Obamacare, with its goal of insuring 30 million Americans, is on the way. In connection with it, insurance companies and others could generate an extra $1 billion in ad revenue for TV stations. Such categories with an inclination to spend locally don't come along every day so broadcasters need to get up to speed and get up to speed fast. They need to identify the advertisers in their markets and get their foot in the door.
Obamacare May Be Healthy $1B For Local TV
What local TV broadcasters could use right about now is a solid, new advertising category — one that they could count on to give a real boost to the paltry annual growth rate of spot.
Well, they may soon be getting one. How’s an extra billion dollars on the top line sound? Yeah, pretty dang good.
Starting this October, health insurance companies will begin marketing policies to some 30 million uninsured Americans under the Patient Protection and Affordable Care Act, known to critics and proponents alike as Obamacare.
The beauty part for insurance companies is that the law contains a so-called individual mandate — that is, a requirement that every American buy a policy by the end of 2013 or start paying an escalating surtax. The poor are exempt from the penalty. In fact, the government will subsidize their premiums to make sure they get coverage, too.
The beauty part for paid media is that insurance companies, large and small, are gearing up to grab big shares of their new government-mandated market, and their marketing strategies undoubtedly include paid media.
And the beauty part for TV stations is that they seem to be a natural fit for the regional and local marketing the insurance companies will likely be doing.
Or so says Scott Roskowski of TVB, who has been learning all he can about the coming of Obamacare and how TV can profit from it.
According to his latest findings, Obamacare could generate as much as $100 billion in new business in 2014 for the insurance companies. If they allocate just 1% of that anticipated revenue for paid media, they will spend a extra $1 billion on them.
And of that $1 billion, 70% — $700 million — could go to TV stations, Roskowski says.
Scores of regional companies now account for about 25% of the health insurance spending and because they are regional they are natural buyers of local media like TV stations.
But even the half-dozen national insurance companies are likely to buy locally because they plan to market regionally. They indicated they will be targeting states where they are already legally able to sell, where they have relationship with health-care providers and where they think can best compete and make money.
“United has said that they are keying in on 12 states,” Roskowski tells me. “Twelve out of 50, right? So that’s telling. Here’s a national provider that if they wanted to be in all 50 states, I guess they could, but yet they choose to do 12.”
The insurance companies also know they can use TV stations to target certain areas where there are likely to be large numbers of buyers of Obamacare-mandated insurance and avoid areas where there are likely to be few. For example, the insurers will eschew markets with high levels of Medicaid recipients, Roskowski says. “They’re already on a government plan and so they don’t need a new one.”
Insurance companies are just one “bucket” of Obamacare-related advertising spending. Others could push the station take to that $1 billion level.
The law also mandates that the insurance be sold through exchanges where consumers can comparison shop. A state may choose to run an exchange itself, partner with the federal government or simply allow the federal government to run an exchange for it.
Regardless of who is running them, the exchanges will want to advertise to let people know they exist, to tell them it’s an opportunity to obtain affordable insurance and to remind them that Obamacare is not something that can be ignored. By 2016, the penalty for not buying some kind of health insurance is pretty stiff — $2,085 or 2.5% of family income, whichever is greater.
The 18 states that have so far opted for the do-it-yourself approach may be the best source of local advertising dollars. A state isn’t interested in spending any money outside the state, Roskowski points out. “They want to keep the spend in their own economy.”
And that’s not all.
The health care industry has created Enroll America, a 501 (c) (3) organization whose mission is to “maximize the number of uninsured Americans who enroll in health coverage” under the new law. One of its missions is to raise awareness, which likely involves a lot of paid advertising.
Other nonprofits and the federal government itself may spend to encourage participation.
Finally, Roskowski believes that as the rolls of the insured swell, hospitals and medical care providers will increase their local advertising buys to let the newly insured know where they can go for care. What’s the sense of having insurance if you are not going to use it?
Obamacare is a potential windfall, but the key word here is “potential.” The push for universal coverage is a huge bureaucratic undertaking with many moving parts, and some Obama-hating conservatives are rooting for it to fail. Some may even be trying to undermine it.
Plus, while it may make sense for insurance companies and exchanges to spend the big part of their advertising dollars on local broadcasting, it doesn’t necessarily follow that they will. Other media see the same opportunity and will be making their case for why its smarter, more efficient to buy them. Even if advertisers recognize the value of local TV, TV stations will still have to duke it out with local cable.
Broadcasters should be encouraged that Roskowski and TVB are on the case, doing the research and cooking up arguments for why any one of those billion Obamacare dollars that’s spent on anything other than TV stations is a wasted dollar.
But it will be up to every group, every station to make sure the potential is realized. They need to get up to speed and get up to speed fast. They need to identify the advertisers in their markets and get their foot in the door now.
Every TV station newsroom should be preparing an on-going series about Obamacare and what it means for local consumers and local health-care providers. Stations should do it because people need to know. They should do it because being perceived as the go-source on health insurance will attract Obamacare advertisers.
New billion-dollar ad categories with an inclination to spend locally don’t come along every day.