As more employers offer employees a choice of health plans, the challenge for managed-care companies is not only to attract enrollees but to retain them. Consumer loyalty has become of paramount importance to health plans.
According to the Sachs Group, a healthcare information company based in Evanston, Ill., 64.7% of U.S. consumers have a choice of at least two health plans among HMOs, point-of-service plans, PPOs and fee-for-service plans.
Because it can cost about $1,000 to attract an enrollee, "health plans must guarantee unprecedented renewal rates to even recover costs-let alone turn a profit," Sachs says in a recent report.
It's no wonder healthcare is finally joining other industries that have made major efforts to develop consumer loyalty.
"It's just another sign that healthcare is evolving into a retail, commodity-based product," says Bob Mayo, Sachs senior vice president. It means plans can't compete totally on features, benefits and costs. "They have to develop proprietary product lines that distinguish them from their competitors," Mayo says.
Defining loyalty. In studying other industries and their own 1996 survey of 90,000 consumers, Sachs researchers found that core behaviors define loyalty. Those characteristics are recommending a product to a friend and the intention to buy again.
So Sachs researchers investigated what prompted these satisfied enrollees to recommend taking such actions.
"What we found is that not all measures of satisfaction are the same. In fact, there are certain measures of satisfaction that contribute more to boosting loyalty," Mayo says.
"Member services have far and away the largest impact on boosting loyalty to the plan. This is great news for plans, because it involves things that plans can readily influence, such as claims handling and explanation of benefits," he says.
The next areas that boost consumer loyalty are network access, medical management and-a distant last-the physician office experience, Mayo says.
"This speaks to the fact that consumers are becoming more savvy, and their expectations are moving beyond treatment by the doctor and medical management. They want superb member services and access or they will shop elsewhere," he says.
Surprises. Sachs researchers were surprised that the physician office experience had almost no impact on loyalty to the health plan.
"The findings mean consumers are making a distinction between the plan and the physician. If you have loyalty to your doctor, it doesn't necessarily mean you will be loyal to your plan," Mayo says.
This finding is important for independent practice associations, because they contract with a number of health plans. Unless the plan has gained the enrollee's loyalty in other ways, the enrollee might switch plans to remain with a doctor he or she prefers.
Based on these findings about what makes enrollees loyal, consumers in Sachs' 1997 survey were asked a series of questions about satisfaction with their health plans. Their responses determined whether plans were placed on Sachs' HMO Honor Roll or awarded the Sachs Seal of Excellence.
Sachs surveyed enrollees under the age of 65 who identified themselves as belonging to an HMO or point-of-service plan. The survey of 97,000 consumers in 114 HMOs was conducted in 30 major markets.
To determine their overall loyalty, respondents were asked whether they were likely to recommend their plan to a friend or relative and whether they intended to switch plans. They also were asked about their overall healthcare coverage and about their overall satisfaction.
In addition, respondents reported on their health plans' member services. Areas covered included whether claims were handled quickly, courteously and accurately; the handling of written and telephone inquiries; the costs of belonging to a health plan, including out-of-pocket expenses; information provided by the plan or doctor about the costs of care; the value of coverage, given the costs; and information about eligibility, covered services and administrative issues.
Responses to questions were coded as follows: 1 for satisfaction rated as "poor," 2 if "fair," 3 if "good," 4 if "very good" and 5 if "excellent."
Achieving honors. In each of the 30 markets surveyed, plans with significant sample sizes were compared with the market average. HMO Honor Roll plans' ratings were statistically higher than the market average in both loyalty and member services.
Plans received the Sachs Seal of Excellence when their ratings were statistically higher than the market average in either the loyalty or member services category.
The Sachs Honor Roll is dominated by group and staff-model plans, even though fewer-34.7% of respondents-were in group and staff-models, and 65.3% were in IPA-model plans.
Sachs researchers found that the underlying populations in the two groups were different. More people over age 35 belonged to group and staff-model plans. About 66% of those in group and staff-models lived in urban and suburban areas, as opposed to rural areas and smaller cities and towns.
The Sachs Honor Roll wasn't meant as a tool for choosing a health plan, Mayo says. Rather, it's a tool to help plans know where to focus their resources to retain enrollees and also to give examples of plans "that are doing different or extraordinary things that lead to increased loyalty."