Selection and plan switching behavior.

A majority of employees can choose among health insurance plans of varying generosity. They may switch plans if prices, information, or their health status change. This paper analyzes switching behavior presumptively caused by changes in health status. We show that people who move to a less generous plan have lower medical spending prior to the switch than the average for the generous plan in which they started, while those who move to a more generous plan appear to anticipate higher spending, which they delay until after the switch. This transfer of costs from a less to a more generous plan increases the burden of adverse selection. Our data suggest that switching may be more important to the level of premiums than previously documented.