Free choice of sickness funds in regulated competition: evidence from Germany and The Netherlands

Sickness funds became the focal point of health insurance reforms in the 1990s. Policy makers expected funds to become more consumer-oriented and more active in managing the provision of health care. This is especially true for two countries in the heart of Europe that, on first view, have many similar institutional characteristics. Both Germany and The Netherlands have introduced competition between sickness funds in the last decade. We present extensive quantitative, as well qualitative, data with regard to the behaviour of consumers after the introduction of free choice between sickness funds. National data was used with regard to contribution rates and member flows and survey data was used to investigate personal motives for actual change and perception of differences between sickness funds. In Germany, contribution rates between sickness funds differ significantly. Accordingly, these differences are the main reason for consumers to switch funds, which occurs on a considerable scale. However, survey data show that other reasons may be important too. In The Netherlands, premium differences are much lower. The same is true for the degree of change. Survey data show that consumers perceive very small differences between sickness funds and do not see much reason for change. Our findings support the claim that the degree of actual changing depends strongly on economic incentives, especially with regard to the extent of financial risk sickness funds have to bear and to the extent premiums or contribution rates can differ. However, the higher the financial risk of individual sickness funds actually is, the higher the incentives for risk selection.