Abstract

The switching of health insurance plans and health care utilization are potentially correlated with both observable and unobservable information. This paper presents a two-period model of health care utilization, and attempts to account for unobserved heterogeneity that simultaneously affects utilization and the decision to switch plans. Data used in this paper are drawn from the Medical Expenditure Panel Survey. Results indicate that non-HMO enrollees increase their utilization of non-emergency related care prior to switching to HMOs, and they decrease utilization after switching. Conversely, individuals enrolled in HMOs report lower levels of utilization before and higher utilization after they switch to non-HMOs.