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Why a flood of new health insurance advertising will miss the boat

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Come New Year's, local television will be deluged with a flood of commercials from health insurance companies. "According to trade association TVB [formally, the Television Advertising Bureau], insurers will spend more than $500 million on local television ads in 2014," the Washington Post's Wonkblog reported December 16. That's more than double the $216 million they spent throughout 2012. And, adds the Post, "that's to say nothing of cable television ads and social media campaigns."

One insurer – Wellpoint – expects to spend $100 million just in December.

Much, if not all, of that money will likely be wasted.

That's because health insurers were unprepared to sell their products directly to consumers and because they don't know how to.

Unprepared

In his January 17 press briefing, White House Press Secretary Jay Carney said private insurers spending hundreds of millions of advertising was a sign of Obamacare's success. "[I]t would be proof that enrollment is working and the website is functioning for the vast majority of users when you saw outside groups, third-party groups, including insurance companies, invest in advertising to reach potential consumers," he claimed.

But the exact opposite is true.

That's because heath insurance companies just aren't set up to market directly to consumers. "Most in the past sold plans to companies and human-resource directors for their workforces," the Wall Street Journal explains.

Given that sales model, it was only natural for them to sit back and wait for October 1, when the government health care exchanges would send new customers rolling in.

But they didn't.

According to Enroll Maven, with nearly 43 percent of the open enrollment gone, just 6.9 percent of an expected 7,066,000 Americans have signed up for qualified health plans. Only five states have beaten 10 percent of their goals. And some – Massachusetts and Oregon come to mind – haven't even made it to the 1 percent mark.

Even with the December 16 hiring of ousted Microsoft executive Kurt Delbene, husband of Congresswoman Suzan Delbene (D-Wash.), it may be months before the government exchange starts working. (Maybe even longer; he comes from the company that brought you Internet Explorer, Windows 8 and the Blue Screen of Death.)

This forces those health insurers to follow the example of Wellmark, Iowa and South Dakota's Blue Cross parent company and both states' largest health insurer, and take to the airwaves and the internet to persuade consumers to bypass the dysfunctional government exchanges and buy their coverage directly.

Incapable

Obamacare's most immediate effect so far has been to increase, not decrease, the net number of uninsureds – by forcing insurers to cancel as "substandard" existing plans that some 85 percent of the population liked and had been told repeatedly they could keep. In the coming year. as the employer mandate kicks in and many companies start shedding spouse coverage, full-time employees and, in some cases, employee health coverage itself, tens of millions more will join the ranks of the uninsured.

This creates a huge potential market for health insurance companies, and a big reason they're advertising is to capture market share.

Too bad they don't know how to. "The ad campaigns are a major shift in strategy for health insurers, most of whom have never really had to market directly to consumers aggressively until now,"the WSJ notes.

Preliminary reports of their commercials' content suggest they haven't had time to learn. Most come off like spots for prescription drugs still protected from competition by patent. Only in this case, they're not talking about acid reflux or erectile dysfunction, but lack of health insurance in general, as if it were a disease and as if competition didn't exist. (At least they spare us that tedious recitation of every possible side effect.)

  • One of the Wellpoint commercials, for example, features a stay-at-home mother. We see her cutting watermelon with her daughter and taking a walk with her husband. "The moment I started taking my health care more seriously was when I became a mom," she says. "So health insurance has become a must."
  • Aetna will run a prime time campaign in local markets. Its semiliterate theme line is "What's Your Healthy?" The target audience, they say, is people who actively manage their own health. In one spot we see an overweight man managing his blood pressure by dancing, doing swim aerobics and resisting a late-night snack. "It's staying fit, it's staying motivated, it's staying on track," he says.
  • A Cigna spot shows a woman jogger on a nature trail, bent over, catching her breath. Then, as the background music turns upbeat, she catches her second wind and starts jogging again. A male voice-over says, "Believe in yourself. We do. Go You."

At least one insurer, though, is actually advertising as if there were competition out there. Blue Cross & Blue Shield Association hired former Procter & Gamble and Revlon marketer Cynthia Rolfe as vice president of consumer brand strategy. Their campaign will at least talk about competitive points, such as the fact that more than 90 percent of doctors and hospitals accept their coverage (important when other plans are cutting out doctors and hospitals left and right) in all 50 states. But having a young child's voice deliver these points, adding that you'll have "the freedom to love, to dream, to dance—like no one is watching" is kinda sappy.

Mistargeted

But all of the campaigns, so far, seem to be ignoring the elephant in the room – the healthy 18- to 34-year-olds whose participation can make the difference between Obamacare's success and failure. As Stanford University economics professor Michael Boskin explains, "If, as many predict, too few healthy young people sign up for insurance that is overpriced in order to subsidize older, sicker people, the insurance market will unravel in a "death spiral" of ever-higher premiums and fewer signups."

The advertising campaigns need to be persuading this make-it-or-break it audience segment, and it doesn't look as if they're even trying to – maybe because there are already indications it'll be a futile effort. While the feds are hoping for 40 percent of 18- to 34-year-olds to sign up, according to the New York Times, many states' signup figures for this cohort are about half that. And according to a recent Harvard study

  • 56 percent disapprove of the Affordable Care Act.
  • Only 20 percent said they'd enroll on the exchanges once they're too old for their parents' plan.
  • 44 percent believe their care will get worse under Obamacare.
  • 50 percent believe the "Affordable" Care Act will make their health care more expensive.

A September Kaiser Family Foundation study reported, "the high cost of insurance is the main reason why people go without coverage." More respondents – 31.6 percent – said the main reason for not having health care coverage was "insurance not affordable."

If you're older and sicker, or if you have a pre-existing condition, the insurance may be worth the every penny of the more extra cost. But if you're young and healthy and don't earn enough for your penalty to add up to very many dollars, it's a different story.

Bloomberg columnist Caroline Baum suggests a different approach:

[A]nnounce and advertise that everyone between the ages of 18 and 34 who enrolls on the health-care exchanges by the end of the year is automatically entered in a lottery. Winners will receive everything from a free iPhone or iPad to a full-year [sic] of health-care [sic] underwritten by Uncle Sam. Refer a friend and get a discount. Buy one (year), get one free. In states that have legalized marijuana for recreational use -- Colorado and Washington -- by all means, throw in a bag of cannabis.

It isn't fair, you say? Who said life is fair? Obamacare is based on the idea of young, healthy people, who don't use a lot of health-care services, subsidizing the sick and elderly. Their generation is on the hook for the debt incurred to provide for the baby boomers in retirement. So forget fair.

There's only one problem here. Federal lottery laws prohibit winning prizes being tied to purchase of a product or service (unless a contest of skill is involved). But hey, Obama's already chosen to ignore and flout other black-letter law, particularly in connection with the healthcare program that bears his name, so why make this an exception?

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