Too Sicky to Switch? Lessons Learned from Elderly Health Plan Choices

We study the degree of inertia among the elderly by analyzing the health plan choices of individuals close to the official retirement age using administrative data from the biggest health insurance company in Switzerland. Applying a fuzzy regression discontinuity design, our results provide evidence against the inertia-hypothesis: we find that the elderly significantly reduce monthly premiums by about 40 Swiss Francs (40 US Dollars) as a response to going into retirement. However, they do not significantly increase their deductible levels which in turn would result in the acceptance of more financial risk and consequently a premium rebate. Instead, the elderly are significantly more likely to switch from the most expensive standard plan (-13%-points) towards managed care plans (+10%-points for PPO; +2%-points for HMO) which restrict the free choice of health care providers and force individuals to consult a general practitioner in a first step before seeing a specialist ("Gatekeeper model"). Moreover, the higher the premium difference to the current insurance provide, the more likely the elderly switch to equivalent outside options further indicating price sensitivity among the elderly.