One of the “joys” of the Obamacare roll-out has been the re-eruption of insights from three or four years ago. It’s like nobody was listening, three or four years ago. But suddenly, now that we’re under the gun and millions of people can’t keep their insurance policies (or their doctors, their hospitals, or their drugs), the light is coming on.
Scott Gottlieb has another such insight at Forbes today: people aren’t buying insurance through the exchanges because the insurance sucks. It doesn’t meet their needs.
The problem is that the Obamacare plans aren’t attractive to consumers. They were designed in Washington to suit political prerogatives rather than being designed in the marketplace to meet the demands of consumers. They’re laden down with costly mandates that leave the products too expensive. The plans try and make up for these costs by using narrow networks of cheap doctors and closed drug formularies. Despite the skinny networks, the plans still leave consumers with big premiums and deductibles. Washington managed to simultaneously degrade the coverage, and make it more expensive.
The lousy offerings on the exchanges are one of the biggest reasons why the consumer’s shopping experience is producing a “conversion rate” of only 5%. Out of the 44.5 million people who have “shopped” the exchanges, online or by phone, only 2.2 million have signed up for policies. That’s comparable to the click-through rate on Internet banner ads.
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The typical e-commerce conversion rate is substantially higher, running to 8-10% or more, and is particularly so for specialty companies that offer a narrow range of products. Insurance consumers go to an insurance website or make a phone call when they need insurance. They aren’t just browsing to admire things they can’t buy right now, as consumers often are at other kinds of retail sites.
In October, Gottlieb asked the CEO of a health-insurance company what the conversion rate was at his retail website. It was 22%.
But they’re just not buying at the Obamacare exchanges. Gottlieb quotes an industry policy expert:
The problem with Obamacare is it’s product driven and not market driven. They didn’t ask the customer what they wanted. And I think that’s the fundamental problem with Obamacare. It meets the needs of very poor people because you’re giving them health insurance for free. But it doesn’t really meet the needs of healthy people and middle-class people.
Of course, we were already giving health insurance to very poor people for free, before the Obamacare law was even passed in 2010. It’s called Medicaid, and we’ve had it since 1965. We didn’t need Obamacare to make that happen.
The expert suggests that the insurance offerings would look quite different if an entrepreneur had designed them, rather than the government. Gee, ya think?