Leading Indicator of Consumer Switching

Deft’s National Senior Loyalty Study, with responses from 4,379 consumers aged 65+, features a “Switch Intention” metric which has proven to be a reliable leading indicator of switching during Medicare’s fall Annual Election Period (AEP).

Prior to the AEP, Switch Intention measures consumers’ inclination to “be on the look out”, “actively look into new health insurance” and “definitely plan to switch”. Over the five years of the study, the Switch Intention rate has corresponded to the actual rate of health plan switching observed after the AEP.

SENIOR SWITCH INTENTION AND ACTUAL SWITCHING RATES

SOURCE: NATIONAL SENIOR LOYALTY STUDY, DEFT RESEARCH, 2010

The chart shows us that, over the past five years, the red line’s rate of senior switching has increased, on average, 1.7% per year – meaning, the number of switchers has increased roughly 350,000 seniors per year.

In the past two years, Switch Intention has forecast actual switching – for each of these years Switch Intention has equaled about 64% of the actual switch rate.

Who Might the Shoppers Be?

Those with middle incomes.
Income does not help understand or predict switch intention among current Medsupp customers. But among MAPD customers the impulse to look for a better deal is strongest among middle class consumers – those with incomes between $25,000 and $100,000.

Those aged 70-74.
Among MAPD customers, the impulse to shop and possibly switch peaks between the ages of 70 and 74, then begins to decline. Surprisingly, for Medsupp customers, Switch Intention remains relatively stable from 65 through 80+.

Those with the lowest premiums.
Consistent with findings from Deft’s Market Dynamics Study, MAPD consumers with premiums between $0 and $30 have, by a small margin, the highest Switch Intention rates. These consumers tend to be economically driven bargain hunters who shop every year.

Those with per diem hospital copayments.
For MAPD customers only, those with per diem hospital copayments are more likely to be looking than those with per stay copayments or deductibles.

Those with primary care copayments above $20.
Rates of switch intention increase as primary care copayments increase from $0 to $20. But after $20 the damage seems to have been done. Consumers paying copayments higher than $20 have a high rate of switch intention, but the rate does not continue rising.

To learn more about the 2010 Loyalty Study:

George Dippel at 262-697-1370
or gdippel@deftresearch.com

Richard Hamer, Principal
612-436-8318