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

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  • Keith Marzilli Ericson
  • Amanda Starc

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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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.493
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 3 (May)
Pages: 493-97

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:493-97

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Cited by:
  1. Normann Lorenz, 2014. "Adverse selection and heterogeneity of demand responsiveness," Research Papers in Economics 2014-02, University of Trier, Department of Economics.
  2. Abe Dunn & Adam Hale Shapiro, 2013. "The impact of health care reform on physician payments: evidence from Massachusetts," Working Paper Series 2013-36, Federal Reserve Bank of San Francisco.
  3. Florian Heiss & Adam Leive & Daniel McFadden & Joachim Winter, 2012. "Plan Selection in Medicare Part D: Evidence from Administrative Data," NBER Working Papers 18166, National Bureau of Economic Research, Inc.
  4. Keith M. Marzilli Ericson & Amanda Starc, 2012. "Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange," NBER Working Papers 18089, National Bureau of Economic Research, Inc.
  5. Keith M Marzilli Ericson & Amanda Starc, 2013. "How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 19527, National Bureau of Economic Research, Inc.
  6. Leemore Dafny & Jonathan Gruber & Christopher Ody, 2014. "More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces," NBER Working Papers 20140, National Bureau of Economic Research, Inc.
  7. Normann Lorenz, 2013. "Adverse selection and risk adjustment under imperfect competition," Research Papers in Economics 2013-05, University of Trier, Department of Economics.

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