NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Frederik T. Schut

Erasmus University Rotterdam
The Netherlands

E-Mail: schut@bmg.eur.nl

NBER Working Papers and Publications

September 2017Premium Levels and Demand Response in Health Insurance: Relative Thinking and Zero-Price Effects
with Rudy Douven, Ron van der Heijden, Thomas McGuire: w23846
In health care systems with a competitive health insurance market, governments or other sponsors (e.g. employers) often subsidize premiums to encourage enrolment. These subsidies are typically independent of plan choice leaving the absolute premium differences in place so as not to distort consumer choice of plan. Such subsidies do, however, change the relative premium differences across plans, which, according to theories from behavioral economics, can affect choice. Consumers might be sensitive to differences relative to a reference premium (“relative thinking”). Furthermore, consumers might be particularly sensitive to a reference premium of zero (“zero-price effect”), a relevant range for some subsidized health insurance markets. This paper tests these ideas with two sources of eviden...

Published: Rudy Douven & Ron van der Heijden & Thomas McGuire & Frederik Schut, 2019. "Premium levels and demand response in health insurance: relative thinking and zero-price effects," Journal of Economic Behavior & Organization, .

 
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