Consumer choice of social health insurance in managed competition

Objective To promote managed competition in Dutch health insurance, the insured are now able to change health insurers. They can choose a health insurer with a low flat‐rate premium, the best supplementary insurance and/or the best service. As we do not know why people prefer one health insurer to another, we investigated their reasons for selecting their health insurer and assessed the importance of the supplementary benefit package and the flat‐rate premium. Methods A self‐administered questionnaire was completed by 468 of a total of 884 (52.9%). Data were compared among three groups. The first group comprised those who left one health insurer for another (exit). The second group had joined the health insurer (entry) and the third group comprised those who did not switch (stayers). Results Those in the entry group were statistically significantly less satisfied with their former insurance organization than those in the other groups (exit and stayers) with the insurance organization under investigation. They were also less satisfied than the other groups in respect of the flat‐rate premium. Those in the exit group were younger and seemed to be in better health. In general, the insured were only aware of small differences between health insurance funds and the three groups did not differ from each other in this respect. About a quarter of the entry group reported the flat‐rate premium as a reason for selecting a particular health insurance fund. However, the most frequently reported reason, for both exit and entry, was the benefit package of the supplementary insurance. Conclusions In the absence of clear differences between insurance organizations, the advantages of managed competition maybe too difficult to achieve.     

Switching benefits and costs in competitive health insurance markets: A conceptual framework and empirical evidence from the Netherlands

Competitive health insurance markets will only enhance cost-containment, efficiency, quality, and consumer responsiveness if all consumers feel free to easily switch insurer. Consumers will switch insurer if their perceived switching benefits outweigh their perceived switching costs. We developed a conceptual framework with potential switching benefits and costs in competitive health insurance markets. Moreover, we used a questionnaire among Dutch consumers (1091 respondents) to empirically examine the relevance of the different switching benefits and costs in consumers’ decision to (not) switch insurer. Price, insurers’ service quality, insurers’ contracted provider network, the benefits of supplementary insurance, and welcome gifts are potential switching benefits. Transaction costs, learning costs, ‘benefit loss’ costs, uncertainty costs, the costs of (not) switching provider, and sunk costs are potential switching costs. In 2013 most Dutch consumers switched insurer because of (1) price and (2) benefits of supplementary insurance. Nearly half of the non-switchers – and particularly unhealthy consumers – mentioned one of the switching costs as their main reason for not switching. Because unhealthy consumers feel not free to easily switch insurer, insurers have reduced incentives to invest in high-quality care for them. Therefore, policymakers should develop strategies to increase consumer choice.     

Increasing health insurance costs and the decline in insurance coverage

OBJECTIVE: To determine the impact of rising health insurance premiums on coverage rates. DATA SOURCES & STUDY SETTING: Our analysis is based on two cohorts of nonelderly Americans residing in 64 large metropolitan statistical areas (MSAs) surveyed in the Current Population Survey in 1989-1991 and 1998-2000. Measures of premiums are based on data from the Health Insurance Association of America and the Kaiser Family Foundation/Health Research and Educational Trust Survey of Employer-Sponsored Health Benefits. STUDY DESIGN: Probit regression and instrumental variable techniques are used to estimate the association between rising local health insurance costs and the falling propensity for individuals to have any health insurance coverage, controlling for a rich array of economic, demographic, and policy covariates. PRINCIPAL FINDINGS: More than half of the decline in coverage rates experienced over the 1990s is attributable to the increase in health insurance premiums (2.0 percentage points of the 3.1 percentage point decline). Medicaid expansions led to a 1 percentage point increase in coverage. Changes in economic and demographic factors had little net effect. The number of people uninsured could increase by 1.9-6.3 million in the decade ending 2010 if real, per capita medical costs increase at a rate of 1-3 percentage points, holding all else constant. CONCLUSIONS: Initiatives aimed at reducing the number of uninsured must confront the growing pressure on coverage rates generated by rising costs.     

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

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. Copyright © 2009 John Wiley & Sons, Ltd.     

Risk selection in the German public health insurance system

The German statutory health insurance market was exposed to competition in 1996. To limit direct risk selection the regulator required open enrollment. As the risk compensation scheme, introduced in 1994, is highly incomplete, substantial incentives for risk selection exist. Due to their low premiums, company-based sickness funds have been able to attract a lot of new members. We analyze, using data from the German Socio-Economic Panel, the determinants of switching behavior from 1995 to 2000. There is no evidence for selection by funds. The success of the company-based sickness funds originates in incomplete risk adjustment together with the negative correlation between health status and switching costs.     

Impacts of rising health care costs on families with employment-based private insurance: a national analysis with state fixed effects

Background

Given the rapid growth of health care costs, some experts were concerned with erosion of employment-based private insurance (EBPI). This empirical analysis aims to quantify the concern.

Methods

Using the National Health Account, we generated a cost index to represent state-level annual cost growth. We merged it with the 1996–2003 Medical Expenditure Panel Survey. The unit of analysis is the family. We conducted both bivariate and multivariate logistic analyses.

