Kaiser Permanente marketing

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Adjunct Professor Kristiana Raube and Continuing Lecturer Lynn Upshaw prepared this case study as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2014 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored, or transmitted in any form or by any means without the express written permission of the Berkeley-Haas Case Series.

Date: March 10, 2014 K R I S T I A N A R A U B E L Y N N U P S H A W

Thrive or Revive? The Kaiser Permanente “Thrive” Marketing Programs From the window of her office on the 27th floor of Kaiser Permanente’s headquarters building, Christine Paige looked out over a sweeping view of Lake Merritt in the heart of Oakland, California. The lake’s placid waters stood in stark contrast to the tumultuous healthcare industry that Paige had to contend with every day in her role as Kaiser Permanente’s Senior Vice President of Marketing. On this crisp and clear day in November 2013, Paige was preparing for an upcoming executive committee meeting in which she needed to recommend some necessary changes in Kaiser’s long-running and greatly admired “Thrive” marketing programs. Some of the thorny questions she would be expected to address: (1) How should Kaiser Permanente capitalize on the widespread success of its innovative Thrive healthcare marketing programs? (2) How could Kaiser Permanente’s marketing become even more accountable in terms of generating tangible membership gains? (3) What is Kaiser Permanente’s best marketing strategy moving forward, given the rise of competition that was mimicking its wellness approach? and (4) How could Kaiser Permanente’s marketing programs best weather what would likely be a difficult transition period when the controversial Affordable Care Act was fully implemented, beginning in 2014?1 Paige took one last glance at the water as she refocused on the documents on her desk and computer as she worked to come up with the optimal plan. She knew her management team would be anxiously anticipating her leadership and vision.

1 The Affordable Care Act (ACA), more commonly known as Obamacare, represents the most significant regulatory overhaul of the country’s healthcare system since the passage of Medicare and Medicaid in 1965. It aims to increase the quality and affordability of health insurance, lower the uninsured rate by expanding insurance coverage, and reduce the costs of healthcare for individuals and government. http://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act.

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KAISER PERMANENTE MARKETING 2

Brief History of the Tumultuous Healthcare Insurance Marketplace Despite being the largest economy in the world, by 2013 the U.S. healthcare marketplace was failing many Americans. The U.S. spent two and a half times more than most developed countries in the world2, and devoted nearly 18 percent of its GDP to healthcare, significantly more than other countries.3 Yet 48 million Americans had been without health insurance as recently as 2011.4

In the 2013 Kaiser/HRET Employer Health Benefit Survey,5 95 percent of employers with 50 or more employees reported offering health insurance benefits. However, the costs of those plans had been increasing precipitously. Over the past 14 years, health insurance premiums and worker’s contributions to those premiums increased by 182 percent, at a time when workers’ wages increased by only 50 percent (Exhibit A). In 2012, the average premium for insurance for a family was $15,746, which was significantly higher than that paid the previous year. In response to these ever-increasing costs, the distribution of health plan enrollment had changed dramatically since 1988, when more than 76 percent were in a so-called “conventional” health plan, which typically meant that the enrollee could see any provider they chose, who would be paid on a fee- for-service basis.

Because costs were difficult to control in these plans, premiums rose rapidly and by 2013, less than one percent of workers were enrolled in conventional plans (Exhibit B). Further, 57 percent of employees were enrolled in a PPO(preferred provider organization) plan, in which enrollees saw a limited group of providers who agreed to provide care to subscribers for a negotiated, discounted fee. The largest recent growth had been in High Deductible Health Plans, which included 20 percent of workers with health insurance, a dramatic increase from essentially no enrollees in 2006. Because the premiums for these plans were much lower, they were particularly popular amongst employers with 100 or fewer employees; in fact, 49 percent of those employers’ workers were enrolled in a health plan with a deductible of $1,000 or more for a single enrollee. Of these employers (100 or fewer employees), another 14 percent of workers were enrolled in an HMO (health maintenance organization) such as Kaiser Permanente. Under this type of plan, a managed care company organized and provided healthcare for its enrollees for a fixed prepaid premium. The percent of workers in HMOs had decreased from 31 percent in 1996, yet varied dramatically by state. For example, in California, which was the home of Kaiser Permanente, the percent of workers in HMOs increased from 49 percent in 2010 to 55 percent in 2012.6

