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Switching costs in competitive health insurance markets

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Abstract

In this paper we investigate the possible presence of switching costs when consumers are offered the opportunity to change their basic health insurance provider. We focus on the specific case of Switzerland which implemented a pure form of competition in basic health insurance markets. We identify several barriers to switching, namely choice overload, status quo bias, the possession of supplementary contracts for enrollees in bad health, firm’s pricing strategies based on providing low price supplementary products, poor regulation of reserves and the limitations of the previous risk-equalization mechanism which left room for risk selection practices.

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File URL: http://hal-essec.archives-ouvertes.fr/docs/00/80/84/20/PDF/WP1305.pdf
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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number WP1305.

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Length: 15 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:ebg:essewp:dr-13005

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Web page: http://www.essec.edu/
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Keywords: Brand loyalty; Choice overload; Competition among health insurers; Status quo bias; Supplementary health insurance; Switching costs; The Swiss case;

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  1. Brigitte Dormont & Pierre-Yves Geoffard & Karine Lamiraud, 2009. "The influence of supplementary health insurance on switching behaviour: evidence from Swiss data," Health Economics, John Wiley & Sons, Ltd., vol. 18(11), pages 1339-1356.
  2. Joseph Farrell & Paul Klemperer, 2006. "Co-ordination and Lock-in: Competition with Switching Costs and Network Effects," Economics Papers 2006-W07, Economics Group, Nuffield College, University of Oxford.
  3. Frank, Richard G. & Lamiraud, Karine, 2009. "Choice, price competition and complexity in markets for health insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 550-562, August.
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