Results

The bivariate analysis found a significant inverse association between the cost index and the proportion of families receiving an offer of EBPI. The multivariate analysis showed that the cost index was significantly negatively associated with the likelihood of receiving an EBPI offer for the entire sample and for families in the first, second, and third quartiles of income distribution.The cost index was also significantly negatively associated with the proportion of families with EBPI for the entire year for each family member (EBPI-EYEM). The multivariate analysis confirmed significance of the relationship for the entire sample, and for families in the second and third quartiles of income distribution.Among the families with EBPI-EYEM, there was a positive relationship between the cost index and this group''s likelihood of having out-of-pocket expenditures exceeding 10 percent of family income. The multivariate analysis confirmed significance of the relationship for the entire group and for families in the second and third quartiles of income distribution.

Conclusions

Rising health costs reduce EBPI availability and enrollment, and the financial protection provided by it, especially for middle-class families.     

The potential premium range of risk-rating in competitive markets for supplementary health insurance

In this paper, we simulate several scenarios of the potential premium range for voluntary (supplementary) health insurance, covering benefits which might be excluded from mandatory health insurance (MI). Our findings show that, by adding risk-factors, the minimum premium decreases and the maximum increases. The magnitude of the premium range is especially substantial for benefits such as medical devices and drugs. When removing benefits from MI policymakers should be aware of the implications for the potential reduction of affordability of voluntary health insurance coverage in a competitive market.      

The role of government in health insurance markets with adverse selection

This paper analyzes the welfare economics of three arrangements for purchasing health insurance: competitive markets in which consumers are free to choose among options with different levels of coverage and prices; systems with compulsory partial pooling which permit private firms to sell supplementary coverage; and government-run pools that purchase comprehensive coverage at a single price for all consumers. Competitive insurance markets are assumed to face the problem of ‘adverse selection’. This refers to a situation in which the insurer cannot observe characteristics of individuals that affect the cost of insurance and that are known to the individuals. Competitive markets with adverse selection are not efficient because low risks cannot purchase comprehensive insurance coverage. However, government-run pools with comprehensive coverage are an inefficient solution to the problem of adverse selection. Compulsory partial coverage may represent an attractive alternative to both competitive markets and comprehensive pools. We discover two situations when government intervention of this type will succeed: when there are not many high risks in the population, and when the risk types are similar. We discuss the implications of these results for health insurance programs in several countries. Our results also have implications for the allocation of public funds for disease-prevention projects. A project targeted at high risks will produce external benefits for low risks, even though they are not directly affected by the program. However, a successful project might eliminate the market for private insurance; in this case the government should consider mandating partial insurance coverage.Copyright © 1998 John Wiley & Sons, Ltd.     

Reducing administrative costs in US health care: Assessing single payer and its alternatives

ObjectiveExcess administrative costs in the US health care system are routinely referenced as a justification for comprehensive reform. While there is agreement that these costs are too high, there is little understanding of what generates administrative costs and what policy options might mitigate them.Data SourcesLiterature review and national utilization and expenditure data.Study DesignWe developed a simulation model of physician billing and insurance‐related (BIR) costs to estimate how certain policy reforms would generate savings. Our model is based on structural elements of the payment process in the United States and considers each provider''s number of health plan contracts, the number of features in each health plan, the clinical and nonclinical processes required to submit a bill for payment, and the compliance costs associated with medical billing.Data ExtractionFor several types of visits, we estimated fixed and variable costs of the billing process. We used the model to estimate the BIR costs at a national level under a variety of policy scenarios, including variations of a single payer “Medicare‐for‐All” model that extends fee‐for‐service Medicare to the entire population and policy efforts to reduce administrative costs in a multi‐payer model. We conducted sensitivity analyses of a wide variety of model parameters.Principal FindingsOur model estimates that national BIR costs are reduced between 33% and 53% in Medicare‐for‐All style single‐payer models and between 27% and 63% in various multi‐payer models. Under a wide range of assumptions and sensitivity analyses, standardizing contracts generates larger savings with less variance than savings from single‐payer strategies.ConclusionAlthough moving toward a single‐payer system will reduce BIR costs, certain reforms to payer‐provider contracts could generate at least as many administrative cost savings without radically reforming the entire health system. BIR costs can be meaningfully reduced without abandoning a multi‐payer system.     

The effect of cancer diagnosis on switching health insurance in medicare

Because health insurance is intended to protect patients in the event of a health shock, it is important to evaluate health insurance policy in the context of patients who experience health shocks. I measure the effect of cancer diagnosis on health insurance switching in order to compare cancer patient's preferences among private and publicly administered Medicare. I estimate that a cancer diagnosis increases the probability a patient will leave a private Medicare plan, for the public plan, by 0.8% points (41%). Similarly, a cancer diagnosis decreases the probability a patient will leave the public Medicare plan, for a private plan, by 0.5% points (16%). The implication is that private Medicare plans are relatively less attractive to cancer patients than they are to noncancer patients.     

