Behavioral Constraints, Health Probability Misweighting, and Nudges in Optimal Health Insurance Choice
Presenter
Ph.D. Candidate in Economics
Abstract
The choice architecture of health insurance in the United States is unique in the vast selection of private insurance plans individuals can select between during an annual open enrollment period. These plans differ in several financial ways by premium, deductible, copayment, as well as across nonfinancial quality dimensions including network coverage. I intend to study behavioral constraints in the selection decision. Firstly, individuals may remain in denial of their health status and mentally misrepresent the probability they will experience a severe health incident that would require a plan with more generous coverage (lower deductible). Secondly, even if individuals correctly represent their health risk, they may be unable to mentally calibrate this using the knowledge about plan deductibles and financial attributes to select the optimal plan, given their risk. I plan to model and study behavioral misrepresentations using health insurance lotteries in online experiments, where I study risk aversion and consistency in individuals’ switching decision between risky and safe insurance plans. I also plan to study the effect of nudging on individuals’ choices between risky and safe insurance plans. From a policy standpoint, nudges can perhaps correct for behavioral constraints in insurance choice.