Kaiser Permanente: Searching for a Better Way to Deliver Healthcare Founded in 1945 by industrialist Henry J. Kaiser and Dr. Sidney Garfield, Kaiser Permanente was originally established to meet the need for affordable healthcare for Kaiser’s steelworkers and shipbuilders (Exhibit C and Exhibit D). By 2013, Kaiser Permanente had grown to become one of the nation’s largest not-for-profit health plans, with approximately $50 billion in revenue, employing more than 180,000 staff and 17,000 physicians—and serving more than nine million members in California and eight other states and the District of Columbia. Kaiser Permanente was an integrated managed care consortium—a form of health maintenance organizations in which members paid a flat monthly fee for largely unlimited care, but who were required to obtain care from 2 OECD Health Data, 2012. 3 OECD countries spend, on average, 9.5 percent of GDP on healthcare. 4 US Census, “Income, Coverage and Health Insurance Coverage in the United States, 2011.” 5 The Henry J. Kaiser Family Foundation is not associated with Kaiser Industries or Kaiser Permanente. 6 CHCF/NORC Employer Benefit Survey 2013.

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within the Kaiser Permanente system of providers, except under rare circumstances. Approximately 75 percent of Kaiser Permanente’s members signed up through their employers. Kaiser Permanente was composed of three, closely integrated organizations: the Kaiser Foundation Hospitals and their subsidiaries, the physical medical facilities that served patients; the Permanente Medical Groups, the physicians who provided care for Kaiser Permanente members; and the Kaiser Foundation Health Plan, the marketed healthcare delivery program and the focus of Kaiser Permanente’s marketing programs.

Kaiser Permanente competed against some of the most aggressive healthcare insurers in the nation, notably the “Blues” (Blue Cross and Blue Shield), as well as other major health insurers such as United Healthcare, HealthNet, Aetna, CIGNA, and Humana. In California, Kaiser Permanente’s largest market, Kaiser had achieved a 40 percent market share by 2011, followed by Anthem Blue Cross (20 percent), Blue Shield of California (15 percent), HealthNet (8 percent), United Healthcare (5 percent), Aetna (5 percent), CIGNA (4 percent), and other smaller plans (5 percent).7

Kaiser Permanente was among the first to introduce or perfect many important innovations to the U.S. healthcare system, including: 1) prepaid health plans, which distributed costs to members in order to make them more affordable; 2) physician group practices that enabled doctors to more effectively care for their patients; 3) a pioneering focus on preventing illness in addition to caring for the sick; 4) an integrated delivery system that consolidated services in order to more efficiently provide care for members; and 5) electronic medical records. In fact, as noted in The New York Times: “When people talk about the future of health care, Kaiser Permanente is often the model they have in mind.”8

The Marketing Challenge As the health insurance field grew more competitive, Kaiser Permanente management was becoming concerned that the organization was not fielding the most compelling marketing programs. They understood that the organization was viewed by many non-subscribers as a lower-quality/lower-value healthcare option. Specifically, in 2003, 75 percent of non-members would not even consider Kaiser Permanente for their healthcare coverage. This attitude stood in stark contrast to the fact that Kaiser Permanente members were far more satisfied with their care than those in competitive organizations.9

It became clear that there was a need for a marketing communications effort to reverse the negative perceptions of Kaiser Permanente. The organization’s advertising in the 1990s and early 2000s touted its highly qualified, caring physicians; but such claims were very similar to competitor messaging and failed to convey the innovativeness inherent in the Kaiser Permanente healthcare model. Such earlier marketing and advertising also did nothing to counter the periodic negative publicity about Kaiser Permanente’s medical services. Although the marketing and advertising from that earlier era did not differentiate the Kaiser Permanente brand, it did help bolster internal morale among selected employees such as Kaiser Permanente physicians who were spotlighted in the ads.

