Question

Which of the following statements are true about the cost of an employer switching the health plan they offer to their employees? 1. Switching costs affect the employer but not the employee 2. Switching costs help a dominant insurer stay dominant by creating a barrier to entry for new insurers. 3. Switching costs include things like the cost of researching possible new insurers and the cost of setting up new financial linkages between the employer and the new insurer. Group of answer choices: Statement 1 Statement 1 and 2 Statement 2 and 3 Statement 1, 2 and 3

Answer 1

Statement 2 and 3 are true.

When the employer switches the cost of insurance, they are trying to look for more cost friendly insurance providers. This might result in the employer hiring an insurance provider that has already been dominant in the market because of the insurances being cost effective. The cost switching also includes other variable costs involved with looking for a new insurance provider.