BusinessWeek 50 Forum

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BusinessWeek 50 Forum
Thinking Like Customers
Leonard D. Schaeffer Chairman and CEO WellPoint
Health Networks Inc.
October 7, 2004
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Agenda

• About WellPoint
• Understanding Our Customer
• Conclusion

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About WellPoint
WellPoint Performance
Growth 1993 2004 Membership1 2.3
million 15.5 million Revenues2 2.3
billion 22 billion3 EPS 1.254 7.075 Mark
et Cap6 1.1 billion 17.6 billion Associates7
2,760 18,700 As An Investment Stock Price
Appreciation 12/31/96-6/30/04 552 Social
Responsibility Funding for Community
Foundations 6 billion WellPoint
Foundation 135 million Local Charities in
California 100 million Hardware and Software
Gift to Physicians 42 million
1 As of December 31, 1993 and June 30, 2004. 2
Total Revenue Premium Revenue Management
Services and Other Revenue Investment Income. 3
Represents total Revenue from July 1, 2003 to
June 30, 2004. 4 For periods prior to the
consummation of WellPoints recapitalization on
May 20, 1996, the information above has been
adjusted to reflect the two-for-three exchange of
common stock which occurred as part of the
recapitalization. 5 Represents the sum of
earnings per diluted share for the quarters ended
September 30, 2003, December 31, 2003, March 31,
2004 and June 30, 2004. 6 Market Capitalization
outstanding common shares x stock price, as of
December 31, 1993 and June 30, 2004. 7 Includes
full-time employees and full-time employees on
leave of absence as of December 31, 1993 and June
30, 2004.
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Agenda

• About WellPoint
• Understanding Our Customer
• Conclusion

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Understanding Our Customer

• Overview Listening to Our Customer
• Customer Segmentation
• Behavioral Focus
• Example Young Invincibles

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Overview Listening to Our Customer
Understanding Our Customer
Voice of the Customer Continuous Feedback Loop
Customer Inputs Feedback using listening
posts
Product, Service and Process Improvements
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Customer Segmentation
Understanding Our Customer
Size
Market Segment

• Individual 1 dependents
• Senior 1
• Small Group 2 50
• Key Accounts 51 250
• Major Accounts 251 2,000
• Special Accounts 2,001
• Public Entities
• State Sponsored Programs
• Employees of schools, municipalities, FEP,
  etc.
• Beneficiaries of Medicaid and similar
  programs

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Product Choice
Understanding Our Customer
Customer Segmentation
Hybrid
HMO
POS
PPO
Indemnity
Medical
HSA
HRA
FSA
Pharmacy
Dental
Behavioral Health
Life/Long Term Care
Specialty
Disability
Medical Management
Network Access
CHOICE VALUE
In conjunction with high-deductible plan
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Behavioral Focus
Understanding Our Customer
Customer segments
Behavioral focus

• Demographics
• Behaviors
• Attitudes
• Culture
• Life-stages lifestyles
• Values Beliefs

• Employer size
• Government
• Individual payers differentiated by age

What motivates sub-groups to buy insurance?

• Customized products

• Segment specific products

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Behavioral FocusUninsured by Age
Understanding Our Customer
Uninsured 18-34 year olds significant market
opportunity18.8 M uninsured 18-34 yr olds in 2003
Source U.S. Census Bureau, CPS 2004
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Example Young Invincibles
Understanding Our Customer
Cost Perception, Willingness to Pay Available
Products
Source California HealthCare Foundation, 1999
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Example Young Invincibles
Understanding Our Customer
Methods to promote deeper (not just stated)
understanding of consumer behavior

• Immersion into consumers world using
  customer-driven research
• Demographic analysis
• Cultural anthropologist hired to interview and
  observe young adults in their daily lives
• Consumers asked to photograph what is a healthy
  lifestyle
• What we learned about young adults and health
  insurance
• Behaviors invincible, instant gratification,
  procrastination and online a lot
• Perceptions affordability, trust, entitlement
• Comprehension complexity, where and what to buy

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Example Young Invincibles
Understanding Our Customer

• Product Features
• Online
• Easy Click n Pick a predefined health package
• Basic/ standard/ premium coverage options
• First dollar coverage for dental, vision and
  preventive wellness checkups
• Illness/injury protection
• Automated credit card or debit card payment
• Immediate temporary ID card
• Communication
• All-in-one coverage packages
• Simple choice and sign up
• Value right away
• Target parents of teens reaching dependent
  eligibility age limit
• Target 19-29 yr. olds through online advertising

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Example Results
Understanding Our Customer
RightPlan PPO 40

• Fastest selling individual product
• Twice as many 19-29 year olds
• Significant proportion of new enrollees
  previously uninsured
• 55 of enrollees select generic only option
• Men and women purchasing product equally

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Agenda

• About WellPoint
• Understanding Our Customer
• Conclusion

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Shape The Future Through Customer Innovation
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(No Transcript)