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The influence of supplementary health insurance on switching behaviour : evidence on Swiss data

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Author Info

  • Brigitte Dormont
  • Pierre-Yves Geoffard
  • Karine Lamiraud

Abstract

This paper focuses on the switching behaviour of sickness fund enrollees in the Swiss health insurance system. Even though the new Federal Law on Social Health Insurance (LAMal) was implemented in 1996 to promote competition among health insurers, there still remains large premium variations within cantons. This indicates that competition has not been able so far to lead to a single price, and reveals some inertia among consumers who seem reluctant to switch to less expensive funds. We investigate one possible barrier to switching behaviour, namely the influence of the supplementary insurance on the choice for basic insurance plan in Switzerland, which has not been studied so far. Our aim is to analyse the two decisions (choice of health plan, subscription to supplementary insurance contracts). We use the data of the OFAS survey conducted in 2000 on health plan choice and import some additional data on the sickness funds (number of enrollees, premiums). The decision to switch is estimated by both logit and a fixed-effects logit models; two main explanatory variables are studied: premiums (for basic insurance contracts) and supplementary insurance. The results suggest that holding a supplementary insurance contract substantially decreases the propensity to switch. The switching decision is positively influenced by the expected gain of switching, measured by the premium differential. The expected gain of switching is higher for switchers with no supplementary insurance (CHF 19.44) than for switchers with supplementary insurance (CHF 13.06). The income level has a direct positive influence on the propensity to buy a supplementary insurance. This finding suggests that the purchase of supplementary insurance is influenced, not only by risk aversion, but also by the willingness to pay for the goods covered by the supplementary insurance, which would be higher for rich people. Bad health has a negative influence on the subscription to a supplementary contract, but is no longer significant when the income is introduced into the specification. All the information about health is captured by the income level, a low income being strongly correlated with a bad health status. Income and a supplementary insurance contract are observable by the insurance company, and can be used as tools for selection.

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Bibliographic Info

Paper provided by University of Lausanne, Institute of Health Economics and Management (IEMS) in its series Working Papers with number 0702.

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Length: 30 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:hem:wpaper:0702

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Keywords: Health Insurance; Private Sector;

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References

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  1. Kifmann, Mathias, 2005. "Risk Selection and Complementary Health Insurance: The Swiss Approach," Discussion Papers, Series 1 328, University of Konstanz, Department of Economics.
  2. Buchmueller, Thomas C. & Feldstein, Paul J., 1997. "The effect of price on switching among health plans," Journal of Health Economics, Elsevier, vol. 16(2), pages 231-247, April.
  3. Brigitte Dormont & Pierre-Yves Geoffard & Karine Lamiraud, 2007. "The influence of supplementary health insurance on switching behaviour : evidence on Swiss data," Working Papers 0702, University of Lausanne, Institute of Health Economics and Management (IEMS).
  4. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
  5. Robert Nuscheler & Thomas Knaus, 2005. "Risk selection in the German public health insurance system," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1253-1271.
  6. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
  7. repec:pse:psecon:2007-34 is not listed on IDEAS
  8. Abraham, Jean M. & Feldman, Roger & Carlin, Caroline & Christianson, Jon, 2006. "The effect of quality information on consumer health plan switching: Evidence from the Buyers Health Care Action Group," Journal of Health Economics, Elsevier, vol. 25(4), pages 762-781, July.
  9. Beaulieu, Nancy Dean, 2002. "Quality information and consumer health plan choices," Journal of Health Economics, Elsevier, vol. 21(1), pages 43-63, January.
  10. Marcus Tamm & Harald Tauchmann & Jürgen Wasem & Stefan Gre�, 2007. "Elasticities of market shares and social health insurance choice in germany: a dynamic panel data approach," Health Economics, John Wiley & Sons, Ltd., vol. 16(3), pages 243-256.
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Citations

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Cited by:
  1. Brigitte Dormont & Pierre-Yves Geoffard & Karine Lamiraud, 2007. "The influence of supplementary health insurance on switching behaviour: evidence on Swiss data," PSE Working Papers halshs-00587785, HAL.
  2. Omar Paccagnella & Vincenzo Rebba & Guglielmo Weber, 2013. "VOLUNTARY PRIVATE HEALTH INSURANCE AMONG THE OVER 50s IN EUROPE," Health Economics, John Wiley & Sons, Ltd., vol. 22(3), pages 289-315, 03.
  3. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2008. "Organizational Fragmentation and Care Quality in the U.S. Healthcare System," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 93-113, Fall.

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