Thought Bubble is a regular feature on the Mintel blog highlighting multiple viewpoints on one topic from Mintel’s team of expert analysts around the globe.

The Patient Protection and Affordable Care Act (ACA) was signed into law in 2010 and is aimed at reducing the number of uninsured people in America as well as the costs of health care. Implementation of various provisions of the Act will take place through 2020 and Americans will be asked to make new decisions about their healthcare and health insurance options. People are much more informed about the ACA than they were a year ago and, as a result, the number of uninsured people has decreased considerably. Recently, State Farm and Blue Cross announced a partnership to sell Obamacare policies. Mintel has invited two of its analysts from different sectors to weigh in with their thoughts.

img_stephanie_royStephanie Roy, Sr. Industry Analyst, Insurance:

The partnership between State Farm and HCSC’s Blue Cross affiliates in advance of the marketplace opening for 2015 enrollment serves to benefit both brands as well as consumers. BlueCross BlueShield and State Farm each bring brand strength to the relationship: BlueCross BlueShield of Illinois (BCBSIL) accounted for 92% of enrollment for the 2014 plan year on the state’s marketplace. That, along with State Farm’s vast network of agents in areas that previously went unreached, stands to increase reach both on and off the exchange during 2015 enrollment. Consumers, 42% who prefer to get information about insurance products from agents, also stand to benefit with a wider network of agents to learn about health insurance options.

This market dominance offers the new partnership an opportunity for high visibility in a consumer’s mailbox. To date in 2014, State Farm is the second largest mailer of all direct mail acquisition offers in the insurance sector, with a 12% share of total voice. While partnerships like State Farm and HCSC are not unique, the partnership has the opportunity to set itself apart by promoting the products consistently across multiple marketing channels. There are other partnerships, for example, various Farm Bureau agents sell health insurance products from Blue Cross companies such as Wellmark and BlueCross BlueShield of Minnesota. These have been around for some time, but a majority of the marketing for these partnerships has been observed in print publications, and less so in the direct mail space or across other channels.

As other large health insurance companies ramp up efforts to market offerings for the 2015 plan year, competition is another reason the partnership will benefit BCBS companies partnering with State Farm. Not only are more insurers joining the public exchanges to sell their products, companies are also participating in private exchanges to sell products to individuals and small businesses. UnitedHealthcare, even developed their own proprietary private marketplace exchange that aimed to provide health solutions, tools, and an integrated experience for plan sponsors and groups with 51 or more individuals. The increased reach available with the State Farm partnership, allows consumers to purchase BCBS plans through a variety of avenues. The ability to purchase products through various distribution channels only looks to continue as brands search for multiple ways to best reach consumers in the years to come as more individuals sign up for coverage.

img_robyn_kaisermanRobyn Kaiserman, Financial Services Industry Analyst:

By partnering with State Farm to sell individual health insurance policies, Blue Cross/Blue Shield is positioning itself to take on the increased competition expected in the health insurance industry in 2015. According to preliminary data reported by the Department of Health and Human Services, there will be a 25% increase in the number of health insurance issuers offering Marketplace coverage in 2015 compared to 2014. At least 67 issuers in the federally-facilitated marketplace and 10 issuers in the state-based marketplaces will be new to the marketplaces. Clearly, competitors who held back from participating in the exchanges due to a “wait and see” attitude have decided that exchanges do indeed offer good business opportunities and are planning to go after them in 2015.

The potential benefits of this partnership to both Blue Cross and State Farm are great. Blue Cross stands to gain much more exposure in states where State Farm offers more coverage in remote areas, and State Farm agents will earn commissions for both individual and family policies sold on and off the exchanges. The State Farm brand name will no doubt help Blue Cross, as will the 11,000 State Farm agents that are spread out around the five states, especially since the open enrollment period will be three months shorter in 2015 than it was in 2014.

While the BCBS-State Farm partnership will only be effective in five states, it will be a good test of partnership models of this type. It follows on the heels of a similar partnership that was created in 2012 between Aetna and Costco and offered in nine states. The partnership enables Costco members to purchase one of several health insurance policies from Aetna through Costco at a price designed to be less expensive than the state exchanges. These two partnerships, both between major players in their respective industries, may well be harbingers of the future as insurers look for ways to win customers in an increasingly competitive market.

Stephanie Roy is a Senior Industry Analyst focused on insurance for Mintel Comperemedia. She is responsible for providing internal and external stakeholders with insights and analysis on trends in the Life and Health insurance industries.

Robyn Kaiserman does research and analysis and writes in-depth reports for use by clients in and associated with the financial services industry. Her most recent topics include Life Insurance and Mortgages and HELOCs.

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