In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of Health Plan Choice

51 Pages Posted: 31 Dec 2011

See all articles by Hendrik Schmitz

Hendrik Schmitz

University of Duisburg-Essen - Department of Economics and Business Administration

Nicolas R. Ziebarth

Cornell University

Multiple version iconThere are 2 versions of this paper

Abstract

This paper provides field evidence on (a) how price framing affects consumers' decision to switch health insurance plans and (b) how the price elasticity of demand for health insurance can be influenced by policymakers through simple regulatory efforts. In 2009, in order to foster competition among health insurance companies, German federal regulation required health insurance companies to express price differences between health plans in absolute Euro values rather than percentage point payroll tax differences. Using individual-level panel data, as well as aggregated health plan-level panel data, we find that the reform led to a sixfold increase in an individual's switching probability and a threefold demand elasticity increase.

Keywords: health insurance, health plan switching, price competition, price elasticity, SOEP

JEL Classification: H51, I11, I18

Suggested Citation

Schmitz, Hendrik and Ziebarth, Nicolas R., In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of Health Plan Choice. IZA Discussion Paper No. 6241. Available at SSRN: https://ssrn.com/abstract=1977827

Hendrik Schmitz (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

Nicolas R. Ziebarth

Cornell University ( email )

Ithaca, NY
United States

HOME PAGE: http://www.human.cornell.edu/bio.cfm?netid=nrz2

Register to save articles to
your library

Register

Paper statistics

Downloads
46
Abstract Views
554
PlumX Metrics