Exit, Voice or Loyalty? An Investigation into Mandated Portability of Front-Loaded Private Health Plans

54 Pages Posted: 24 May 2017

See all articles by Juan Atal

Juan Atal

University of Pennsylvania

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Martin Karlsson

University of Duisburg-Essen

Nicolas R. Ziebarth

Cornell University

Date Written: May 23, 2017

Abstract

We study theoretically and empirically how consumers in an individual private long-term health insurance market with front-loaded contracts respond to newly mandated portability requirements of their old-age provisions. To foster competition, effective 2009, German legislature made the portability of standardized old-age provisions mandatory. Our theoretical model predicts that the portability reform will increase internal plan switching. However, under plausible assumptions, it will not increase external insurer switching. Moreover, the portability reform will enable unhealthier enrollees to reoptimize their plans. We find confirmatory evidence for the theoretical predictions using claims panel data from a big private insurer.

Keywords: Individual Private Health Insurance, Portability, Old-Age Provisions, Health Plan Switching, Switching Costs, Health Policy Reform, Consumer Bargaining, Retention

JEL Classification: G22, I11, I18

Suggested Citation

Atal, Juan and Fang, Hanming and Karlsson, Martin and Ziebarth, Nicolas R., Exit, Voice or Loyalty? An Investigation into Mandated Portability of Front-Loaded Private Health Plans (May 23, 2017). PIER Working Paper No. 17-012, Available at SSRN: https://ssrn.com/abstract=2972734 or http://dx.doi.org/10.2139/ssrn.2972734

Juan Atal

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Martin Karlsson

University of Duisburg-Essen ( email )

Nicolas R. Ziebarth

Cornell University ( email )

Ithaca, NY
United States

HOME PAGE: http://www.human.cornell.edu/bio.cfm?netid=nrz2

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