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

  • Keith Marzilli Ericson
  • Amanda Starc

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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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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  1. 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.
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