Consumer Price Sensitivity and Social Health Insurer Choice in Germany and the Netherlands

In this paper, we examine the effects of the introduction of free choice and price competition in social health insurance in Germany and the Netherlands. Using panel data at the sickness fund level we estimate the price elasticity of sickness fund choice in both countries. We find that the price elasticity in Germany is high and rapidly increasing. Consistent with findings of other studies on health plan choice, the price elasticity is much lower for elderly than for non-elderly. In the Netherlands, by contrast, the price elasticity of fund choice is negligible. Only when people were forced to choose a sickness fund, they were quite sensitive to premium differences. Key factors in explaining the observed differences in switching behavior between both countries are the degree of financial risk for sickness funds, the features of the risk-adjustment mechanism and the role of employers.