Low rural health insurance take‐up in a universal coverage system: perceptions of health insurance among the uninsured in La Guajira,Colombia

Despite enacting a universal healthcare system in 1993, many Colombians do not participate. Understanding perceptions of the system could help the government market certain features or adjust benefits in order to increase enrollment. Using La Guajira, Colombia, as a case study, we surveyed uninsured rural households regarding insurance preferences, values and beliefs, and perceptions of available services. Four hundred heads of households responded in La Guajira, Colombia. Respondents reported high levels of long‐term uninsurance. Overall, the quality of services in the government‐run system is perceived as better than being uninsured, but there appear to be constraints on enrollment. Rural Colombians value more family coverage and better choice of physicians, but offering better benefits may not be enough. Many cited access barriers, so reducing these barriers may also increase enrollment. Further surveys in other parts of Colombia should be undertaken to confirm results. Copyright © 2013 John Wiley & Sons, Ltd.     

The mental health residential care study: the "hidden costs" of provision

Reforms to the organization and funding of health and social care in the UK have placed new responsibilities on social and health care purchasers to undertake assessment of the accommodation and care needs of people with mental health problems who are living in the community. This responsibility is hampered by a lack of reliable or complete data on the range of services and costs associated with residential care, in particular the non-accommodation or costs which are hidden in the sense that they are often unaccounted for by individual agencies, such as the use of hospital, community and peripatetic services falling outside residential facilities core functions or budgets. Employing service use and cost data from a wider study of residential care, non-accommodation costs were calculated for a number of residential settings (both in and outside London). As a proportion of total costs of care, these ranged from below 10% in hospital settings to between 13% and 39% in community-based staffed hostels. These figures represent estimates of the cost “add-ons” required for this element of care where only accommodation costs are known. Multiple regression analyses were also undertaken to examine the possible influence of resident, facility and area characteristics on hidden costs. Resident characteristics alone explained only a small amount of the inter-resident variation in hidden costs. The inclusion of care environment, sector and locality enhanced the predictive power of the models. The relevance and interpretation of these findings are discussed.     

Setting health insurance remuneration rates of private providers in Kenya: the role of costing, challenges and implications

Successful health financing depends on prudent design of resource collection, pooling and purchasing. One of the critical purchasing design issues is the provider payment mechanism and the remuneration rates, which need to set appropriate incentives to health providers. In order to set remuneration rates, cost information is required, but this is not known in many developing countries. This paper illuminates the role of costing and the challenges of resetting health insurance remuneration rates for private hospitals in Kenya and discusses the implications and lessons. The results and proceedings of costing studies from Kenya are reviewed, which reveals methodological and practical challenges as to revising remuneration rates. The costing results are characterized by high variability, which is, among other factors, due to suboptimal resource use at some hospitals and provider payment mechanisms that incentivise over-provision. In such a context, hospital-specific remuneration rates are advisable. In conclusion, remuneration rate setting is not just about translating costing results into a price tag, but other factors have to be considered in a low-income country context in order to balance out health sector objectives and provider interests. Inclusion of providers in developing the costing methodology proves important to increase acceptability of results.     

Community-based health insurance in poor rural China: the distribution of net benefits

The collapse of China's Cooperative Medical System (CMS) in 1978 resulted in the lack of an organized financing scheme for health care, adversely affecting rural farmers' access to health care, especially among the poor. The Chinese government recently announced a policy to re-establish some forms of community-based insurance (CBI). Many existing schemes involve low premiums but high co-payments. We hypothesized that such benefit design leads to unequal distribution of the "net benefits" (NB)--benefits net of payment--because even though low premiums are more affordable to poor farmers, high co-payments may have a significant deterrent effect on the poor in the use of services in CBI. To test this hypothesis empirically, we estimated the probability of farmers joining a re-established CBI using logistic regression, and the utilization of health care services for those who joined the scheme using the two-part model. Based on the estimations, we predicted the distribution of NB among those who joined the CBI and for the entire population in the community. Our data came from a household survey of 4160 members of 1173 households conducted in six villages in Fengshan Township, Guizhou Province, China. Three principal findings emerged from this study. First, income is an important factor influencing farmers' decision to join a CBI despite the premium representing a very small fraction of household income. Secondly, both income and health status influence enrollees' utilization of health services: richer/sicker participants obtain greater NB from the CBI than poorer/healthier members, meaning that the poorer/healthier participants subsidize the rich/sick. Thirdly, wealthy farmers benefit the most from the CBI with low premium and high co-payment features at every level of health status. In conclusion, policy recommendations related to the improvement of the benefit distribution of CBI schemes are made based on the results from this study.     

The effects of public health insurance in labor markets with informal jobs: Evidence from Mexico

This paper studies the labor market effects of the most significant public health insurance expansion in the Americas: Mexico's Seguro Popular (SP). To identify its impact, I exploit the staggered rollout of SP across municipalities. I find that SP increases labor supply by reducing the likelihood of informal workers exiting the labor market. This reduction is driven by women, who experience a 15% decrease in the probability of transitioning from informal employment to inactivity. I also find that this reduction is concentrated among female secondary earners residing in households with dependents. These findings suggest that SP may operate through a novel channel, namely that health insurance enables caregivers to continue working by reducing health shocks among dependents.