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Too sticky to switch? Lessons learned from health plan choices of the elderly

On 7th May 2018 (1-2pm) Mujaheed Shaikh, assistant professor at the Vienna University of Economics and Business, will give a presentation about “Too sticky to switch? Lessons learned from health plan choices of the elderly” in Q4.245. Afterwards, Mr. Shaikh will be available for questions and discussions. His presentation is part of:


Prompted by the ongoing debate about consumer inertia in health plan choices, we study health plan choices of older individuals using unique claims-data from the biggest health insurance company in Switzerland. Owing to the insurance contract design, we expect that retirees will face a significant increase (7%) in premium at retirement. However, we observe in the data that the change in premium at retirement is less than expected i.e. retirees adjust their insurance plans such that the increase in the premium is less than 7%. In order to adjust to this premium change, they switch their health plan within the current insurance provider and increase their deductible level. Specifically, we observe that the newly retired are switching from the most generous (in benefits) and expensive standard plan (-15%-points) towards restrictive managed care plans (+11%-points for PPO; +3%-points for HMO). Further, we also explore two important variables that matter for switching  i) salience of the premium and ii) past health expenditures. The results contribute to the growing literature on consumer switching behavior and success of managed competition models, and have important implications for policy.

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