Characterizing Enrollee Turnover and Relations to Benefit Design

Health insurance companies experience significant enrollee turnover each year. The industry average is approximately 15% each year, with significant variation by the type of product and population served. Turnover has important implications on premium setting: if those who leave a particular plan are of different health status than those who stay, the plan’s premiums should adjust to reflect such selection. Additionally, the nature of turnover may also impact plan benefit design considerations.

In this study, we quantify and characterize enrollee turnover by comparing demographic and clinical characteristics of enrollees who turnover relative to those who do not and highlighting heterogeneity across products. We utilize commercial eligibility and claims data from a large national insurer from 2006 through 2018 to evaluate four types of turnover: 1) internal turnover where enrollees willingly change to one of the insurer’s other products (e.g. switching from PPO to high deductible), 2) internal turnover where enrollees are required to change products based on new product offerings by their current employer, 3) external turnover where enrollees leave their insurer, even though the employer remains with insurer, and 4) external turnover where the employer leaves the insurer.

As part of this study, we also investigate how the introduction of the Affordable Care Act (ACA) health insurance exchanges may have influenced turnover patterns, including potential differences based on state choices to expand Medicaid. By making available alternative sources of coverage, the ACA may significantly affect workers’ employment and insurance decisions, as well as firms’ decisions to offer insurance. Both pathways have the potential to impact turnover in an insurer’s small- and large-group employer markets.