The Price Sensitivity of Health Plan Choice: Evidence from Retirees in the German Social Health Insurance

40 Pages Posted: 7 May 2014 Last revised: 6 Jan 2016

See all articles by Amelie C. Wuppermann

Amelie C. Wuppermann

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Sebastian Bauhoff

Center for Global Development

Markus Grabka

German Institute for Economic Research (DIW Berlin)

Date Written: June 30, 2014

Abstract

We investigate two determinants of the price sensitivity of health plan demand: the size of the choice set and the salience of premium differences. We use variation in the choice set over time and between regions in the German Social Health Insurance (SHI), and an increase in the salience of premium differences introduced by a recent reform that changed how premiums are framed and paid. Using information on health plan switches of retirees in the German Socio Economic Panel, augmented with information on individuals’ choice sets we find that retirees are less likely to react to potential savings from switching when they have more plans to choose from and when differences between premiums are less salient. The results imply that simplifying choices could save consumers money and also improve the functioning of the health insurance market.

Suggested Citation

Wuppermann, Amelie C. and Bauhoff, Sebastian and Grabka, Markus, The Price Sensitivity of Health Plan Choice: Evidence from Retirees in the German Social Health Insurance (June 30, 2014). Netspar Discussion Paper No. 02/2014-013 - revised version June 2014. Available at SSRN: https://ssrn.com/abstract=2433588 or http://dx.doi.org/10.2139/ssrn.2433588

Amelie C. Wuppermann (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Sebastian Bauhoff

Center for Global Development ( email )

2055 L Street NW
Washington, DC DC 20009
United States

HOME PAGE: http://scholar.harvard.edu/bauhoff/

Markus Grabka

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstrasse 58
SOEP
D-10117 Berlin
Germany
+49-30-89789-339 (Phone)
+49-30-89789-109 (Fax)

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