Advertising to publicize new mandatory health insurance could mean an extra $1 billion for TV stations over the next two years.
Local TV’S Healthy Ad Prescription
President Obama and his fellow Democrats were not thinking about local TV broadcasters when they enacted the Patient Protection and Affordable Care Act over the vehement opposition of the Republican Party and many conservatives in 2010. They were thinking of the millions of Americans without health insurance.
But the law, better known to proponents and critics alike as Obamacare, might go a long way to restoring TV stations to the robust financial health they enjoyed before the Great Recession of 2008-09.
According to TVB, implementation of the law could pile an extra $1 billion onto the top lines of TV stations over the next two years. “It should be a new, rather significant amount of revenue,” says TVB President Steve Lanzano. “With all that’s been going on, this would be welcomed money.”
The centerpiece of the law mandates that uninsured individuals with sufficient income get insured by Jan. 1, 2014, or face stiff tax penalties. To help, the law is funding federal and state exchanges or marketplaces where the uninsured can shop for affordable policies. The law also subsidizes premiums for low-income consumers and extends free Medicaid to more of the very poor.
insurance company bonanza
The exchanges will open their doors on Oct. 1, and they are already advertising to make the uninsured aware of their obligations under the law and where they can go to meet those obligations. The outreach would also steer those who qualify to Medicaid.
But the real money for broadcasters will come not from the exchanges, but from the health insurance companies lining up to sell policies through the exchanges. To make sure they get their share of what some estimate could be $100 billion in new Obamacare business, they will be advertising heavily, according to TVB.
And broadcasters could pick up even more money from advertising by hospital and medical centers that want to let the newly insured know where they can go for treatment and from political groups that continue to squabble over whether Obamacare is right for America (see sidebar, page 18).
“From what we have seen thus far, and consistent with our expectations, there won’t be a single group or entity responsible for all of the ad expenditure growth for the health care category,” says Scott Roskowski, the TVB executive who is closely tracking the Obamacare opportunity.
“Instead, the sum total will be made up of many entities — both on the national government and advocacy stage and also at the state and local levels.
Today, health insurance is a modest source of revenue for TV stations.
According to TVB’s crunching of Kantar Media data, the health insurers spent approximately $600 million to advertise across all media in 2012. Of that, $173 million or 29% went to spot TV ($130 million national and $43 million local), making it the 27th largest spot category.
Local health services, which includes hospitals, clinics and medical centers, spent $479 million in spot TV, making it the sixth largest spot category.
But these figures are about to change. Here’s how Roskowski figures that extra $1 billion.
The insurance companies stand to ring up an extra $100 billion in new sales thanks to the get-insured-or-get-taxed mandate, he says. If so, companies will conservatively spend 1% — or $1 billion — on advertising in the scramble for market share.
Of that $1 billion, Roskowski figures, $700 million will find its way to local TV broadcasting. Spot is tailor- made for the insurers, he says. Their business is regulated and generally marketed on a state-by-state basis, and TV is still the most effective way to brand.
The rest of the $1 billion for stations — $300 million — will come from the federal and state exchanges, advocacy advertising and charged-up local health services.
Figuring out what the insurance companies will spend to capture Obamacare business requires the kind of deduction that Roskowski does because most of the companies are not saying much about their plans.
Roskowski believes that all the major insurers and HMOs, including Aetna, Cigna, WellPoint, Blue Cross/Blue Shield, United Healthcare, Humana and Kaiser Permanente, will be in the hunt. Today, they account for about 75% of the $600 million ad insurance health spend, he says.
As many as 140 smaller, mostly regional companies account for the rest of the health insurance industry and the other 25% of the advertising.
Roskowski says he doesn’t believe the majors will be spending as quickly as they once did. They may not plunge in right away out of concern that the first wave of customers may be the costliest because they are the most likely to have pre-existing conditions, Roskowski says.
They may wait until they see the “young and healthy” signing up and they are more confident of having a good balance of customers and risk, he says. “If the young and healthy don’t sign up, then things can get turned around a little sideways.”
By contrast, Roskowski says, the smaller companies will be less cautious and more aggressive in their marketing and ad spending, figuring that Obamacare is a rare opportunity to rapidly expand their businesses.
Whatever the spend, Roskowski says, local media, including TV, are positioned to take home most of it.
