Price Elasticities and Social Health Insurance Choice in Germany: a Dynamic Panel Approach

In 1996, free choice of sickness funds has been introduced to the German social health insurance scheme in order to enhance its efficiency. A crucial precondition for competition among sickness funds is that consumers are inclined to search for lower-priced sickness funds. In order to determine whether this actually applies we estimate the price elasticities of consumers' health insurance choice. We use unique panel data at the level of individual social health insurers and specify a dynamic panel model explaining market shares of sickness funds. Estimation results suggest that price elasticities are much smaller than preciously found by other studies.