In an effort to achieve greater separation from competitive health plans, Kaiser Permanente initiated a major qualitative research program dubbed, “The Big Dig.” In a series of strategically designed qualitative discussions with healthcare consumers in 2002, the research uncovered what was called “a new paradigm

7 http://www.chcf.org/publications/2013/03/data-viz-health-plans downloaded 7/31/13. 8 “The Face of Future Health Care,” New York Times, 3/20/13. 9 Company research reports, 2003

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about health” that would prove to be critical to the development of a new marketing approach for the organization. The research led to many important insights:

x Traditional healthcare focused on the physical and clinical; the new health was about lifestyle and a balancing of the physical, emotional, and spiritual. Health was not just a physical state, it was a state of mind.

x Whatever direction Kaiser Permanente pursued, they needed to focus on fundamental human truths, not the same old bromides the industry had touted for years.

x It wasn’t about “us” at Kaiser Permanente, but about “them,” the healthcare consumers. Unlike the way the world viewed many competitive healthcare insurers, Kaiser Permanente’s priorities should be driven by those of its members.

x After years of industry problems, the term “healthcare” was filled with negative associations and imagery, while the term “health” was associated with positives. “Healthcare” equated to sickness, exorbitant costs, and heartless HMOs and health insurers companies. In contrast, “health” connoted “wellness,” “empowerment,” “happiness,” and “life balance.”

x Because the healthcare category was viewed with such cynicism by consumers Kaiser Permanente’s operational emphasis on proactive prevention—which consumers greatly valued—was an untapped asset.10

Many of these conclusions were subsequently validated by a 2004 Forrester Research study that confirmed that Kaiser Permanente was seen as far stronger than the competition on the attribute of “health advocacy.”11 Kaiser Permanente’s Marketing and Brand Platform Strategies Kaiser Permanente’s overall marketing strategy was to motivate potential members to learn more about their health plans and to choose it over competitive plans offered through their employer’s healthcare benefit programs. More specifically, the goal was to “raise awareness of Kaiser Permanente in the minds of consumers and purchasers, and to increase their willingness to consider Kaiser Permanente as their healthcare provider.”12 With the results of The Big Dig in hand, Kaiser Permanente now had the insights they needed to help achieve that goal through a more contemporary and customer-relevant approach to healthcare marketing that involved capitalizing on Kaiser Permanente’s unique services structure, taking the position of a proactive health advocate, and becoming more relevant and compelling to the end-users of Kaiser Permanente’s services.

Based on this new overarching marketing strategy, the Kaiser Permanente marketing team crafted a new brand positioning, summarized as:

“We stand for Total Health: Kaiser Permanente’s integrated health care delivery system and commitment to preventive care empowers our members to maximize their total health—in mind, body, and spirit.”

That statement would serve as an internal call to action and an external manifesto that was, at the time, a direct counterpoint to the industry’s more common company-centered perspective.

10 Company “Big Dig” report. 11 Forrester Consumer Technographics North American Online Study, August 2004. 12 “Thrive Ad Campaign Changing Consumer Perceptions of Kaiser Permanente,” Kaiser Permanente Press Release.

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Working with the support of Kaiser Permanente executive sponsor and then-Senior Vice President Bernard Tyson (now Kaiser Permanente's Chairman and CEO), Christine Paige’s team hired a communications firm in 2003 to help them articulate their new strategic direction. Advertising and marketing agency CampbellEwald, best known for its work for GM's Chevrolet division, helped Kaiser Permanente create a fresh approach to their marketing efforts by rethinking how to articulate and communicate health advocacy. It was Campbell Ewald who proposed that Kaiser Permanente’s marketing messaging should be less about what the organization did and more about what it believed. And, what Kaiser Permanente believed—and what they demonstrated everyday with their current members—was that they should help people to stay healthy, not just help them to get well after they became sick.

The agency captured all of this thinking in the single-word positioning line, “Thrive.” According to Tyson: “This campaign is not a new direction for Kaiser Permanente, but a new way of talking about what we do.”

Bringing “Total Health” to Life in the Marketplace Based on The Big Dig and other research, the Kaiser Permanente marketing team identified five major consumer segments and decided to focus their new marketing program on the segments called the “Proactives,” “Alternatives,” and “Basics” (Exhibit E). Research showed that Kaiser Permanente’s proactive approach to health and prevention resonated with these segments. The challenge was to communicate Kaiser Permanente’s total health approach more effectively.

