Health insurers spent $22M on advertising in 2010
By TRACEY DRURY
[email protected] | 716-541-1609
If it feels as though you can't drive down the road or open a newspaper without seeing a health-insurer logo, there's a good reason for that. Actually. 22 million reasons.
BlueCross BlueShield of Western New York, Independent Health and Univera Healthcare spent more than $22 million last year on marketing, advertising and branding including media advertising, billboards and direct mail, according to annual reports filed with the state Insurance Department, now part of the State Department of Financial Services.
That media spend, which is part of the health plans' administrative expenses, included $7.7 million with Eric Mower and Associates from HealthNow New York Inc., the parent of BlueCross; $4.9 million with Gelia from Independent Health; and $5.4 million with Butler Till Media Services in Rochester from Excellus Health Plan, Univera's parent company. All three health plans buy advertising in Business First.
Executives at the three health plans say the dollars spent are just a fraction of premium dollars - in most cases less than a penny on every dollar - and are actually less than plans spend in other markets relative to their size. But, not surprisingly, each is quick to stress that they're spending less than their competitors.
"It kills me, it pains me to see how much the others spend on marketing and advertising - in particular with the Bills and Sabres," says Art Wingerter, president of Univera. "We're outspent probably 10 to 1 or maybe 10 to 2 in our market."
Wingerter says only a small portion of the total Excellus marketing/advertising budget is spent in Western New York, where the company has 145,000 members. In total, the company spends more than $8 million to reach existing and prospective members throughout the Rochester region, as well as Western New York, Central New York and Utica.
With 2010 revenue of $5.2 billion, Excellus serves 1.8 million members for health insurance and self-funded business, plus another 647,000 members enrolled in dental products. Total spending on advertising/marketing exceeded $8 million.
Rather than target members in its advertising campaigns, Univera instead seeks to reach human resource officers and CFOs by promoting its ActiveRewards plan that offers cash back to those who live healthier lifestyles, Wingerter says.
"When you take Excellus as a whole and then trickle down, our costs for total advertising and marketing spent per member, per month is far, far less than our competitors," Wingerter says. "We just don't think that's a good use of the consumer's premium dollars."
Comparing spending here with other markets or companies in other states is also hard to gauge: Both the New York Health Plan Association and the New York State Conference of BlueCross and BlueShield Plans say they simply don't ask members and don't track that information.
Advertising and marketing industry professionals say there's no hard and fast rule for how much a company should spend relative to its overall budget, and there are no set guidelines for nonprofit organizations like health insurers versus private companies either. Measuring return on investment is even more difficult, says Robert Carr, president of Carr Marketing Communications, which holds no contracts with any of the three health plans.
"You have to take a look at how prominent your brand is through surveys and top-of-mind awareness," he says. "If people are going to enroll in your program, what you're trying to do is influence behavior and you have to measure that. Are they receptive to your organization, do they accept your organization? Sometimes that's dictated not on an individual level if the employer only offers one or two programs."
It would be even more difficult to measure if spending $10 million on advertising now has a longer term impact of reducing health care costs, says Robert Travers, a partner at Travers Collins & Co., which has provided contract services to Independent Health for about 15 years, including $231,897 in business last year.
"There are so many variables," Travers says. "It depends on the category too. If you're business-to-business, and doing $2 billion in sales, you may not have to even spend $1 million. Your market segments can be reached effectively with a lot less money."
Each insurer has different campaign goals, be it spreading awareness about the brand, capturing or retaining members or selling a particular product. For others, it could be changing behaviors to lower costs in health-care spending.
"You know that there's going to be investment spending if you're trying to create awareness, like BlueCross BlueShield is doing with Healthy Changes Everything," Travers says. "With Independent Health, it's a different approach: It's more about personal satisfaction and meeting expectations. It's saying 'our brand is there when you need it.'"
Independent Health executives say the company focuses on highlighting its reputation, allowing the customer experience to speak for itself through customer testimonials. With total revenue of nearly $1.09 billion in 2010, the company has 350,000 members in Western New York across all lines of business. The company spent over $5 million for marketing/advertising last year.
Dr. Michael Cropp, president and CEO, says the company has been "rigorous and disciplined" in its advertising efforts, partly in response to its competitors' media campaigns.
"We can't be completely silent out there, but we know that we don't need any more awareness - people know who we are," he says.
"Overall, the dollars we spend on advertising are a small piece of our overall administrative expense, which is really quite a lot for the industry."
Communicating that to members, many of them unhappy with rising premium costs, can be difficult. It's hard to rationalize a multi-million dollar advertising budget, even after calculating the percentages on over $1 billion in revenue, Cropp says.
"It's a challenge," he says. "It's a complicated answer. When you want to sell new products and services, you've got to make people aware and you've got to show them how it fits into their life and how it's better than the alternative. We are a business and we compete. In order to be an effective and good competitor, you've got to continue to generate interest and an uptick in products."
HealthNow/BlueCross BlueShield continues to push its "Healthy Changes Everything" branding campaign out to 800,000 members, including 500,000 in the Western New York region. The company had total revenue of $2.44 billion in 2010, spending nearly $9 million on marketing/advertising.
Cheryl Howe, executive vice president for operations, says the company's total media spend goes across multiple markets beyond Western New York, including Albany, California, Arizona, Massachusetts, New Jersey and Pennsylvania.
"When you think about the spend, it's rather modest, comparatively speaking," she says.
Alphonso O'Neil-White, president and CEO, says the goal of the spending is to shift perspectives about the "Blue" brand, focusing on healthy lifestyles and positive outcomes. And, he says, it's about a lot more than just beating out local competitors.
"The health-care reform debate didn't help us. There was a lot of negativism about health insurance companies and we're trying to combat that, just like what M&T is trying to do given the negative perspectives about banks," he says.