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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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  • Lamiraud , Karine, 2013. "Switching costs in competitive health insurance markets," ESSEC Working Papers WP1305, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-13005
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    References listed on IDEAS

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    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. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    3. 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, November.
    4. 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.
    5. repec:dau:papers:123456789/1623 is not listed on IDEAS
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    1. Karine Lamiraud & Pierre Stadelmann, 2020. "Switching costs in competitive health insurance markets: The role of insurers' pricing strategies," Health Economics, John Wiley & Sons, Ltd., vol. 29(9), pages 992-1012, September.
    2. Atherly Adam & van den Broek-Altenburg Eline & Feldman Roger D. & Dowd Bryan, 2020. "Switching Costs in Medicare Advantage," Forum for Health Economics & Policy, De Gruyter, vol. 23(1), pages 1-14, June.

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    More about this item

    Keywords

    Brand loyalty; Choice overload; Competition among health insurers; Status quo bias; Supplementary health insurance; Switching costs; The Swiss case;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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