The overall communications goal was to achieve more positive attitudes about Kaiser Permanente among healthcare consumers. This would be accomplished via an emotional connection with their often-skeptical audiences by: 1) reinventing the language of healthcare, 2) redefining the system of healthcare, and 3) championing the cause of “Total Health.” That cause was articulated in the words of the campaign's customer- centered creative strategy: “Kaiser Permanente empowers me to maximize my well-being and live a happier, healthier life. In other words, to thrive.” As Paige later put it: “The concept is centered on the consumer and Kaiser Permanente’s role in empowering them to have the kind of healthy life that they want…. This bold statement is a way to break through stereotypes that the public may have about healthcare, and especially about Kaiser Permanente. We believe that all of us have the opportunity, regardless of healthcare status, to be well and do well.” In addition, a key goal of the campaign was to motivate Kaiser Permanente’s tens of thousands of employees as brand ambassadors who would rally around and “live” the new Kaiser Permanente brand. Thrive External and Internal Marketing Tactics The Thrive marketing communications campaign was aggressively implemented over eight years beginning in 2004, via far-reaching broadcast, print, out-of-home, and online media channels. The campaign was supported initially with $40 million in annual advertising spending, which was increased to more than $50 million per year in subsequent years.13 Thrive was eventually rolled out to all of Kaiser Permanente’s regions, and included a heavy broadcast schedule, as well as prominent exposure in print, out-of-home, and later in online media channels. The broadcast efforts used popular actress Allison Janney (West Wing) as the Kaiser Permanente spokesperson voice-over, who told the KP/Thrive story through a voice of credibility and intelligence. “Thrive” won many creative communications awards and was acknowledged throughout the industry as one of the most powerful healthcare campaigns in the country (Exhibit F). 13 Rauber, Chris, San Francisco Business Times, August 7, 2008.

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Beyond traditional marketing of Kaiser Permanente’s healthcare services, the Thrive campaign highlighted how numerous programs demonstrate the organization’s commitment to offering members multiple ways to achieve “total health.” Some of these included:

x KP HealthConnect: a massive electronic initiative that integrated patients’ clinical records with appointment, registration, and billing. This electronic system monitored preventive care measures for each patient and provided health reminders to patients and providers.

x Health and Wellness Classes: Members were provided or encouraged to embark on proven exercise

regimens, yoga, tai chi, smoking cessation courses, mindfulness training, instruction in stress reduction, and other classes. Many of these programs were made available online as well as in central meeting places.

x Community Benefit Programs: Kaiser Permanente devoted several hundred million dollars in services and funding to promote the overall health of communities as a whole.

Internally, the Thrive campaign helped align employee understanding of what the new and improved Kaiser Permanente brand stood for. Thrive was socialized internally on multiple levels, including through employee online and offline internal communications, extensive Total Health training, frequent and comprehensive distribution of the Thrive marketing communications, and an ongoing integrative effort between the physicians of Kaiser Permanente and the business side of the organization to “bring ‘Thrive’ to life in every aspect of patient care and treatment.”14 Kaiser Permanente employees were so motivated by the Total Health/Thrive approach that it had a major positive impact on every aspect of the organization, including physical plant design, signage, policies and procedures, and employee morale. In fact, during negotiations with Kaiser Permanente management, employee union leaders specifically asked that the Thrive campaign be continued because they felt it was a great morale booster for the Kaiser Permanente staff. Whenever asked, employees described the Thrive campaign as spirited, positive, and uplifting—a strong indication that Kaiser Permanente was moving forward.15

One of the internal brand alignment benefits of the Thrive campaign was the rebranding of many Kaiser Permanente patient services to more fully reflect the more contemporary look and feel of Thrive. For example, Kaiser Permanente’s “Optical Services” department was renamed “Vision Essentials” and “Health Education” became “Healthy Living” (Exhibit G).

In another closely aligned initiative in 2003, Dr. Preston Maring, a Kaiser Permanente obstetrician/gynecologist, organized a weekly farmers market to sell fresh fruits and vegetables at the Oakland California Kaiser Permanente Hospital. Capitalizing on the momentum built by the Thrive campaign, 55 of the Kaiser Permanente facilities eventually established weekly farmers markets over the next 10 years. The Thrive Campaign also inspired other Kaiser Permanente employees to organize farmers markets outside of the Kaiser Permanente facilities, including the opening of a weekly market in the Watts neighborhood of Los Angeles, an area that offered residents few options for obtaining fresh fruits and vegetables.

Similarly, Dr. Bob Sallis, a Kaiser Permanente family physician and former President of the American College of Sports Medicine, became an important advocate and authoritative spokesperson for the “EveryBody Walk” campaign launched by former Kaiser Permanente CEO George Halverson. The “EveryBody Walk” initiative recommended walking 30 minutes a day, five days a week, and was adopted by the U.S. Surgeon General Dr. Regina Benjamin, who issued a Call to Action for all Americans to walk as frequently as possible.

