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TAMPA, Fla. – Rapidly rising acquisition costs have elevated retention to a new place of prominence in carrier growth strategies. That was the message sent by Jeff Bak, President and CEO, HealthPlan Services (HPS), the nation’s largest independent provider of service and technology solutions to the insurance and managed care industry, to attendees of World Research Group’s May conference Building Individual Insurance Products.
“New member acquisition costs now consume the highest percentage of a carrier’s administrative fees, while the ongoing economic turbulence has created an environment where up to 10 percent of group members are in transition at any given time. As such, retention is more critical than ever to carrier profitability,” said Bak. “Effective retention programs allow carriers to capitalize on the trend away from group coverage toward individual and voluntary plans, and help them avoid paying multiple times to acquire the same member.”
In his presentation, Developing an Effective Retention Strategy: From Welcome to Renewal, Bak noted that two macro economic factors have weakened the group health market: 1) Because 60 percent of small businesses do not offer health insurance, their employees must look to the individual market for coverage; and 2) rising unemployment means terminated workers must transition from employer-sponsored coverage to COBRA, short-term or limited medical coverage.
Carriers with processes in place to track existing members throughout their life stages are positioned to protect individual retention by moving members into short-term and limited medical plans when group coverage is lost. These individuals are also more likely to seek out ancillary “gap” coverage such as dental, vision, life and disability to supplement coverage. As such, carriers offering both individual and voluntary products can expand enrollment across multiple products, enhancing member satisfaction and retention rates.
Finally, with the cost to acquire a new member currently averaging 27 percent per member, per month, acquisition now consumes the highest percentage of administrative fees of all functions, exceeding information technology (13 percent), claims administration (9 percent), customer service (6 percent), enrollment and billing (4 percent) and underwriting (1 percent).
“While carriers cannot control 100 percent of the reasons for termination, they can control the vast majority of them by deploying proactive and reactive retention strategies designed to gauge and respond to member needs and improve satisfaction levels,” said Bak. “This is where HPS’ proven retention methodologies come into play. We have identified more than 25 unique member touch points that, when aligned with a carrier’s goals and driven by our dedicated team of licensed sales consultants, can deliver a five-to-one return on the client’s outsourcing investment.”
Carriers that outsource proactive retention to HPS will typically realize a 10 percent increase over traditional reactive programs. That translates into the following average return in six months, based on a plan with 100,000 active members:
• 9,000 additional retained policies
• $8.1 million in retained premiums
• 5 percent additional profit
• $2.4 million in acquisition cost avoidance
• $2.8 million incremental income/profit
For carriers seeking to respond to the shift in demand from group plans to individual and voluntary products, HPS also offers the industry-leading management and processing expertise, proprietary technologies and dedicated resources needed for str
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