Open Enrollment Periods and Plan Choices

Open enrollment periods are pervasively used in insurance markets to limit adverse selection risks resulting when enrollees can switch plans at will. We exploit a change in the open enrollment rules of Medicare Advatage to analyze how beneficiaries responded to the option of switching to a 5-star rated plan at anytime, in a setting where insurers adjusted premiums and benefit design to counterbalance the increased selection risk. We present three findings: within-year switches to 5-star plans increase by 7-16%; demand for 5-star plans across the years does not change; the enrollees who switch to a 5-star plan during the year are in better health status than those who do not switch.