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Consumers’ misunderstanding of health insurance

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Author Info

  • Loewenstein, George
  • Friedman, Joelle Y.
  • McGill, Barbara
  • Ahmad, Sarah
  • Linck, Suzanne
  • Sinkula, Stacey
  • Beshears, John
  • Choi, James J.
  • Kolstad, Jonathan
  • Laibson, David
  • Madrian, Brigitte C.
  • List, John A.
  • Volpp, Kevin G.

Abstract

We report results from two surveys of representative samples of Americans with private health insurance. The first examines how well Americans understand, and believe they understand, traditional health insurance coverage. The second examines whether those insured under a simplified all-copay insurance plan will be more likely to engage in cost-reducing behaviors relative to those insured under a traditional plan with deductibles and coinsurance, and measures consumer preferences between the two plans. The surveys provide strong evidence that consumers do not understand traditional plans and would better understand a simplified plan, but weaker evidence that a simplified plan would have strong appeal to consumers or change their healthcare choices.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 32 (2013)
Issue (Month): 5 ()
Pages: 850-862

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Handle: RePEc:eee:jhecon:v:32:y:2013:i:5:p:850-862

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Web page: http://www.elsevier.com/locate/inca/505560

Related research

Keywords: Insurance; Behavioral economics; Simplification;

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References

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  1. Richard Frank & Karine Lamiraud, 2008. "Choice, Price Competition and Complexity in Markets for Health Insurance," NBER Working Papers 13817, National Bureau of Economic Research, Inc.
  2. Justin Sydnor, 2010. "(Over)insuring Modest Risks," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 177-99, October.
  3. Heiss, Florian & McFadden, Daniel L. & Winter, Joachim, 2006. "Who failed to enroll in Medicare Part D, and why? Early results," Munich Reprints in Economics, University of Munich, Department of Economics 19427, University of Munich, Department of Economics.
  4. Justine S. Hastings & Lydia Tejeda-Ashton, 2008. "Financial Literacy, Information, and Demand Elasticity: Survey and Experimental Evidence from Mexico," NBER Working Papers 14538, National Bureau of Economic Research, Inc.
  5. Jason Abaluck & Jonathan Gruber, 2011. "Heterogeneity in Choice Inconsistencies among the Elderly: Evidence from Prescription Drug Plan Choice," American Economic Review, American Economic Association, American Economic Association, vol. 101(3), pages 377-81, May.
  6. Justine S. Hastings & Jeffrey M. Weinstein, 2007. "Information, School Choice, and Academic Achievement: Evidence from Two Experiments," NBER Working Papers 13623, National Bureau of Economic Research, Inc.
  7. Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
  8. Jeffrey R. Kling & Sendhil Mullainathan & Eldar Shafir & Lee C. Vermeulen & Marian V. Wrobel, 2012. "Comparison Friction: Experimental Evidence from Medicare Drug Plans," Mathematica Policy Research Reports, Mathematica Policy Research 7375, Mathematica Policy Research.
  9. Henrik Cronqvist & Richard H. Thaler, 2004. "Design Choices in Privatized Social-Security Systems: Learning from the Swedish Experience," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 424-428, May.
  10. Peter J. Cunningham & Charles Denk & Michael Sinclair, 2001. "Do Consumers Know How Their Health Plan Works?," Mathematica Policy Research Reports, Mathematica Policy Research 2864, Mathematica Policy Research.
  11. Eric P. Bettinger & Bridget Terry Long & Philip Oreopoulos & Lisa Sanbonmatsu, 2009. "The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment," NBER Working Papers 15361, National Bureau of Economic Research, Inc.
  12. Benjamin R. Handel, 2011. "Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts," NBER Working Papers 17459, National Bureau of Economic Research, Inc.
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