14 http://www.everybodywalk.org. 15 Author interviews with Mike Dowling, Kaiser Permanente, 2013.

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More recently, Kaiser Permanente significantly expanded its digital footprint by launching an integrated digital program whose goal was to achieve greater reach and interaction with current and potential members through “owned” (e.g., website), “paid” (digital advertising), and “earned” (social media word-of-mouth) digital vehicles. The program sought to more aggressively convey the organization’s consumer value proposition through member stories, videos, medical team chronicles, health reform information, prevention guidelines, and chronic care information. Importantly, this more advanced digital presence—much of which was consolidated under the flagship www.kp.org site—began to serve as the “front door” for Kaiser Permanente’s sales properties for individual plans, Exchange plans, and Medicare coverage. The Thrive advertising was then used to drive customers and prospects to kp.org, an effort that became a prime example of how the Thrive brand advertising supported direct consumer sales.

Campaign Results As the Thrive campaign began to take hold, Kaiser Permanente marketers observed multiple positive attitude shifts among their members between 2004 and 2012:16

Criteria Attitudes about Kaiser

Permanente among Kaiser Permanente Members

Attitudes about Kaiser Permanente among Non-

Kaiser Permanente Members

Attitudes about Blue Cross plans among Non-Kaiser Permanente

Members

2004 2012 2004 2012 2004 2012 Provides excellent care 78% 87% 37% 46% 59% 64% Top-notch MDs 70 81 32 41 63 66 Compassionate 68 82 30 46 44 47 Changing for the better 47 60 29 41 18 16 Overall opinion 79 90 30 41 46 55 Consider joining KP -- -- 38 39 67 63

However, despite strong attitudinal gains, the “consider joining” score among Kaiser Permanente non- members remained statistically flat during the same nine-year period. On the other hand, Kaiser Permanente significantly out-performed its Blue Cross competition in improving scores on virtually all such measures.

The Thrive marketing communications also increased significantly in terms of awareness and the delivery of key messaging. In the Fall of 2012, for example, positive perceptions among those who had seen Kaiser Permanente advertising versus those who did not were measurably higher across key criteria. These included:

Criteria Consumers who had

seen no Kaiser Permanente TV ads

Consumers who had seen at least one

Kaiser Permanente TV ad

Difference

Provides excellent care 33% 39% + 6 pts. Top notch MDs 33 37 + 4 Proactive about keeping people healthy 40 49 + 9 Leader in technological innovation 31 37 + 6 Overall opinion 33 36 + 3 Willingness to consider Kaiser Permanente

25 23 - 2

Again, however, the “willingness to consider Kaiser Permanente” score did not improve and, in fact, marginally declined. In addition, the Kaiser Permanente Fall 2012 Net Promoter Scores indicated a strong

16 Company reports; percent reporting 9 or 10 on a 10 point scale.

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support of the health plan among its members, relative to competition.17 For example, Kaiser Permanente’s Net Promoter Scores among Kaiser Permanente members in most of its regions were 20 to 40 points higher than the scores for local Blue Cross plans among Blue Cross members.18

There were also some preliminary, but as yet unconfirmed indications that the Thrive campaign was beginning to have a directional impact on subscriber sign-ups. For example in 2012 alone, membership increased 131,000 to an expanded base to more than nine million. The company believed that the Thrive campaign was a contributing factor to that membership boost.19 Further, Kaiser Permanente saw measureable gains in membership during two of three Thrive advertising heavy-up tests held in 2010 and 2011.20

An unexpected but welcome added benefit of the Thrive program was a significant rise in positive attitudes among both current and prospective employers offering Kaiser Permanente to their employers due to their exposure to the broad-based Thrive marketing efforts. For example, in 2009, after five years of exposure to the Thrive campaign, perceptions of Kaiser Permanente were significantly higher among employers without Kaiser Permanente plans in such key attitudes as “(has) top-notch doctors” (38 percent in 2009 vs. 28 percent in 2004), “effective at keeping employees on the job” (45 percent vs. 37 percent), and “serious about proactively keeping people healthy” (59 percent vs. 51 percent). This positive trending also coincided with more diversified product offerings, greater pricing transparency, and increased sales focus on reducing upstream cost savings. In addition, Kaiser Permanente conducted research among employer companies that carried Kaiser Permanente versus those that did not, and discovered that the Thrive campaign had generally had a positive impact on both groups. Specific conclusions from the research included:

x “Thrive is positively perceived, but its role in Non-Customer (Employer and Broker) B2B21 applications is still unclear.”

x “When decision-makers are acting more like consumers, or are heavily considering what their

employees will want, Thrive is seen as a strong asset.”

x “Among Current Customers, the Thrive logo is noticeable, expected, and immediately identifies KP communications.”

