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Attention Please! Health Plan Choice and (In-)Attention

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  • Tamara Bischof
  • Michael Gerfin
  • Tobias Mueller

Abstract

We study the role of inattention as a key source of inertia in health plan choices. Our structural model shows that more than 90% of the elderly in Switzerland are inattentive and thus stick to their previous plan. We estimate sizeable switching costs even conditional on attention explaining part of the observed choice persistence. Inattention leads to overspending and generates considerable welfare losses for most consumers. A policy simulation shows that eliminating financially dominated plans from the choice set yields welfare gains for two thirds of individuals.

Suggested Citation

  • Tamara Bischof & Michael Gerfin & Tobias Mueller, 2021. "Attention Please! Health Plan Choice and (In-)Attention," Diskussionsschriften dp2111, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp2111
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    References listed on IDEAS

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    Cited by:

    1. Drake, Coleman & Ryan, Conor & Dowd, Bryan, 2022. "Sources of inertia in the individual health insurance market," Journal of Public Economics, Elsevier, vol. 208(C).

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    More about this item

    Keywords

    health plan choice; inertia; attention; switching costs; managed competition; elderly;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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