Wednesday, June 12, 2013
Posted by D. Daniel Sokol
Karine Lamiraud (Economics Department - ESSEC Business School) discusses Switching costs in competitive health insurance markets.
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.