The Value of Choice in Mandatory Health Insurance

University of St. Gallen Working Papers on Finance No. 2021/04

36 Pages Posted: 16 Feb 2021

See all articles by Christian Biener

Christian Biener

Institute of Insurance Economics, University of St. Gallen; University of St. Gallen - School of Finance

Lan Zou

University of St.Gallen

Date Written: February 1, 2021

Abstract

Giving consumers choice can improve welfare in principle. In this study, we explore the financial consequences of choice and information provision in the Swiss mandatory health insurance market that entails non-optimal options by design. This market is characterized by a significant redistribution of welfare due to the approximately 36 percent of the adult population participating in such non-optimal plans. We run a laboratory experiment in which we contrast choices under an increased information and a restricted choice setting to the control choice situation as it is currently observed in the market. We find that financial losses resulting from poor choice are economically meaningful and amount to 9.4 percent of total annual health costs and that decision quality cannot be easily improved by interventions. We suggest several policy changes in light of our findings.

Keywords: health insurance, policy, value of choice

JEL Classification: D81, D83, G22, I13

Suggested Citation

Biener, Christian and Zou, Lan, The Value of Choice in Mandatory Health Insurance (February 1, 2021). University of St. Gallen Working Papers on Finance No. 2021/04, Available at SSRN: https://ssrn.com/abstract=3778635 or http://dx.doi.org/10.2139/ssrn.3778635

Christian Biener

Institute of Insurance Economics, University of St. Gallen ( email )

Girtannerstrasse 6
St. Gallen, St. Gallen 9010
Switzerland

HOME PAGE: http://ivw.unisg.ch/cb

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Lan Zou (Contact Author)

University of St.Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

HOME PAGE: http://https://www.unisg.ch/en/personenverzeichnis/f638cfc7-2d4c-431d-976e-5754b9b379f7

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