Maximizing Healthy Benefits Programs in Retail

Healthy benefits programs have flourished into a multibillion-dollar market opportunity for the food retail industry. These programs, which range from health savings or flexible spending accounts to supplemental benefits in Medicare Advantage, give consumers options to spend funds on health and well-being. In collaboration with FMI, we have dug into the types of programs that are publicly and privately funded, and which benefits are included. We’ve identified actions retailers can take to benefit from this growing market and harness its full potential.

What you need to know about the healthy benefits space

Employers, consumers, and state and federal governments are grappling with rising healthcare costs. Healthcare spending in the US is expected to account for 19.6% of gross domestic product. Employers anticipate a 5.4% rise in per-employee costs this year, according to data from Mercer. One tool that employers, as well as Medicare and Medicaid, have adopted to contain costs is investing in health and wellness programs.

These initiatives, funded by both public and private sources, are designed to drive consumer spending toward health-related items that can be found in many grocery aisles, representing a substantial retail-centric opportunity. Between employer-sponsored initiatives, government programs, and other nascent programs, we project there’s nearly $90 billion of potential spending available to retailers via healthy benefits. This presents retailers with a significant opportunity to develop innovative business models to tap into these funds while supporting their growth.

Funding sources for healthy benefits programs

Eligible products and services for healthy benefits

Funds can be used to purchase retail products and services that contribute to consumer health, such as over- the-counter medications, vitamins, supplements, healthy foods, or fitness equipment. They can also be used to buy meals for people recovering from medical treatments or with ongoing health conditions.

Retailers’ role in health benefits programs

As insurance companies, employers, and government payers broaden their supplemental benefits and market them more aggressively, access to these programs have decreased. However, actuarial interviews by us suggest only about half of the available dollars are being utilized. Retailers should enhance their health and wellness offerings to attract these customers.

Enhance acceptance of healthy benefits

Retailers can increase point of sale acceptance of payment cards that access these new sources of funds. In addition, retailers should ensure all their eligible products and services are included in the approved product lists for each type of fund. Achieving this requires a multifaceted approach, including integrating online processing systems and developing technological capabilities for efficient adjudication.

Boost customer engagement in healthy benefit programs

Competition is intensifying to engage consumers on healthy benefits programs. This is particularly evident with Medicare Advantage plans, which are broadening the scope of funds to promote healthy eating and lifestyles. Retailers can enhance consumer awareness and utilization of these programs and devise strategies to capture this spending. This could involve integrating loyalty programs with new offerings, bolstering in- store and digital marketing, and improving employee education on these initiatives.

Explore supplemental benefit partnerships

Foster nascent programs in the healthy benefits space

Many nascent restricted-spend programs are emerging in the market, including Medicaid waivers and provider-linked post-operation recovery care. These programs can benefit from partnering with retailers, which can play a pivotal role in shaping these strategies through competitive negotiations with key partners.

Supporting these challenger programs could yield significant benefits for retailers. By actively engaging with these programs, retailers can develop innovative payment mechanisms like digital gift cards to attract and retain customers.

Capitalizing on the healthy benefits market

Healthy benefits programs present a significant opportunity for retailers to make healthy choices more accessible to consumers and tap into a new volume of spending. By leveraging and building on the emerging ecosystem, food retailers can position themselves for merchandising growth and success in this evolving market.