compete with Anthem. While Blue Shield still has higher premiums, Anthem’s NCQA ratings are very similar to Blue Shield’s. On top of that, the smaller companies like Aetna and Cigna also have solid numbers in individual enrollment that Blue Shield could hope to steal away. We have found the first piece of our strategy.
Knowing that Blue Shield of California’s strengths are not in courting businesses further sets the direction of both the creative and communications strategy. We know that when people pick their own plan they are more willing to consider Blue Shield. We can also narrow our demographic search from every adult person in California, to just the kinds of people who are going to be making their own insurance purchasing decisions.
There are three main types of people who buy their own insurance. The first is people who recently left the workforce. They have quit, been fired, or have recently retired. They are no longer covered by their company’s insurance, but they need something to tide them over until the next thing comes their way. For the younger set, that means being covered until their next benefited job. For the older, that means until Medicare kicks in. The second type is people who are not insured by their work. These people are independent contractors, freelancers, consultants, part-time workers, and some employees of small businesses. The final type is retirees on the Medicare advantage program, who purchase private insurance with a stipend from Medicare, instead of relying entirely on Medicare for their insurance needs.
Blue Shield of California already has a focus on the baby boomer market, with efforts to court the Medicare advantage type. If you look over the meager offerings on their YouTube channel, almost all the content is explicitly targeted at baby boomers. This makes sense, as it is almost certainly a prime market for Blue Shield’s offerings. The second market I talked about, the self-employed, might not be as juicy as the Medicare advantage folks, but they present a great opportunity for Blue Shield to take members away from Anthem et. al.
Based on data from the U.S. Small Business Administration, the number of incorporated self-employed in California was 2.9 million in 2014, and there are many more self-employed who are not incorporated. Successfully tapping that market would put Blue Shield solidly in second place for total enrollment in California. It would deplete Anthem’s 500k enrollment lead in the sub-category. It would not put Blue Shield in contention with Kaiser, yet, but it would put the brand in a healthier position for long-term success.
On paper, that sounds easy enough, but how do we do it? Blue Shield of California needs a brand strategy built around a unifying set of values. It needs an identity. Looking over months of their social media posting, there isn’t much cohesion to their posts. There are posts about healthy recipes. There are posts about technology and research related to the health care industry. There are posts about motivation, financial planning, music recommendations, and even throwback photos of iconic locations in California. And then there are the endless posts about site updates, site outages, and reminding you that their customer support teams are just a call or click away. Where is the brand identity in all of this? Wait, what is Blue Shield’s brand identity to begin with? Usually such an identity is communicated most obviously in traditional advertising, but the only thing I was able to find there were a handful of 30 sec spots from 2012-2013 that ran with the tagline “for care, not profit.” But that message isn’t consistent with the other things they’ve produced. For example, the boomer-focused videos on Blue Shield’s YouTube page instead have the tagline “We’re Not Done.”
When retooling this identity, we can focus on where Blue Shield is actually strong right now. Earlier, I pointed out that Blue Shield doesn’t compete with either Kaiser or Anthem on price, plan, or quality. But there is an intangible that Blue Shield can compete on: flexibility of care. They provide great flexibility to the people under their plan in where and how they get their health care. They have the largest network of health care providers in California. They have amazing coverage outside of California, both nationally and internationally, for members who are traveling. They have health and wellness discounts that cover things like weight loss programs, gym memberships, Lasik eye surgery, and many more. They even support some forms of alternative treatment like acupuncture and chiropractic services. This flexibility is exactly the right way to go after the self-employed market.
Based on my research, self-employed people tend to share some characteristics. They tend to be mid-to-late in their careers. They typically rely on contacts and prestige they built up early in their careers to attract clients when they go their own way. They understand the value of a dollar. Self-employed people have to manage their own finances, so they often have a much keener sense of the true cost of things than their corporately employed peers. They are busy, stressed, and pressed for time. As a one-man-band, they have to keep their eyes on the work, their accounting, their legal risks, and their marketing, usually without much outside help. Many of these people, especially consultants, sales people, and some contractors, travel a lot for work. While they may have a house or apartment they consider home, they are often slaves to where the work is.
These characteristics are great match for the top-notch service provided by Blue Shield of California. Travel a lot? Blue Shield has you covered wherever you might be going. Pressed for time? Blue Shield’s large network of doctors and facilities makes it easy to find treatment near you that’s covered by the insurance. Plus, their Blue Ribbon program helps you pick the best physicians in your area, so you know you can trust the quality of your care. Concerned about the value of a dollar? Blue Shield has lots of enticing discounts on preventative care options. Blue Shield even has loads of convenient features online or by phone to simplify health care, something not just the busy self-employed are looking for.
Blue Shield of California is not in a great place. While it is doing well enough in the market now, its unhealthy combination of poor quality and expensive price makes one wonder why anyone still pays for their service. While Blue Shield can’t fix its core problems overnight, it can strengthen its position in the market by overhauling the way it communicates with the public. It needs to focus on building an identity around its excellent flexibility of care. This new identity will also help it court a potentially quite lucrative market, in the self-employed, without drawing unfavorable comparisons to its chief rival, Kaiser Permanente.
In short, Blue Shield makes health insurance easy, which is exactly what busy Californians need. Blue Shield is there for them.
Blue Shield of California is the third largest provider of health insurance in the state, by total enrollment (individual, small, and large group plans).
The PPACA forced all insurance providers to standardize their plans around what percentage of costs the insurance company covers. These standard plans were broken into tiers.
Blue Shield of California has amongst the highest premiums when comparing plans from the same tier. Blue Shield has middling quality ratings according to the NCQA.
As a result, Kaiser (cheaper and higher quality) is dominant in the market, and Anthem (slightly cheaper, similar quality) is closer to Blue Shield but slightly higher in total enrollment.
With everyone legally obligated by the PPACA to have health insurance, the health insurance market is a zero sum game where the only way to grow is to take from somewhere else.
Blue Shield of California can’t reasonably expect to take people away from Kaiser, which is better in every measurable way. They can, however, take people from Anthem, as well as the smaller providers like Aetna and Cigna.
Blue Shield of California wants to pick its battlegrounds where Kaiser is the weakest, and they are strong, so as not to draw unfavorable comparisons. This makes the individual plan marketplace ideal. Kaiser has its weakest numbers there, and there are plenty of softer targets, like Anthem, Aetna, and Cigna, from which Blue Shield can steal customers.
Blue Shield can court the individual plan market by playing to their corporate strengths: a flexible, robust, and convenient customer care network.
In particular, these strengths match well with the needs of the self-employed who make up the vast majority of individual plan enrollment in California.
Blue Shield of California lacks cohesion in its brand communication. The company should refocus, unifying Blue Shield’s communications around their exceptional flexibility of care, with an eye for the specific ways in which this benefits the self-employed. With any luck, this can bolster their individual enrollment numbers, and maybe bring in small and large group enrollment who identify with that same message.