More Options, More Problems? Lost in the Health Insurance Maze
Journal
Journal of Risk and Insurance
Type
journal article
Date Issued
2024
Author(s)
Abstract
While the opportunity to choose from a diverse range of options can be advantageous, consumers often struggle to make optimal decisions in the domain of health insurance. In this study, we examine the effects of decision aids on improving choice optimality in a health insurance setting that allows for variations in coverage but is standardized otherwise. While this relatively simplistic setting theoretically implies optimal conditions for observing large fractions of optimal choices, we observe widespread adoption of non-welfare-maximizing plans, with at least 36% of the population winding up with suboptimal insurance plans. In a hypothetical-choice survey experimental setting, we estimate the treatment effects of increasing transparency through information provision and restricting choice on choice optimality. We find that decision quality cannot be improved meaningfully by our interventions and that nonoptimal choice is economically relevant, as it accounts for an increase of approximately 9.4% in total annual cost.
Language
English
HSG Classification
contribution to scientific community
Refereed
yes
Volume
91
Number
1
Start page
5
End page
35
Official URL
Subject(s)
Division(s)
Eprints ID
261410