Switching gains and health plan price elasticities: 20 years of managed competition reforms in The Netherlands

Rudy Douven*, Katalin Katona, Frederik T. Schut, Victoria Shestalova

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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 languageEnglish
Pages (from-to)1047-1064
Number of pages18
JournalEuropean Journal of Health Economics
Volume18
Issue number8
DOIs
Publication statusPublished - 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.

FundersFunder number
Dutch Healthcare Authority
Dutch National Health Care Institute

    Keywords

    • Health insurance
    • Health plan price elasticity
    • Managed competition
    • Switching gains

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