US health care insurers are missing an opportunity to capture low-hanging fruit: better retention of members making the transition between major product classes. The two largest opportunities for such a conversion occur when commercial members become eligible for Medicare (the federal government’s health care program for the elderly), at 65, and when they leave group coverage and either move to the individual market or go uninsured. Such cases include job transitions and when dependent children “age out” of their parents’ coverage, which also often results in a transition from group to individual coverage.

The industry as a whole, we estimate, has a conversion opportunity worth roughly $40 billion or more a year (exhibit). Yet most health insurers, in our view, will convert less than 10 percent of their members. Many companies fail to recognize the extent of the possible gains and don’t have purposeful, integrated strategies to identify and convert prospects. Our consumer research shows, for example, that 68 percent of all members aged 60 to 64 have never been approached by their current insurers to discuss retirement options.

Nonetheless, a few best-in-class payers have recognized...