Health Insurance for "Humans": Information Frictions, Plan Choice, and Consumer Welfare
American Economic Review
vol. 105,
no. 8, August 2015
(pp. 2449-2500)
(Complimentary)
Abstract
Traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk. In practice, choosing an insurance plan is a complicated decision often made without full information. In this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences, information frictions, and hassle costs. Our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates. We study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro-foundations for welfare analysis. (JEL D81, D8 3, G22, I13)Citation
Handel, Benjamin R., and Jonathan T. Kolstad. 2015. "Health Insurance for "Humans": Information Frictions, Plan Choice, and Consumer Welfare." American Economic Review, 105 (8): 2449-2500. DOI: 10.1257/aer.20131126Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G22 Insurance; Insurance Companies; Actuarial Studies
- I13 Health Insurance, Public and Private