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

Abstract

This paper focuses on the switching behaviour of enrolees in the Swiss basic health insurance system. Even though the new Federal Law on Social Health Insurance (LAMal) was implemented in 1996 to promote competition among health insurers in basic insurance, there is limited evidence of premium convergence within cantons. This indicates that competition has not been effective so far, 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 supplementary insurance. We use survey data on health plan choice (a sample of 1943 individuals whose switching behaviours were observed between 1997 and 2000) as well as administrative data relative to all insurance companies that operated in the 26 Swiss cantons between 1996 and 2005. The decision to switch and the decision to subscribe to a supplementary contract are jointly estimated.Our findings show that holding a supplementary insurance contract substantially decreases the propensity to switch. However, there is no negative impact of supplementary insurance on switching when the individual assesses his/her health as 'very good'. Our results give empirical support to one possible mechanism through which supplementary insurance might influence switching decisions: given that subscribing to basic and supplementary contracts with two different insurers may induce some administrative costs for the subscriber, holding supplementary insurance acts as a barrier to switch if customers who consider themselves 'bad risks' also believe that insurers reject applications for supplementary insurance on these grounds. In comparison with previous research, our main contribution is to offer a possible explanation for consumer inertia. Our analysis illustrates how consumer choice for one's basic health plan interacts with the decision to subscribe to supplementary insurance.

Statutory health insurance competition in Europe: A four-country comparison

“…By selecting the highest deductible and enrolling in a managed-care network, policy holders in Switzerland can lower their premiums by up to 50%; in Zurich canton, for example, 5% of people paid an annual premium of less than CHF 3,500 (€2,895) in 2010, while 5% paid over CHF 4,900 (€4,053), a difference of more than CHF 1,400 (€1,158) (19). Unlike the Netherlands, there is no evidence of premium variation within cantons narrowing over time (20), which may be an indication of insufficient consumer mobility.…”

“…There is no clear evidence of insurers using VHI to select risks in the statutory market in any of the four countries (20,26,31). Nevertheless, consumer beliefs about risk selection by insurers in the VHI market seem to be a powerful barrier to switching in the statutory market for less healthy people.…”

“…Until recently, Belgian households were required to purchase voluntary and statutory cover from the same entity and VHI was the main way in which insurers differentiated themselves. Legislation in Switzerland explicitly prevents insurers from linking the sale of voluntary and statutory cover (20,26), but there are close ties between them; 93% of those with voluntary policies (purchased by 75% of the population) obtain both types of cover from the same insurer, partly because reimbursement is much simpler when it comes from one company (20). In the Netherlands VHI covers about 90% of the population and most people buy voluntary and statutory cover from the same insurer (8).…”

“…In spite of the energy devoted to strengthening formulas, no country has fully eliminated incentives to select risks (38). Circumstantial evidence for all of the countries indicates there is risk selection through targeted advertising, through the use of reminders and discounts and through product differentiation in VHI 10 (8,20,38,51), while anecdotal evidence suggests insurers in some countries have tried to deter high risks from enrolling 11 . Further strengthening of the formula continues to be a priority for Switzerland, but there is scope for improvement in the other countries too.…”

Service Components and Their Importance in Health Insurance Changes

“…Izločili pa nismo spremenljivke »plačevanje zavarovalne premije brez stroškov na sedežu zavarovalnice« (R 2 = 0,489), saj je R 2 zelo blizu predpisane vrednosti 0,5, njena povprečna vrednost (4,14) pa višja od povprečne vrednosti faktorja (4,07), kar nakazuje njeno pomembnost v storitvi DPZZ pri zamenjavi zdravstvene zavarovalnice. Dobljeni rezultati, prikazani v tabeli 1, potrjujejo konvergenčno veljavnost.…”