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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ron van der Heijden

CPB Netherlands
Bureau for Economic Policy Analysis
The Hague

E-Mail: r.p.vanderheijden@amc.nl
Institutional Affiliations: CPB Netherlands and Erasmus University Rotterdam

NBER Working Papers and Publications

September 2017Premium Levels and Demand Response in Health Insurance: Relative Thinking and Zero-Price Effects
with Rudy Douven, Thomas McGuire, Frederik T. Schut: 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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