Does Price Framing Affect the Consumer Price Sensitivity of Health Plan Choice?

This paper provides field evidence on how price framing affects consumers' decision to switch health plans. In 2009 German federal regulation required insurers to express premium differences between standardized health plans in absolute euro values relative to a federal reference price, rather than in percentage point payroll tax differences. Representative individual-level panel data and aggregated health plan level panel data on the universe of health plans show that the reform strongly increased enrollees' willingness to switch plans, with demand elasticities increasing fourfold. The salience of premium differences and the default premium are obviously key driving forces in the decision to switch insurers.