Many HMOs Experience High Rates of Beneficiary Disenrollment

HEHS-98-142: Published: Apr 30, 1998. Publicly Released: May 5, 1998.

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William J. Scanlon
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Pursuant to a congressional request, GAO reviewed the feasibility of computing health maintenance organizations' (HMO) voluntary disenrollment rates from readily available data and analyzed the extent to which these rates varied among plans, focusing on: (1) disenrollment rates for all Medicare HMOs operating in 1996; (2) the disenrollment rates of plans operating in the same markets; (3) disenrollment rates of relatively new plans; and (4) the percentage of disenrollees who switched to fee-for-service.

GAO noted that: (1) annual disenrollment rates exceeded 20 percent of plans' average monthly membership at more than 40 Medicare HMOs in 1996; (2) in one extreme case, the number of members who disenrolled from a plan equaled 71 percent of that plan's average monthly membership; (3) in contrast, 32 HMOs had disenrollment rates below 5 percent; (4) comparing disenrollment rates among HMOs operating in different markets may be misleading; (5) local market characteristics, such as the competition between plans or beneficiaries' familiarity with managed care, may affect plans' disenrollment rates; (6) in some cases, a rate that is relatively high in one market might be relatively low in another; (7) for example, in 1996 the highest disenrollment rate in the Portland-Vancouver area (7.4 percent) was below the lowest rate in Miami (10.1 percent); (8) among plans operating in the same market, disenrollment rates varied substantially; (9) in many markets, the highest disenrollment rate exceeded the lowest disenrollment rate by more than fourfold; (10) for example, in Houston, Texas, the highest disenrollment rate was nearly 56 percent while the lowest rate was 8 percent; (11) the data clearly indicate that competing plans vary widely in their ability to retain members but do not reveal why; (12) disenrollment rates that are high relative to rates at competing plans could, for example, be caused by plans' poor marketing practices, less-generous benefits, higher beneficiary out-of-pocket costs, or inferior service; (13) HMOs in operation for less than 2 years tended to have higher annual disenrollment rates than older plans; (14) however, rapid disenrollment rates--that is, the percentage of new members who left within 3 months of their enrollment--tended to be slightly lower for plans that were in operation for less than 2 years; (15) many HMO members who disenroll switch to fee-for-service Medicare; and (16) in markets served by at least two plans, more than one-third of disenrollees switched to fee-for-service.

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