Abstract
In this paper we estimate health plan price elasticities and financial switching gains for consumers over a 20-year period in which managed competition was introduced in the Dutch health insurance market. The period is characterized by a major health insurance reform in 2006 to provide health insurers with more incentives and tools to compete, and to provide consumers with a more differentiated choice of products. Prior to the reform, in the period 1995–2005, we find a low number of switchers, between 2 and 4% a year, modest average total switching gains of 2 million euros per year and short-term health plan price elasticities ranging from −0.1 to −0.4. The major reform in 2006 resulted in an all-time high switching rate of 18%, total switching gains of 130 million euros, and a high short-term price elasticity of −5.7. During 2007–2015 switching rates returned to lower levels, between 4 and 8% per year, with total switching gains in the order of 40 million euros per year on average. Total switching gains could have been 10 times higher if all consumers had switched to one of the cheapest plans. We find short-term price elasticities ranging between −0.9 and −2.2. Our estimations suggest substantial consumer inertia throughout the entire period, as we find degrees of choice persistence ranging from about 0.8 to 0.9.
Original language | English |
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Pages (from-to) | 1047-1064 |
Number of pages | 18 |
Journal | European Journal of Health Economics |
Volume | 18 |
Issue number | 8 |
DOIs | |
Publication status | Published - Nov 2017 |
Funding
The authors gratefully acknowledge Ramsis Croes, Misja Mikkers, Minke Remmerswaal and two anonymous referees for their comments on a previous version of this paper. We would like to thank the Dutch Healthcare Authority and the Dutch National Health Care Institute for providing the data.
Funders | Funder number |
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Dutch Healthcare Authority | |
Dutch National Health Care Institute |
Keywords
- Health insurance
- Health plan price elasticity
- Managed competition
- Switching gains