LOCAL IS KEY
Even the national companies will not be marketing nationally. Their strategy is to target a handful of states and markets where they already have a substantial presence and where they think prospects for sales are best. “They are absolutely picking their spots,” Roskowski says.
Last May, for instance, Aetna, Cigna and United Healthcare announced that they will not be selling through the California exchange. But Blue Cross/Blue Shield member companies and the HMO provider Kaiser Permanente, which currently account for 87% of the individual policies in the state, said they will.
On the other hand, Cigna said that it will make policies available through the exchanges in Arizona, Colorado, Florida, Tennessee and Texas, according to a spokesperson, while continuing to pitch individual insurance plans outside exchanges and the Obamacare umbrella in California, Connecticut, Georgia, North Carolina and South Carolina.
A spokesperson for Kaiser Permanente confirmed that ad agency Lowe Campbell Ewald is behind the ad campaign that began running last month targeting the uninsured of California; Hawaii; Baltimore; Cleveland; Denver; Colorado Springs, Colo.; Portland, Ore.; and Washington, D.C.
ANOTHER REVENUE STREAM
A smaller, but more definitive source of Obamacare-related advertising is coming from the government-run exchanges or marketplaces where consumers can shop, compare and sign up for insurance. Altogether, they could generate more than $400 million in advertising with local media, again, being the natural recipients.
The advertising constitutes a large portion of the nearly $700 million that the federal government will spend on all publicity and marketing on Obamacare outreach, according to research by the Associated Press earlier this summer.
As the lead agency in implementing Obamacare, the U.S. Department of Health & Human Services invited the states to set up their own exchanges, promising to fund them and their outreach efforts.
Eighteen, including the District of Columbia, took HHS up on the offer. The 17 states: California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington.
Another seven states — Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and West Virginia — said they would work closely with HHS in informing the public and bringing uninsured consumers into the field, but stopped short of saying they would run exchanges.
NATIONAL MONEY, TOO
HHS also has set up a national exchange for consumers in the 33 states without state exchanges. It’s accessible online at healthcare.gov.
From what TVB can gather, HHS is prepared to spend more than $200 million to promote its national exchange, according to Roskowski. TVNewsCheck could not confirm that figure. HHS’s Centers for Medicare & Medicaid Services confirmed only one contract so far, for $41.5 million to Weber Shandwick to handle “paid media and digital outreach” for the exchange through the end of May 2014.
If TVB is correct about HHS’s plans, the $200 million in direct federal spending would come on top of another $200 million that, according to a TVNewsCheck survey, the state exchanges have already begun spending on advertising (see sidebar, page 16).
The survey elicited responses from 16 of the 17 states and the District of Columbia with full-blown exchanges (all but Idaho and Maryland).
The budgets for these exchanges vary widely. Utah has earmarked about $400,000, compared to $98 million for California, for instance. Hardly surprising, considering the population differences.
The campaigns are using the full range of local media and targeting low socio-economic groups and younger people, currently healthy, who see little need for insurance.
“Connecticut’s uninsured and underinsured residents are clustered in a handful of communities, with 80% or more of the uninsured in each county contained in 20 ZIP codes,” says Kathleen Tallarita, government affairs and outreach manager for Connecticut’s exchange, Access Health CT.
While Minnesota was the only respondent to break out how it’s allocating spending for different media, local TV was on everybody’s list of media.
“We did a prior campaign last October that featured a big splashy billboard, as well as newspaper, magazine and online,” says Steve Gooch, communications/marketing director, Avenue H, Utah’s exchange. “This time, we feel that TV advertising will be most advantageous to get the message out to people throughout the entire state.”
Roskowski says he is confident that local hospitals, clinics and medical centers will spend heavily to reach the newly insured, although he hasn’t yet gotten a handle on how much
Like the big insurance providers, some of the big hospitals may take a wait-and-see approach, he says. “But most are committing to this and saying, you know what, we see this as an opportunity to gain more patients into our hospitals. We’re ready for it. We’re going to welcome it and we’re going to market ourselves accordingly.
“There’s a business opportunity on the local, local level” that should benefit those who “try to ramp up their business,” he says.
This story originally appeared in TVNewsCheck’s Executive Outlook, a quarterly print publication devoted to the future of broadcasting. Subscribe here.