Supplementary insurance as a switching cost for basic health insurance: Empirical results from the Netherlands

Daniëlle M.I.D. Willemse-Duijmelinck, Wynand P.M.M. van de Ven and Ilaria Mosca

Health Policy, 2017, vol. 121, issue 10, 1085-1092

Abstract: Nearly everyone with a supplementary insurance (SI) in the Netherlands takes out the voluntary SI and the mandatory basic insurance (BI) from the same health insurer. Previous studies show that many high-risks perceive SI as a switching cost for BI. Because consumers’ current insurer provides them with a guaranteed renewability, SI is a switching cost if insurers apply selective underwriting to new applicants. Several changes in the Dutch health insurance market increased insurers’ incentives to counteract adverse selection for SI. Tools to do so are not only selective underwriting, but also risk rating and product differentiation. If all insurers use the latter tools without selective underwriting, SI is not a switching cost for BI. We investigated to what extent insurers used these tools in the periods 2006–2009 and 2014–2015. Only a few insurers applied selective underwriting: in 2015, 86% of insurers used open enrolment for all their SI products, and the other 14% did use open enrolment for their most common SI products. As measured by our indicators, the proportion of insurers applying risk rating or product differentiation did not increase in the periods considered. Due to the fear of reputation loss insurers may have used ‘less visible’ tools to counteract adverse selection that are indirect forms of risk rating and product differentiation and do not result in switching costs. So, although many high-risks perceive SI as a switching cost, most insurers apply open enrolment for SI. By providing information to high-risks about their switching opportunities, the government could increase consumer choice and thereby insurers’ incentives to invest in high-quality care for high-risks.

Keywords: Dutch health insurance; Consumer choice; Supplementary insurance; Guaranteed renewability; Competitive insurance market; Switching cost; Basic health insurance (search for similar items in EconPapers)
JEL-codes: G22 I11 I13 I18 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:hepoli:v:121:y:2017:i:10:p:1085-1092

DOI: 10.1016/j.healthpol.2017.08.003

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