As one employer offering KP plans put it, “Live well and thrive is the most memorable and compelling thing going for Kaiser Permanente. It shows concern and is a great tagline to associate with Kaiser Permanente.” 22 The Emerging Challenges of the Affordable Care Act On March 23, 2010, President Obama signed into law the Affordable Care Act (ACA), now better known as “Obamacare.” This landmark legislation, which expanded health insurance coverage for Americans, was controversial from the outset. It survived a challenge in the Supreme Court and more than 40 attempts by the House of Representatives to repeal the legislation. In addition, during the 2012 presidential election, President Obama was reelected over opponent Mitt Romney, who had promised: “If elected, I will repeal

17 The Net Promoter Score is based on a simple question, “How likely is it that you would recommend Kaiser to a friend or colleague?” On a 0-to-10 point rating scale, those scoring 9 or 10 are considered “Promoters,” who are loyal enthusiasts who will keep buying and refer others. Detractors score 0-to-6 points and are unhappy customers. The net score is calculated by taking the percentage of promoters minus the percentage of detractors.

18 Company reports. 19 “Kaiser Plans Thrive 2013 as Exchanges Take Shape,” PR Week, April 26, 2013. 20 Company reports. 21 Business to Business (B2B). 22 Company reports.

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Obamacare on Day 1.”23 A government shut-down in October 2013, just as the health exchanges, a key component of the law were rolled out, was an attempt by Republicans to repeal and then delay the law. Despite continuing unfavorable public views of the legislation,24 it was poised for full implementation in 2014. At that time, the ACA would require most Americans to have health insurance. In 2013, approximately 48 million people did not have health insurance—when Obamacare became fully implemented, it would expand coverage to 30 million additional people. Approximately half of Americans would continue to receive health insurance through their employers, much as they did before 2014. A third would receive health insurance through the government programs of Medicare or Medicaid, while 10 percent would purchase insurance themselves, leaving less than 10 percent without any coverage. Employer-based insurance would not change dramatically, except that there would be caps on out-of-pocket payments and a new requirement that all plans covered preventive care (which, of course, Kaiser Permanente had been implementing for years prior to ACA). Additionally, starting in 2010, all insurers and employers offering dependent care had been required to offer coverage to dependent children up to age 26. Further, all employers with 50 or more employees would be required to provide health insurance beginning in 2015. Smaller employers would be encouraged to purchase health insurance by providing subsidies for use in newly established healthcare exchanges or marketplaces for the purchase of private insurance plans. The insurance would be set up on either a state-based or national basis, and both small employers and individuals who did not receive employer-provided insurance or did not qualify for Medicare or Medicaid could shop for insurance in the new exchanges. These insurance marketplaces would have more transparent pricing and standardized plan choices than previously available. Individuals who earned less than 400 percent of the federal poverty level (for example, $78,120/year for a family of three) would receive a subsidy to help them purchase health insurance in the exchange. The early rollout of the health exchanges was less than smooth, dogged by computer glitches that made signing up for insurance difficult.25 For those with Medicare, the largest changes were implemented before 2014 and helped seniors and the disabled with drug purchasing and better preventative care coverage. Medicaid, on the other hand, would see many changes beginning in 2014, including expansion of coverage for those up to 138 percent of the federal poverty level, or $15,856 in annual income for a single person. The Supreme Court ruled that states were not required to expand Medicaid as originally required under the law. Therefore, despite federal funding to cover the initial additional state costs for expanding Medicaid, many states were unlikely to expand their Medicaid programs, leaving a portion of the population in those states uninsured.

Decision Time Despite Kaiser Permanente’s great success with the Total Health positioning and Thrive campaign, the company still had many challenges ahead, including the negative perceptions of HMOs. According to a June 2013 Gallup survey, only 19 percent of Americans had “a great deal” or “quite a lot” of confidence in HMOs (the only lower rating was for the U.S. Congress), compared to 35 percent for the U.S. medical system as a whole.26 Even more unsettling, all of the historic changes in healthcare put tremendous pressure on health insurers, including Kaiser Permanente. Such companies had to make tough strategic decisions about: 1) what their overall role should be in the new healthcare environment; 2) whether to participate in the state or federal healthcare exchanges; 3) whether to offer Medicare or Medicaid managed care plans; and 4) whether to

23 http://news.yahoo.com/romneys-pledge-repeal-obamacare-elected-165418907.html. 24 In the June 2013 poll by the Kaiser Family Foundation, 43% had an unfavorable view of the law, 35 percent had a favorable view, and 25 percent were undecided.

