A competitive national health insurance system was introduced in Israel in 1995. Comsumer mobility has been traditionally a signal of market (managed) competition. However, since 1998, sickness funds’ switching rate has been stable at around 1% of the population. The low switching rate is explained by limited real options and similarity in the sickness funds functioning, and reluctance to change providers. The paper aims to characterize the 1% of the population who switches sickness fund in relation to the stayers, and to examine the implications for public policy. The National Insurance Institute Health Registry was used to conduct two analyses: (i) bivariate comparisons on selected socio-demographic characteristics of the switchers to those of the stayers in the years 1999–2000, and (ii) a multivariate logistic analysis of the propensity to switch for the entire adult (21+) population in the years 2005–2006. The main result is that switching is an inferior good. Both the bivariate and the multivariate analysis show that persons with lower labor-income, receiving income support or unemployment benefits are more likely to switch. Switchers have more children up to age 18. Arabs and Orthodox Jews are more likely to switch sickness funds. The 1% of switchers does not form a random draw from the age–sex-adjusted population. The over-representation of poor persons among switchers is unique to the Israeli scene, which might have resulted from demand-side initiatives, but also from implicit risk-selection strategies exercised by the sickness funds under the Israeli incomplete age-based risk-adjustment system.
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