Switching health insurers: the role of price, quality and consumer information search.

We examine the impact of price, service quality and information search on people's propensity to switch health insurers in the competitive Dutch health insurance market. Using panel data from annual household surveys and data on health insurers' premiums and quality ratings over the period 2006-2012, we estimate a random effects logit model of people's switching decisions. We find that switching propensities depend on health plan price and quality, and on people's age, health, education and having supplementary or group insurance. Young people (18-35 years) are more sensitive to price, whereas older people are more sensitive to quality. Searching for health plan information has a much stronger impact on peoples' sensitivity to price than to service quality. In addition, searching for health plan information has a stronger impact on the switching propensity of higher than lower educated people, suggesting that higher educated people make better use of available health plan information. Finally, having supplementary insurance significantly reduces older people's switching propensity.

Consumer price sensitivity in Dutch health insurance.

AIM: To estimate the price sensitivity of consumer choice of health insurance firm. METHOD: Using paneldata of the flows of insured between pairs of Dutch sickness funds during the period 1993-2002, we estimate the sensitivity of these flows to differences in insurance premium. RESULTS: The price elasticity of residual demand for health insurance was low during the period 1993-2002, confirming earlier findings based on annual changes in market share. We find small but significant elasticities for basic insurance but insignificant elasticities for supplementary insurance. Young enrollees are more price sensitive than older enrollees. CONCLUSION: Competition was weak in the market for health insurance during the period under study. For the market-based reforms that are currently under way, this implies that measures to promote competition in the health insurance industry may be needed.

Preferences and choices for care and health insurance.

Legislation that came into effect in 2006 has dramatically altered the health insurance system in the Netherlands, placing greater emphasis on consumer choice and competition among insurers. The potential for such competition depends largely on consumer preferences for price and quality of service by insurers and quality of affiliated providers. This study provides initial evidence on the preferences of Dutch consumers and how they view trade-offs between various aspects of health insurance product design. A key feature of the analysis is that we compare the responses of high and low risk individuals, where risk is defined by the presence of a costly chronic condition. This contrast is critically important for understanding incentives facing insurers and for identifying potential unanticipated consequences of market competition. The results from our conjoint analysis suggest that not only high risk but also low risk individuals are willing to pay substantially more for insurance products that can be shown to provide better health outcomes. This suggests that insurance products that are more expensive and provide better quality of care may also attract low risk individuals. Therefore, development and dissemination of good, reliable and understandable health plan performance indicators may effectively reduce the problem of adverse selection.

Consumer mobility in social health insurance markets : a five-country comparison.

During the 1990s, the social health insurance schemes of Germany, the Netherlands, Switzerland, Belgium and Israel were significantly reformed by the introduction of freedom of choice (open enrolment) of health insurer. This was introduced alongside a system of risk adjustment to compensate health insurers for enrolees with predictable high medical expenses. Despite the similarity in the health insurance reforms in these countries, we find that both the rationale behind these reforms and their impact on consumer choice vary widely.In this article we seek to explain the observed variation in switching rates by cross-country comparison of the potential determinants of health insurer choice. We conclude that differences in choice setting, and in the net benefits of switching, offer a plausible explanation for the large differences in consumer mobility.Finally, we discuss the policy implications of our cross-country comparison. We argue that the optimal switching rate crucially depends on the goals of the reforms and the quality of the risk-adjustment system. In view of this, we conclude that switching rates are currently too low in the Netherlands, and an active government policy to encourage consumer mobility seems warranted. In Germany and Switzerland, high switching rates call for an improvement of the rather poor risk-adjustment systems. Given low switching rates in Israel and Belgium, improving risk adjustment is less urgent, but still required in the long run.