Guest post by Dan Jamieson, associate partner in McKinsey & Company's healthcare practice
When people get to age 75, chances are they'll stay put--with their health plans at least.
According to our Annual Enrollment Period (AEP) survey of 2,208 senior consumers, fielded in May 2015, the Medicare population is a loyal bunch, and loyalty increases with age. Eighty-one percent of Medicare customers 75 and older said they renewed their plans without shopping for a new plan in the past year. Seventy-six percent of 71 to 74-year-olds and 70 percent of 65 to 69-year-olds reported doing the same.
What, then, do insurers need to do to attract consumers to their plans when they become eligible for Medicare? And once in, how do insurers keep them satisfied? The answer lies in three buckets: value, provider options and experience. Insurers need to pay attention to all three--and adjust their strategies accordingly.
Contrary to popular perception, most people, including seniors, do not make healthcare product purchasing decisions based on price--or total cost--alone. In fact, in our recent AEP survey, seniors were given the opportunity to design their own plans, and 30 percent designed a plan that was more expensive than what they were currently enrolled in.
While the physician network is also critical, only 24 percent of respondents decided to make a cost trade-off for a narrow network plan to save between $25-50 a month. Moreover, when asked about the premium of their current plan, only 14 percent of respondents believed they were in the lowest-cost plan, and 50 percent weren't sure how their premium compares.
Besides economics, access is also important to seniors--the prospect of having one's current physician and preferred hospital in-network as well as having a wide array of doctors and hospitals to choose from. In the McKinsey AEP survey, 34 percent of consumers said having their doctor in-network is one of the top three factors in selecting a plan. Twenty-three percent said the same of their hospital.
When it comes to having choices among doctors and hospitals, 30 percent and 20 percent, respectively, said these are priority considerations. Potential customers also considered the health insurer's brand and its reputation.
Developing the right product and network design is a great start to getting members into a plan, but insurers must also make a significant investment in raising consumer awareness and optimizing their distribution strategy.
When considering average revenue, margin and the length of time members stay in a plan, the lifetime value of a Medicare Advantage member is more than three times that of a large group member, and almost 10 times that of an individual member. Insurers should consider this disparity in lifetime value as they develop budgets and invest in building acquisition capabilities in Medicare.
Once members have enrolled, the health insurer's brand and reputation take a backseat to the experience that customers have with it. That experience is of paramount importance in determining how satisfied members will be--and whether they'll shop around come enrollment season--so insurers want to be certain they're paying ample attention to keeping their members satisfied.
Medicare customers who renew their plans tell us that the top drivers of overall satisfaction are coverage and three specific types of interactions: paying bills, making claims and getting answers to questions or concerns. These factors are directly related to either customer experience or access and are well within a payer's control.
Here are some best-in-class techniques health insurers can take to improve acquisition and retention efforts:
Make sure you are creating the right customer experiences for different member segments. One size does not fit all. When your customers engage with you, you should have a full view of all the ways they are interacting with their plan. Developing this view requires extensive cross-communication among different business functions.
Use consumer insights based on demographic, behavioral and attitudinal data to drive decisions and tactics, including how you communicate with your members. In the acquisition process, for example, know what type of coverage your potential members are coming from and why they consider joining. Are they aging in, coming from fee-for-service, or another plan?
Understanding their previous experiences and expectations will help you target them more effectively. Once they're enrolled in your plan, use data to keep tabs on what might make them shop around. Know whose premiums are increasing, whose networks have changed, whose doctors are leaving and who's calling the customer service line--why, and how many times.
Understand the lifetime value of each member. This will help you identify your high-value members and determine how much you would be willing to spend to keep them.
Know how much you have invested in each member, using transactional and investment data, online profiles and life-stage indicators, and by keeping track of the promotions they've taken advantage of and contacts they've made. This will help you provide your members with a personalized--and ultimately, better--experience.
Test your approaches to engaging members--and potential members--to learn what types of engagement and communication work best: Create pilots, test sample data and conduct member surveys to understand the impact of everything you do.
Invest in the product design process and focus your efforts on the benefits that members use frequently, such as primary care copays and formularies. This will have the dual benefit of attracting new MA members, and improving member experience when they are in the plans.
Seniors are a sticky group. By following some of these techniques, insurers are more likely to acquire and retain this loyal cohort.
Jenny Cordina, Rohit Kuma and Monisha Machado Pereira contributed to this column.