Hey, Health Insurers: You're Missing Out

Les Masterson, for HealthLeaders Media, January 28, 2009

Health insurance companies lose $40 billion each year—and it has nothing to do with cost containment.

Instead, the problem stems from health insurers losing 3% of its group members annually because they aren't retaining members who retire or lose group coverage. Insurers could reverse that trend by simply tweaking communication processes and improving training that would nudge these members into individual or Medicare plans when the time comes. Retaining members is particularly important in the face of the current global economic crisis and a shrinking employer market. Instead, health insurers are focused on reducing spiraling costs and putting more responsibility on individuals. Those are both important initiatives, but as health insurers look to cut costs, converting existing members to other plans could provide a cost-effective solution.

Insurers should expect the situation to get worse. Health insurance companies will lose members at a rate of between 4% to 8% annually over the next five years because of employers dropping coverage, layoffs, and baby boomers reaching retirement age, according to McKinsey & Company, which recently released a report called The missed opportunity for U.S. health insurers. Insurers don't tell members about their myriad offerings so those who move from employer-based coverage to Medicare have no idea that their health plan offers a Medicare Advantage or Part D program.

The solution to this problem would be fairly simple to implement. McKinsey & Company suggests the financial-services industry should inspire health insurers. For instance, Fidelity Investments captures 50 to 60% of workers who move from employer-managed 401(k) accounts to personally owned rollover Individual Retirement Accounts.

"There are a lot to be learned in how a health insurer can work with sponsors, the employers, in making it a much smoother process and making a fairly simple transition project," says Shubham Singhal, principal at McKinsey & Company.

Singhal provides three ways that health insurers can improve member conversion:

  1. Standardize your communication processes so companies provide insurers will employee information at the time of a life-changing event and make converting members a priority in your organization. For example, promote different options to members so when they go through a life-changing event, such as losing a job or retiring, they will know their insurer offers health plans that suit their new needs. Another example is if a member who recently lost coverage calls the call center asking a question about COBRA, inform the person about your company's individual insurance offerings.
  2. Simplify processes for the consumer. When you send out information on COBRA to a recently laid off member, include information about individual insurance options and enrollment forms. Don't make them take three steps when you can combine processes into one.
  3. Incorporate conversion strategies into your training. One way is to train call center employees so they can pick up on cues to transform an issue into a sales opportunity. For instance, if a parent calls to ask whether her ineligible 20-something child is still covered under her plan, the call taker could provide tell the caller "no," but also provide information on individual insurance options. Insurers could perform similar strategies to convert people of retirement age to join one of their Medicare Advantage or Part D offerings. Here's one easy change for a health insurer: when a member turns 60, send the person information about your Medicare options. As the person moves closer to retirement age, make sure that the Medicare offering is displayed prominently on communication with that individual.

"I think it's a set of what at the end of the day seems like reasonable things, but the collective executive of those makes a big difference," says Singhal.

Singhal says most executives haven't figured out how to provide conversion solutions, while maintaining a profit and offering products that can pertain to any life situation.

"I think it's a mindset of understanding that the consumer is actually a customer and they have a set of real needs we need to meet. That is really an important element to have if health insurance is to move up in the ranking of industries that consumers show high satisfaction with," says Singhal.

Les Masterson is senior editor of Health Plan Insider. He can be reached at lmasterson@healthleadersmedia.com.
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