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The True Cost of Return Mail for Health Plans

By Dan Moeller Director of Direct Mail and Data Services at Command Direct

Return mail is often seen by many Health Plans as a relatively minor problem that rarely warrants a focused effort to reduce costs or streamline processes. For many, it is seen simply as a cost of doing business. However, when you measure its impact beyond postage and material costs, it is clear that return mail can be a significant revenue drain, it can cause member satisfaction issues and at times it can become a regulatory concern. If ignored, it can lead to increased labor costs, delayed access to services for returned ID cards/Welcome Packets, reduced cash flow and many other problems. Overall return mail can be correlated to member alienation from the health plan resulting in higher levels of member disenrollment and dissatisfaction.

Organizations that recognize the impact of return mail can employ several strategies to minimize its adverse effects. One of these is using mail tracking data available via the Intelligent Mail® barcode (IM™ BC) to access Postal Service™ address change services. Additionally, there are other applications that can enhance performance in several areas throughout an organization.


Generally, 1-2% of first class mail is returned.

Return mail is a problem for virtually any business. It acts like a small tax throughout an organization, costing a little bit in a lot of areas. When all the small “taxes” are added up, it can easily amount to thousands of dollars in losses to an organization. For Health Plans the financial impact of return mail goes beyond the cost of postage, envelopes and re-sending documents. The time associated with identifying and correcting addresses ties up a tremendous amount of resources and when not corrected, members simply do not receive critical information.

Increased postage, paper usage and service costs, along with duplicate work, accelerated fraud, poor cash flow, loss of customers and a damaged business reputation are all very real outcomes from return mail. Despite these factors, return mail remains one of the most tolerated profit drains in organizations everywhere.


There are several factors driving the high cost of return mail. Two of the most important factors are poor address quality and the challenges of accurate data capture. Database decay resulting from people moving and delays in correcting addresses also compound other problems such as handling, remailing, and extended cycle time.

Let’s look at each of these issues:

  • Poor Address Quality When health plan enrollment teams are tasked with capturing address information on physical or web forms, it’s inevitable that some mistakes will be made, and incorrect data will be entered. When this information isn’t checked at the entry stage, it affects all future correspondence, as well as the relationship with that member.

  • Natural Database Decay People move at the rate of 12 to 17% per year. Only 60% of movers inform the United States Postal Service® (USPS®) of the move in a timely manner.

  • Physical Handling and Remailing An enterprise that mails a large volume of pieces per month will process a sizable amount of return mail per day. This mail is opened, assessed by a knowledgeable person or system, and forwarded to the appropriate party. If it's urgent, steps are taken, usually manually, to locate the member. Once the member is found, after spending a fair amount of time and resources, and not always with 100% success, the entire mailer is re-manufactured and re-issued. Sometimes mailers aren’t even aware of whether return mail is processed. For example, some health plans have mail returned to delegated entities. The company relies on the motivation or workflow of the delegated entity to share or fix address problems. This process, however, offers no insight into the ongoing issues and can perpetuate a loop of poor quality.

  • Cycle Time A piece of bad mail can be identified in the postal system as early as the point of entry, or as late as the postal delivery. When mailers manifest and package their mail to achieve the highest possible discounts, return mail has likely made its way to the intended destination before it is identified as undeliverable. Even then, the postal processes demand a certain diligence that takes several days to determine whether or not it can be delivered. Only after it’s finally identified as undeliverable can return mail begin its journey back to the sender. When return mail is handled by the USPS®, it’s given one of the lowest priorities for handling. USPS® service objectives dictate that priority post and First-Class Mail® receive prime spots on trucks and planes. Then, Standard Mail® fills unused capacity. Finally, return mail fills any space that is left over. Capacity varies by day of the week and day of the month. The net result is that the return time can vary enormously—on average, around 45 days before it’s received by the sender. The long cycle time is a major source of financial drag on mailers. Re-mailing is delayed, and remedial actions are often put into motion too late. It’s highly probable that a second mailer has been sent, without knowledge that the first one never reached its destination.


Health Plans often have limited insight into the total costs and the lost opportunities that result from return mail. Most organizations do not realize that there is a $0.60 to $1.00 cost on every piece of mail sent and that the full impact is felt throughout the organization. With a financial impact analysis in hand, organizations can look at two general strategies to address the issue:

FIRST STRATEGY Analysts should examine the primary and secondary root causes: address quality management and database decay. Teams should design a series of projects to establish new processes for managing and improving address quality. These include:

  1. Leveraging a USPS postal address validation tool internally or with your mail vendor. This process will ensure that records that will not be delivered due to address issues can be corrected or extracted prior to mail. This will typically come in the form of a monthly cleanse, as well for larger mail projects that require a presort.

  2. Developing a process for incorrect data to be immediately shared back to the plan for outreach or leveraging a delegated entity to manage outbound calls to members

  3. Regardless of the address correction process, return mail will always exist. A process must be developed for the outbound coding of mail that can be tracked when returned. It is critical that incorrect address for return mail be corrected quickly to avoid future issues.

SECOND STRATEGY Focus on minimizing the impact of return mail by reducing or eliminating physical handling and cycle time. This approach does not address the main causes but speeds the organization’s response to problems and reduces the costs of re-establishing member relationships. One way is to eliminate the need to physically deal with mail that is returned. For regulatory purposes, organizations should always organize and archive return mail as it is received, which can be automated into a “no touch” process.

With an automated "no touch" process, the return mail cycle time can be reduced from 45 days to as little as 5-7 days by virtualizing the flow of information.

This virtualization simply means that the health plan can be proactive in its actions, and address problems before damage occurs. With the elimination of most physical handling, many of the benefits accrue to the mail operations cost center. Overall, a project of this type should show payback within one calendar year and eliminate some 40 to 70% of return mail costs. The cost of returned mail goes well beyond the dollars and cents. Communicating with your members in a timely manner is a critical part of satisfaction and retention rates. It is also important to note that the regulatory risks of delays communication are real. The good news is that the issues surrounding return mail can be addressed and minimized. It is important for your organization to create a plan today.

For more information, contact:

Dan Moeller Director of Direct Mail and Data Services Command Direct

Dan Moeller leads Command Direct’s Data Management and Direct Mail division and oversees the communication services for over 40 Health Plans. His expertise in data management, programming and automation allows Health Plans to streamline process, ensure compliance and maximize postal discounts.



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