Prospecting for customers in the small employer market: the experience of Arizona Health Care Group.

Abstract

The findings of this study provide an interesting profile of the small employer "prospects" for prepaid health plans, where a prospect is defined as an employer that responds to a mass mailing effort with a request for information and further contact. About 60% of these prospects already have insurance, with 40% having group insurance. Therefore, a substantial portion of prospects are seeking to replace their existing health benefit package with a different one. Of those who do not offer existing insurance, the most common reason is that it is "too expensive" or the employer is "not profitable." A very small proportion do not offer insurance because they do not qualify for it due to medical underwriting considerations. Prospects tend to be larger than non-prospects in terms of sales, but employ lower wage employees, on average. About half of prospects are in service industries, a proportion typical of small employers in general. Somewhat surprisingly, most prospects have been in operation for over five years. They are not new firms attempting to establish their benefit packages. This is consistent with the findings on gross sales, suggesting that some maturity is necessary before an employer considers offering group health insurance as a benefit. The prepaid plans in this study also appeared to target established employers for their marketing efforts. In responding to questions about their attitudes towards health insurance, over one-quarter of prospects indicated that they would be unwilling to offer insurance at rates so low that they would not normally apply to the coverages offered by prepaid plans. Thus, although they were "prospects" by the study's definition, they were unlikely to eventually contract with prepaid plans. Those prospects that had offered insurance previously, but had discontinued it, tended to cite premium increases as the reason. This suggests that prospects among small employers are likely to be very price sensitive, and that further prescreening of prospects by phone, during which premium levels are discussed, might be cost-effective in following up leads from mass mailings. The study data also suggest the importance of quick follow-up for mass mailing leads, as the drop-off in recall and interest appears to be substantial. About half of the prospects interviewed stated that they were unaware of AHCG, although they or someone in their business had returned a mailer requesting more information. In addition to their implications for marketing to small employers, the results of the study appear to have broader policy implications as well.(ABSTRACT TRUNCATED AT 400 WORDS)