Responses to losses in high-deductible health insurance: persistence, emotions, and rationality

There have been few empirical studies on how consumers respond to their loss experience over time when choosing between high- and low-deductible health insurance plans. To address this question, we designed a ten-period web-based experiment to explore how subjects respond to the presence or absence of illness-related costs in a given period when making their future health insurance choices when they are explicitly informed that future premiums or loss probabilities will not change over time. A sizable minority of the respondents who initially chose high-deductible plans switched after a loss, and switching is more likely if they self-report negative emotional responses to experiencing an uninsured loss. Switching from low- to high-deductible plans is less likely and less responsive to loss experience. The study reveals that many individuals make their health insurance choices by considering factors not included in classical economic models of choice.