Choosing health insurance: more transparency alone is not enough


Approximately 9.8 million insured individuals have basic health insurance packages for which a cheaper alternative exists that is similar or almost similar to their current package. This is because it is difficult for consumers to compare basic health insurance packages, thereby making it hard for them to choose one. This has been revealed by a study conducted by the Netherlands Authority for Consumers and Markets (ACM) and the Dutch Healthcare Authority (NZa) into the differences between basic health insurance packages in 2018. Similar results were found in 2016 and 2017. ACM and NZa therefore call on health insurers and policymakers to make it easier for consumers to compare and choose health insurance packages. Increasing transparency alone is not enough.

Small differences

Numerous policies are available on the market. That means consumers need to compare many different options. Several insurance groups offer policies that are presented as different policies, but which, according to the analysis, are the same or very similar. Overemphasizing such small differences makes it difficult for the insured to choose wisely. If comparing policies is difficult, health insurers will be less likely to set competitive premiums and develop better policies.

Other obstacles when choosing

Besides small differences between policies, we also see other obstacles in the consumers’ choice process: the time and effort it takes to choose the right policy, information that is difficult to find or comprehend, and the limits to the amount of information that consumers are able and actually willing to process. In addition, behavioral pitfalls also play a role, just like an often unjustified fear of not getting the same coverage with other policies. All of these obstacles could prevent consumers from taking action or from being able to find their way to the policy that suits their needs best, which means they end up paying more than necessary.

Transparency alone is not enough

Traditionally speaking, the go-to solution of policymakers and regulators for consumer choice problems is increased transparency and improved information. However, that is no longer enough. Additional measures are needed in order to make it easier for consumers to make sound choices. Possible solutions are, for example, simplifying the range of policies on offer, and anticipating behavioral pitfalls of consumers, thereby enabling them to find their way to the policy that suits their needs best.

ACM and NZa emphasize that it is not a goal unto itself that consumers switch insurers. But it is important that they are impeded as little as possible in their choice process. Comparing and choosing the right policy must become much easier for consumers.

Research methodology

Using algorithms, ACM and NZa analyzed the basic health insurance packages (policies) in 2016, 2017 and 2018. With so-called ‘machine learning,’ the 55 policies of 2018 were grouped into 10 clusters. Within each cluster of similar (or almost similar) policies, the differences in premiums were identified. In 2018, 72% of the insured did not have the cheapest policy in their cluster. There can be good and not-so-good reasons for that. Some of those good reasons could be: people may pay more because they value the policy’s brand or base their choices on characteristics that have not been included in the analysis.