Insurers have historically relied on strong direct relationships with employers and providers as part of their core group business, so their interaction with certain consumers has been minimal — at least from a billing and payment perspective.
With the Patient Protection and Affordable Care Act (PPACA) in effect, the individual policy business is set to grow tremendously, bringing with it non-traditional customer segments like the unbanked and underbanked, to the ranks of the insured.
However, due to their varying levels of access to traditional financial services, members of this market segment struggle to pay premiums through traditional methods such as debit or credit cards. This requires insurers to come up with new mechanisms to communicate and work efficiently with consumers. The insurers who do so effectively will stand out from their competitors — and increase their appeal to the agents and brokers in the public exchange qualified health plan (QHP) market.
The first step of the innovation process is to identify reliable, convenient and affordable payment options for the cash-centric consumer who enrolls via either the state-based exchanges or the federally-facilitated marketplace.
What are the key questions to be answered about cash consumer payments?
Insurers often ask whether cash consumers should really be a top QHP marketing priority.
The short answer is “yes,” for the following reasons:
- More than one-third of all U.S. households are either unbanked or underbanked — 8.2 percent are unbanked and 20.1 percent are underbanked. It seems likely that a higher percentage of the uninsured falling into this category.
- Cash is the leading payment instrument for several expenditure categories, including medical services and personal services.
- Even higher-income consumers may prefer to pay some or all of their bills with cash.
Additionally, there is an overall agreement in the industry that providing a range of safe, convenient and affordable payment options increases on-time collections across all customer segments and all industries. This may be even more true for cash consumers, as they are traditionally offered a much more limited range of payment options than their banked counterparts. Offering those consumers a cash-payment option helps insurers differentiate themselves and better attract and retain these new customers.
Insurers also wonder where the money to support a cash-payment option will come from.
There is no easy answer to that question, but insurers could absorb the costs, find a way to pass the costs on to the consumer, or get a third party to pay.
What does HHS say?
The U.S. Department of Health and Human Services (HHS) set minimum requirements for payments to exchange QHPs in a regulation:
§ 156.1240 Enrollment process for qualified individuals.
(a) Premium payment. A QHP issuer must –
(1) Follow the premium payment process established by the Exchange in accordance with § 155.240.
(2) At a minimum, for all payments in the individual market, accept paper checks, cashier’s checks, money orders, EFT, and all general-purpose pre-paid debit cards as methods of payment and present all payment method options equally for a consumer to select their preferred payment method.
Interestingly, the payment methods listed above that cater to cash-centric consumers — cashier checks, money orders and general-purpose pre-paid cards — all have fees that must be borne by the consumer. These ‘convenience fees’ are not the only disadvantage linked to these methods of payments, though.
A money order could cost $1 to $10, and the hours of the businesses that offer them tend to be limited. Getting a money order is also a time-consuming, error-prone process.