Kopafbeelding publicaties CPB

Switching gains and health plan price elasticities: 20 years of managed competition reforms in the Netherlands

CPB Discussion Paper 343, 24 February 2017

In this paper we estimate health plan price elasticities and financial switching gains for consumers over a 20 years period in which managed competition was introduced in the Dutch health insurance market.

The period is characterised by a major health insurance reform in 2006 to provide health insurers with more incentives and tools to compete, and to provide consumers with a more differentiated choice of products. Prior to the reform, in the period 1995-2005, we find a low number of switchers, between 2-4% a year, modest average total switching gains of 2 million euro per year and short-term health plan price elasticities ranging from -0.1 to -0.4. The major reform in 2006 resulted in an all-time high switching rate of 18%, total switching gains of 130 million euro, and a high short-term price elasticity of -5.7. During 2007-2015 switching rates returned to lower levels between 4-8% per year, with total switching gains in the order of 40 million euro per year on average. Total switching gains could have been 10 times higher if all consumers would have switched to one of the cheapest plans. We find short-term price elasticities ranging between -0.9 and -2.2. Our estimations suggest substantial consumer inertia throughout the entire period as we find degrees of choice persistence ranging from about 0.8 to 0.9.

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