Health Insurance for "Humans": Information Frictions, Plan Choice, and Consumer Welfare

Benjamin R. Handel and Jonathan T. Kolstad

American Economic Review, 2015, vol. 105, issue 8, 2449-2500

Abstract: Traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk. In practice, choosing an insurance plan is a complicated decision often made without full information. In this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences, information frictions, and hassle costs. Our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates. We study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro-foundations for welfare analysis. (JEL D81, D8 3, G22, I13)

JEL-codes: D81 D83 G22 I13 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20131126
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Citations: View citations in EconPapers (197)

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