How Obamacare Creates An Insurance Industry Ad Blitz

Molly Messick / StateImpact Idaho

Karen Early is the director of corporate communications for Blue Cross of Idaho, the state's largest insurer.

One of Blue Cross of Idaho’s new television commercials opens with a chirpy jingle.  “You’re protected in the sun, you’re protected when it rains,” the song begins.  The pitch is clear: this is the insurer for you, no matter your lifestyle.

For Blue Cross of Idaho, this is more than an advertisement.  It’s a big step.

“This is the first time the company has ever, in its 65 plus years of existence, actually gone out with a brand campaign to explain who we are,” says Karen Early, the company’s director of corporate communication.

She says it’s a direct response to the Affordable Care Act.  “Literally, the day after the bill passed was the day we all looked at each other and said, ‘Things are going to change a lot,’ Early says.

From the insurers’ perspective, a big change the health care law brings is this: there will be many more people buying insurance in the individual market.

By 2014, insurers won’t be able to deny anyone coverage based on a preexisting condition.  There will be online marketplaces for comparing and buying insurance.  What’s more, the Affordable Care Act will subsidize the cost of health insurance purchased through those exchanges, and set limited penalties for people who don’t buy insurance.

From there, Early says, it’s simple math.

“We have about a 20 percent un-insurance rate in Idaho,” she says.  “That’s roughly 300,000 people.  Many of those people are going to be eligible for some level of subsidy to buy health insurance.  If even half of those people start shopping, that’s 150,000 new people in the marketplace that we have not seen before.”

And that’s a business opportunity, says Brian Wieser, a senior analyst with New York-based Pivotal Research Group.  “Now we’re in a situation where, for the first time, at scale, it will be in the interests of health insurers to market directly to consumers,” he says.

Wieser isn’t a health insurance guy.  He’s spent much of his career forecasting advertising spending.  This summer, when the Supreme Court upheld the Affordable Care Act, he made a prediction.  Health insurers would soon vie for individual customers in a way they never had before, just as Blue Cross of Idaho has already begun to do.

“It’s a relatively rare example of a situation where a change in government policy leads to the creation of a new advertising category,” Wieser explains.

He can only think of one comparable case: the pharmaceutical industry.  In 1997, the FDA relaxed regulations on consumer advertising.  Since then, drug companies’ ad spending has skyrocketed.

Now, Wieser says, think about the way most people get insurance.  They get it through their jobs. Because of that, insurers have focused on what’s called business-to-business marketing.  They’ve spent their time pursuing contracts with employer groups, not courting individual customers.  Now, the Affordable Care Act could give birth to a $2.5 billion direct-to-consumer ad category.

The Blue Cross and Blue Shield Association’s Cynthia Rolfe agrees that many companies — not just Blue Cross of Idaho — are thinking about how to adjust to the market changes that come along with the health care law.

“Since the Affordable Care Act was passed, a lot of insurers have said ‘I need to reconsider what I’m communicating,'” Rolfe explains.  “The big shift is from selling to a distribution channel to creating that relationship with the end user.”

Before you get too worked up at the prospect of health insurers pouring money into marketing campaigns, consider one other aspect of the Affordable Care Act.  It limits how much insurers can spend on overhead — like advertising — compared to how much they spend on what their customers really care about: health care.

“Blue Cross can invest as much money as they want in advertising,” explains Karen Pollitz, a senior fellow at the non-profit Kaiser Family Foundation, “but they’d better get a really good return on it, because there is this overriding limit on how much of the premium dollar you can spend on non-claims costs.”

From Pollitz’s perspective, perhaps insurers’ flurry of preparation is a good sign.  “Insurers are getting ready,” she says.  “They’re getting ready for 2014. We’ve had a whole lot of uncertainty for the last three years about – is this going to happen?  It’s going to happen!”

When it does, the individual insurance market will start to look a lot more like the group market.  And insurers want to be sure it’s them – their coverage, and their brand – that all of those new buyers think of first.

To listen to an audio version of this story, click here.