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Consumer price sensitivity in health insurance

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  • Machiel van Dijk

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  • Marc Pomp
  • Rudy Douven

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    Abstract

    This CPB Discussion Paper presents new estimates for the price elasticity of the residual demand for health insurance. This elasticity measures the loss in market share of a health insurer as a consequence of a unilateral increase in price, assuming other firms keep their prices constant. The main findings are as follows: the price elasticity of residual demand for social health insurance by enrollees was very low during the period 1996-2002. We find small but significant effects of the price of basic insurance but no robust effect of the price of supplementary insurance. Young enrollees are more price sensitive than older enrollees. However, these findings are conditional on the limited variation in price observed in our data. At larger price differentials, the elasticity may well be higher. This Discussion Paper is based on joint work of Machiel van Dijk, Marc Pomp, Rudy Douven (all three at CPB), Trea Laske-Aldershof, Erik Schut (both Erasmus University), Willem de Boer and Anne de Boo (Vektis). We would like to thank Marieke Smit (Vektis) for her help in getting this project off the ground. We would also like to thank Katie Carman (Tilburg University) for her comments on a previous draft of this paper.

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    Bibliographic Info

    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 56.

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    Date of creation: Feb 2006
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    Handle: RePEc:cpb:discus:56

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    1. Schut, Frederik T. & Hassink, Wolter H. J., 2002. "Managed competition and consumer price sensitivity in social health insurance," Journal of Health Economics, Elsevier, vol. 21(6), pages 1009-1029, November.
    2. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
    3. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
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    Cited by:
    1. Rudy Douven & Marco Ligthart & H. Lieverdink & I. Vermeulen, 2007. "Measuring annual price elasticities in Dutch health insurance; a new method," CPB Discussion Paper 90, CPB Netherlands Bureau for Economic Policy Analysis.

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