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Exit, Voice, or Loyalty? An Investigation Into Mandated Portability of Front‐Loaded Private Health Plans
Author(s) -
Atal Juan Pablo,
Fang Hanming,
Karlsson Martin,
Ziebarth Nicolas R.
Publication year - 2019
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12233
Subject(s) - software portability , legislature , business , loyalty , competition (biology) , health insurance , unobservable , actuarial science , health care , marketing , economics , computer science , political science , econometrics , law , ecology , biology , programming language , economic growth
We study theoretically and empirically how consumers in an individual private long‐term health insurance market with front‐loaded contracts respond to a newly mandated portability requirement of their old‐age provisions. To foster competition, effective 2009, the 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.