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American Economic Review: Vol. 102 No. 3 (May 2012)

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Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector

Article Citation

Ericson, Keith Marzilli, and Amanda Starc. 2012. "Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector." American Economic Review, 102(3): 493-97.

DOI: 10.1257/aer.102.3.493

Abstract

We examine heuristic decision rules in consumer choice on health insurance exchanges using data from the Massachusetts Connector. Consumers may have difficulty making optimal choices in a complex environment. The heuristic "choose the cheapest plan" is suggested by the decision context, previous research, and the data: about 20% of enrollees choose the cheapest plan possible. We find evidence of this heuristic in many models, but while heuristics may play a role, preference heterogeneity is also important. Our most flexible models find an insignificant heuristic effect. In part because holding context fixed, this heuristic is observationally equivalent to extreme price sensitivity.

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Authors

Ericson, Keith Marzilli (Boston U)
Starc, Amanda (U PA)

JEL Classifications

G22: Insurance; Insurance Companies
I18: Health: Government Policy; Regulation; Public Health
H75: State and Local Government: Health; Education; Welfare; Public Pensions
I13: Health Insurance, Public and Private


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