Nicolas R . Ziebarth In Absolute or Relative Terms ? How Framing Prices Aff ects the Consumer Price Sensitivity of Health Plan Choice

This paper provides fi eld evidence on (a) how price framing aff ects consumers’ decision to switch health insurance plans and (b) how the price elasticity of demand for health insurance can be infl uenced by policymakers through simple regulatory eff orts. In 2009, in order to foster competition among health insurance companies, German federal regulation required health insurance companies to express price diff erences between health plans in absolute Euro values rather than percentage point payroll tax diff erences. Using individual-level panel data, as well as aggregated health plan-level panel data, we fi nd that the reform led to a sixfold increase in an individual’s switching probability and a threefold demand elasticity increase. JEL Classifi cation: H51, I11, I18