How Framing Prices Affects the Consumer Price Sensitivity of Health Plan Choice

In Absolute or Relative Terms?How Framing Prices Affects the Consumer Price Sensitivity ofHealth Plan Choice This paper provides field evidence on (a) how price framing affects consumers’ decision toswitch health insurance plans and (b) how the price elasticity of demand for health insurancecan be influenced by policymakers through simple regulatory efforts. In 2009, in order tofoster competition among health insurance companies, German federal regulation requiredhealth insurance companies to express price differences between health plans in absoluteEuro values rather than percentage point payroll tax differences. Using individual-level paneldata, as well as aggregated health plan-level panel data, we find that the reform led to asixfold increase in an individual’s switching probability and a threefold demand elasticityincrease. JEL Classification: H51, I11, I18