Reaching out to retirees.

The numbers pertaining to the approaching demographic boom in health-care-related expenditures are eye-popping: Health-related financial products to help retiring baby boomers deal with out-of-pocket costs alone will generate up to 80 billion dollars in revenues and 8-12 billion dollars in pre-tax profits by 2014. But health insurers will have to refocus their efforts if they want to take full advantage of this opportunity. (For more, see "Turning Subscribers Into Customers: The Future Is Now" in the July/August issue, the first in this two-part series.) Two areas are critical: product innovation to provide comprehensive solutions that meet seniors' needs more effectively, and advice-based distribution that creates privileged customer relationships.

Turning subscribers into customers: the future is now.

The launch of Medicare's prescription drug plan marks a major milestone in federal health policy. Nearly 90 percent of Medicare's 43 million beneficiaries now have some form of prescription drug coverage, approximately 6 million of whom had no coverage prior to the introduction of Part D. The enrollment boom presents a tremendous opportunity for health insurers. But the new enrollments also present a challenge, as insurers' ability to build customer loyalty will depend on their success in reorienting themselves to the consumer market where tastes can be even more fickle than in the group business. The good news is that as insurers focus on serving senior customers, there is an even more promising opportunity on the horizon than Medicare Part D: providing products that help consumers-particularly retirees and those nearing retirement-to plan for and manage their out-of-pocket health care spending. The retirement health market beyond Medicare Advantage and Part D could significantly impact many health insurers' bottom line; it's expected to generate $80 billion in revenues and $8-$12 billion in pre-tax profits by 2014.