Churning converts cream to butter. This process agitates the cream and separates it into butter and buttermilk. Whereas cream is a fat-in-water emulsion, butter is a water-in-fat emulsion. Fun fact: This process is reversible — melt the butter, add back the buttermilk, mix, and, voila, you’re back to cream!
Member churn is when members gain, lose, or change health coverage. Most discussions of churn understandably focus on the problems associated with it. For example, churn can dissuade payers from making long-term investments in members’ health. But churn can also solve some problems.
Twists and turns resulting in churn
Churn happens for a mix of reasons, but the separation of a member from a health plan is always due to some sort of agitation. Churn may result from decisions by purchasers, payers, and members themselves. Some member churn is a consequence of changes in employment, income, age, or residency.
When purchasers change the plans they offer, the impact on churn varies depending on the number of options and enrollment patterns. If, for example, an employer that offers only a single option switches plans, then all employees and their dependents are impacted. In contrast, imagine an employer dropping a plan with little enrollment. The impact would be minimal.
Payers may enter or exit certain markets on their own volition in pursuit of profits or market share. For example, some insurers, including UnitedHealth and Aetna, exited the ACA marketplaces in some states in 2017 after experiencing losses. Since 2019, however, the number of insurers in the ACA marketplaces has increased.
When given a choice, some members switch plans out of self-interest. Members may change plans over provider networks or formularies. Employees who are happy with their coverage are less likely to leave, so, the quality and cost of coverage, in turn, impacts churn. But member-based churn does not always reflect consumerism. Gaining or losing employment or switching jobs also can result in churn. And moving from one state or even from one county to another can also result in churn. More than 27 million people changed residences in 2021.
One study looking at disenrollment and reenrollment at Anthem from 2006 through 2018 yielded several interesting insights:
Only 25% of members were continuously enrolled for 5 years
34% of those who left the plan returned within 5 years after disenrolling, and those who re-enrolled tended to be younger and healthier than members already enrolled at the start of the study period
The individual market has higher turnover than the group market
In the group market, churn is higher among younger members, while in the individual market, churn is higher among older members
Successfully revolving around the sun 65 times qualifies a person for Medicare and a host of coverage options, including Medicare Advantage and Part D plans. A study of MA enrollees showed that their churn was driven predominantly by voluntary choices. Further, enrollees who changed insurance, especially those who voluntarily disenrolled, were more likely to: have switched from traditional Medicare; be dual eligibles; and to have, on average, more chronic conditions.
In Medicaid, income fluctuations can impact eligibility, resulting in churn. Churn may also be due to challenges navigating renewal processes and eligibility checks. Approximately 10% of Medicaid/CHIP enrollees disenroll and then re-enroll in less than one year. Churn rates are lower for elderly adults beneficiaries with disabilities and higher for younger, poorer and non-white beneficiaries.
In response to COVID-19, the public health emergency (PHE) kept millions of Medicaid beneficiaries continuously enrolled in Medicaid. While this increased Medicaid enrollment and suppressed Medicaid churn, Kaiser Family Foundation analysts estimate that 5 to 14 million will lose Medicaid coverage when the PHE ends, including nearly 7 million who will likely still be eligible!
Just skim the literature and you’ll find ample evidence that churn rates are not homogenized. Some groups experience more churn than others. We need to ensure that differences in churn are not due to discriminatory processes (e.g., disadvantaging those with less education or less health literacy).
The costs of churn
Churn is typically associated with costs, including:
- Coverage gaps
- Care delays
- Skipped doses
- Emergency department visits
- Adverse and often preventable events
Churn could encourage payers to underinvest in prevention. And it can also discourage payers from investing in treatments with high up-front costs and long-term savings, such as gene therapies.
Enrolling and disenrolling members results in administrative costs. And payers spend a lot of money on marketing to attract new members, some of whom will replace those who left the plan.
The benefits of churn
In theory, competition results in lower prices, higher quality, greater variety, and more innovation. These benefits should flow to both purchasers and consumers.
For decades, substantial resources have gone into measuring and reporting payer quality. The HEDIS program and the MA Star Ratings system were meant to help consumers make more informed decisions when selecting plans. These quality metrics can encourage churn. That said, the extent to which consumers leverage this information is a different story.
Consumers have benefitted from other developments as well. Today, members have greater access to, and transparency around, formulary and provider-network information. And tools have been developed to help consumers comparison shop and calculate their out-of-pocket costs. All of this is meant to support consumerism.
Churn can help payers be more profitable. And churn rates help payers evaluate their competitiveness. If churn is higher than desired, then payers know they must enrich benefits, enhance services, reduce restrictions, or lower premiums to attract and retain members.
Agitation and separation
Churn has both costs and benefits. Whip some cream a bit and you get whipped cream. Yummy! But if you keep whipping whipped cream, then you get butter and buttermilk — that’s great if that’s what you want. Similarly, member churn is inherently neither good nor bad, but it does come with costs and benefits.
To a considerable degree, the amount of churn is a function of purchasers, payers, and consumers simultaneously pursuing arrangements that better suit their needs and wants. Too little or too much churn can be problematic. A competitive market with at least a little agitation and separation probably benefits all.
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