The effect of quality information on consumer health plan switching: evidence from the Buyers Health Care Action Group

Abstract

We examine the factors that lead employees to search for health plan quality information and the effect of such information on the decision to switch plans. Extending Hirshleifer and Riley's model [Hirshleifer, J., Riley, J.G., 1979. The analytics of uncertainty and information--an expositional survey. Journal of Economic Literature 17 (December (4)), 1375-1421] of the economics of information, we develop a two-equation model of quality information awareness and switching behavior. We estimate the model using data from a random sample of 651 single employees from 16 firms that are members of the Buyers Health Care Action Group, a health care purchasing coalition in the Minneapolis-St. Paul region. Our empirical results do not support either a link between quality information and switching behavior, or between perceived health plan satisfaction and switching. We do, however, find that switching is influenced by changes in premiums and whether an individual has an existing relationship with a health care provider.