Do the Dutch Insured make sound Decisions when choosing their Health Care Insurance

1. Introduction From 1941 until 2006 the Dutch health care system experienced numerous reforms in an attempt to (a) ensure universal coverage and equal access, (b) contain cost and (c) improve efficiency. Although, each phase of reform had known its successes, the systems’ structure during that period did not support the achievement of the three goals simultaneously. Notwithstanding, these years of reform did produce valuable insights and as such they led to the belief that managed competition would be able to produce the desired outcome. The rationales for the introduction of managed competition into this market are twofold: it generates efficiency incentives and it induces quality improvements in the health care sector (F.T. Schut and W.P.M.M. Van de Ven, 2005). These rationales eventually led to the enactment of the Health Insurance Act and the Market Regulation Act in 2006; the Dutch health care system as it is known today. One of the areas where the competition has been introduced is the health care insurance (HCI) market. This newly introduced competition implies that there exists one uniform basic insurance, mandatory for every Dutch resident over the age of 18, which is purchased through private HCI companies. Moreover, health care insurers are obliged to accept every applicant of basic insurance. In addition, consumers can buy their basic HCI contracts at their preferred insurer and they are allowed to change insurer annually. Consumers may choose to buy supplementary health insurance covering care that is not included in the basic insurance, but this supplementary insurance is not characterized by open-enrollment (Hamilton, G. J. A. 2008). However, of critical importance for the effectiveness of the introduced competition is sound decision making on the consumer side. This is defined as decisions that are based on both price and quality considerations (Hamilton, G. J. A. 2005). Moreover, as the insured have the opportunity to switch annually, it is essential for competitive effectiveness that these considerations are made each year. The choices made by the insured, whether they switch or not, will produce signals that convey their quality and price preferences to the HC insurers. These signals, in turn, allow HC insurers to purchase the appropriate health care and engage in selective health care purchasing. Thus, choices not based on the adequate considerations will hinder effective competition and as such distort the Dutch HC market. This is in line with the research of Kerssens and Groenewegen where they indicate that “low levels of switching may not provide adequate demand signals in a system of managed ERASMUS UNIVERSITY ROTTERDAM - 4- competition”. Here, appropriate demand signals are defined as the adequate reflections of the consumers price and quality preferences, generated through informed consumer choice. Although previous research has investigated the decision making process of the insured, no attempt has yet been made to investigate whether the Dutch insured have been considering these quality and price aspects yearly, after the new system has been introduced. Therefore, the objective of this paper is to analyze whether the Dutch insured that do not switch yearly consider the existing options with regard to their choice of health care insurer. The second section of this paper will explain the concept of managed competition and the role of the health care insurer in more detail. Furthermore, this section introduces literature that addresses decision-making behavior. In the third section each construct of the model will be specified, after which the results of the analysis will be presented. Subsequently, a discussion and implication of the results, the conclusion and possible limitations and suggestions for further research are provided.