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Switching costs in competitive health insurance markets: The role of insurers' pricing strategies.

ABSTRACT: Our article deals with pricing strategies in Swiss health insurance markets and focuses on the relationship between basic and supplementary insurance. We analyzed how firms' pricing strategies (i.e., pricing of basic and supplementary products) can create switching costs in basic health insurance markets, thereby preventing competition in basic insurance from working properly. More specifically, using unique market and survey data, we investigated whether firms use bundling strategies or supplementary products as low-price products to attract and retain basic insurance consumers. To our knowledge, this is the first paper to analyze these pricing strategies in the context of insurance/health insurance. We found no evidence of bundling in the Swiss setting. We did however observe that firms used low-price supplementary products that contributed to lock in consumers. A majority of firms offered at least one of such product at a low price. None offered low-price products in both basic and supplementary markets. Low-price insurance products differed across firms. When buying a low-price supplementary product, consumers always bought their basic contract from the same firm. Furthermore, those who opted for low-price supplementary products were less likely to declare an intention to switch basic insurance firms in the near future. This result was true for all risk category levels.

SUBMITTER: Lamiraud K

PROVIDER: S-EPMC7496908 | biostudies-literature | 2020 Sep

REPOSITORIES: biostudies-literature

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Switching costs in competitive health insurance markets: The role of insurers' pricing strategies.

Lamiraud Karine K Stadelmann Pierre P

Health economics 20200615 9

Our article deals with pricing strategies in Swiss health insurance markets and focuses on the relationship between basic and supplementary insurance. We analyzed how firms' pricing strategies (i.e., pricing of basic and supplementary products) can create switching costs in basic health insurance markets, thereby preventing competition in basic insurance from working properly. More specifically, using unique market and survey data, we investigated whether firms use bundling strategies or supplem ...[more]

PMID: 32542729

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Project description:In a healthcare system based on managed competition, health insurers are intended to be the prudent buyers of care on behalf of their enrollees. Equally, citizens are expected to be critical consumers when choosing a health insurance policy. The choice of a health insurance policy may be related to trust in the health insurer, as enrollees must believe that the health insurer will make the right choices for them when it comes to purchasing care. This study aims to investigate how enrollees' trust in health insurers is associated with their choice of a health insurance policy in the Netherlands. We will focus on the switching behaviour of enrollees and the choice of a policy with restrictive conditions. In February 2022, a questionnaire was sent to a representative sample regarding gender and age of the adult Dutch population. In total 1,125 enrollees responded, a response rate of 56%. Respondents were asked about the choices they made in choosing health insurance. Trust in health insurers was measured using the Health Insurer Trust Scale (HITS), a validated multiple item scale. Descriptive statistics, a paired t-test and logistic regression models were conducted to analyse the results. Of all respondents, 35% indicated that they agree, or completely agree, with the statement that they trust health insurers completely. In addition, trust in enrollees' own insurer is slightly higher than trust in other insurers (36.29 vs. 33.59, p<0.001). Furthermore, we found no significant associations between trust in health insurers, and whether enrollees have either switched health insurers or have chosen a policy with restrictive conditions. This study showed that enrollees' trust in health insurance in the Netherlands is relatively low and that trust in their own insurer is slightly higher than trust in other insurers. Furthermore, this study does not show a relationship between trust in health insurers and, either switching health insurers, or choosing a policy with restrictive conditions. Nevertheless, attention for increasing the trust in health insurers might still be important, as low trust may have negative consequences for other elements of the functioning of the healthcare system.

Project description:ImportanceUse of hospice has been demonstrated to be cost saving to the Medicare program and yet the extent to which hospice saves money across all payers, including whether it shifts costs to families, is unknown.ObjectiveTo estimate the association between hospice use and total health care costs including family out-of-pocket health care spending.Design setting and participantsThis retrospective cohort study of health care spending in the last 6 months of life used data from the nationally representative Medicare Current Beneficiary Survey (MCBS) between the years 2002 and 2018. Participants were MCBS participants who resided in the community and died between 2002 and 2018.ExposuresCovariate balancing propensity scores were used to compare participants who used hospice (n = 2113) and those who did not (n = 3351), stratified by duration of hospice use.Main outcomes and measuresTotal health care expenditures were measured across payers (family out-of-pocket, Medicare, Medicare Advantage, Medicaid, private insurance, private health maintenance organizations, Veteran's Administration, and other) and by expenditure type (inpatient care, outpatient care, medical visits, skilled nursing, home health, hospice, durable medical equipment, and prescription drugs).ResultsThe study population included 5464 decedents (mean age 78.7 years; 48% female) and 38% enrolled with hospice. Total health care expenditures were lower for those who used hospice compared with propensity score weighted non-hospice control participants for the last 3 days of life ($2813 lower; 95% CI, $2396-$3230); last week of life ($6806 lower; 95% CI, $6261-$7350); last 2 weeks of life ($8785 lower; 95% CI, $7971-$9600); last month of life ($11 747 lower; 95% CI, $10 072-$13 422); and last 3 months of life ($10 908 lower; 95% CI, $7283-$14 533). Family out-of-pocket expenditures were lower for hospice enrollees in the last 3 days of life ($71; 95% CI, $43-$100); last week of life ($216; 95% CI, $175-$256); last 2 weeks of life ($265; 95% CI, $149-$382); and last month of life ($670; 95% CI, $530-$811) compared with those who did not use hospice. Health care savings were associated with reductions in inpatient care.Conclusions and relevanceIn this population-based cohort study of community-dwelling Medicare beneficiaries, hospice enrollment was associated with lower total health care costs for the last 3 days to 3 months of life. Importantly, we found no evidence of cost shifting from Medicare to families related to hospice enrollment. The magnitude of lower out-of-pocket spending to families who enrolled with hospice is meaningful to many Americans, particularly those with lower socioeconomic status.

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Switching costs in competitive health insurance markets: The role of insurers' pricing strategies.

Publications

Switching costs in competitive health insurance markets: The role of insurers' pricing strategies.

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