25 Pear, Robert, LaFraniere, Sharon, Austen, Ian, “From the Start, Signs of Trouble at Health Portal,” New York Times, October 12, 2013. 26 http://www.gallup.com/poll/1597/confidence-institutions.aspx#1.

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participate in the pilot programs in which Medicare would pay a bundled payment for episodes of care (as opposed to a fee-for-service payment). Each of these decisions had significant implications for marketers in such organizations as Kaiser Permanente, raising such questions as: should marketing try to convert as many prospects as possible or focus only on the more profitable segments. And, who might those segments be in this new healthcare environment? And, would the seismic changes in healthcare offerings fundamentally change the “drivers of choice” for prospective members and employers? The “Total Health/Thrive” program had successfully boosted positive perceptions of Kaiser Permanente, but the dearth of hard data regarding subscriber increases was weighing on Paige’s mind as she pondered what to recommend to management. More specifically, she worried that:

x The healthcare consumer and employers will likely be very confused by the new environment, not to mention skeptical about whether the Affordable Care Act will, in fact, actually make quality healthcare more affordable.

x Competitive healthcare insurers were circling fast, and many were adopting a “wellness” approach similar to that of Kaiser Permanente, creating a “white noise” effect in the industry surrounding wellness.

x In addition, the percentage of enrollees in traditional HMO plans like Kaiser Permanente’s continued to decline, except in some states such as California.

x Among the general public and selected audiences, there continued to be a disturbing gap between the

actual quality of care provided by Kaiser Permanente and non-member perceptions of that care.

Given those challenges and the uncertainties of the unfolding Affordable Care Act, Paige needed to provide management with her and her team’s recommendations about the optimal next moves for marketing Kaiser Permanente. As she formulated her decisions, she was acutely aware that Kaiser Permanente may not have a second chance to get it right. The specific questions she knew she needed to address were:

1. How can Kaiser Permanente expand its penetration into more employer groups and, in the process,

expand its consumer membership? 2. Should Kaiser Permanente continue to focus on a “Total Health” strategy, or does the impending ACA

environment require another strategic approach? 3. Correspondingly, should Kaiser Permanente move away from the Thrive campaign, given the

apparent commoditization of “wellness” strategic approaches by competitors? Should Kaiser Permanente move on to a more contemporary campaign, or should they continue to rely on the power of “Thrive” and simply update that approach?

4. What metrics should be used to measure their success? More specifically, how could Paige address

management’s desire to see evidence that the campaign has resulted in increased enrollment, return on marketing investment (ROMI), or other similar “hard metrics?” Or, should she resist that pressure from management and recommend another way to look at marketing metrics at Kaiser Permanente?

Paige glanced one more time at Lake Merritt outside her window, then began preparing for her management meeting, hoping that her marketing recommendations would help Kaiser Permanente successfully navigate the choppy waters that lay ahead for the healthcare industry.

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Case Discussion Questions

1. What is your overall assessment of Kaiser’s Total Health positioning and its Thrive campaign to date? What are the key lessons that can be learned from its experience with the marketing program in the marketplace?

2. How can Kaiser expand its penetration into more employers and build its consumer membership? Are these the only marketing objectives Kaiser should be seeking to achieve?

3. Should Kaiser continue to focus on a Total Health brand positioning, or does the advent of the Affordable Care Act environment require another strategic approach? If so, what brand positioning would you recommend, and specifically why?

4. Tactically, should Kaiser move away from the Thrive campaign, given the apparent commoditization of “wellness” strategic approaches by competitors? Do you have any tactical approaches that you believe might have merit?

5. How can Christine Paige address management’s desire to see evidence that the campaign has resulted in increased enrollment or other similar “hard metrics?” Or should she resist that pressure from management and recommend another way to look at marketing metrics at Kaiser? Moving forward, which marketing metrics should be used to track the progress of Kaiser’s marketing programs, given the organization’s business and marketing goals?