A Change of Plans: The Impact of Involuntary Switching in Health Insurance (JMP)


Employees and beneficiaries of public health insurance programs often have to switch involuntarily to another health plan, when a contract with their insurer is not renewed. I study the effects of such involuntary switches using plans' exit after a lost bid in Medicaid Managed Care, comparing enrollees forced to switch to enrollees in remaining plans. I find that switching plans disrupts medical care: switchers have fewer visits to primary-care physicians and more visits to emergency departments; their utilization of prescription drugs decreases, including patients using drugs for chronic conditions; children and non-whites also have more preventable hospital admissions. At the year after the exit, insurers' spending on switchers is 10% lower than the pre-exit baseline, comparing to beneficiaries in remaining plans, and Medicaid's total spending is lower by 4%. Exploring possible mechanisms, I find that loss of access to familiar primary care physicians, changes in the network of providers, and changes in drug formularies - all may play a role in disrupting care after a switch. Plans' effect on utilization may also partly explain the results.
Last updated on 11/06/2021