Choice, Price Competition and Complexity in Markets for Health Insurance

44 Pages Posted: 15 Feb 2008 Last revised: 11 Nov 2013

See all articles by Richard G. Frank

Richard G. Frank

Harvard Medical School; National Bureau of Economic Research (NBER)

Karine Lamiraud

ESSEC Business School

Date Written: February 2008

Abstract

The United States and other nations rely on consumer choice and price competition among competing health plans to allocate resources in the health sector. A great deal of research has examined the efficiency consequences of adverse selection in health insurance markets, less attention has been devoted to other aspects of consumer choice. The nation of Switzerland offers a unique opportunity to study price competition in health insurance markets. Switzerland regulates health insurance markets with the aim of minimizing adverse selection and encouraging strong price competition. We examine consumer responses to price differences in local markets and the degree of price variation in local markets. Using both survey data and observations on local markets we obtain evidence suggesting that as the number of choices offered to individuals grow their willingness to switch plans given a set of price dispersion differences declines allowing large price differences for relatively homogeneous products to persist. We consider explanations for this phenomenon from economics and psychology.

Suggested Citation

Frank, Richard G. and Lamiraud, Karine, Choice, Price Competition and Complexity in Markets for Health Insurance (February 2008). NBER Working Paper No. w13817. Available at SSRN: https://ssrn.com/abstract=1093655

Richard G. Frank (Contact Author)

Harvard Medical School ( email )

Department of Health Care Policy
Boston, MA 02115
United States
617-432-0178 (Phone)
617-432-1219 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Karine Lamiraud

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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