Skip to main content Accessibility help
×
Home

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

  • MARK V. PAULY (a1) and HOWARD KUNREUTHER (a2)

Abstract

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.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

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

      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

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

      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

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

Copyright

Corresponding author

*Correspondence to: Department of Health Care Management, The Wharton School, University of Pennsylvania, 208 Colonial Penn Center, 3641 Locust Walk, Philadelphia, PA 19104, USA. Email: pauly@wharton.upenn.edu

References

Hide All
Abaluck, J. and Gruber, J. (2011), ‘Choice inconsistencies among the elderly: Evidence from plan choice in the Medicare Part D Program’, American Economic Review, 101(4): 11801210. doi:10.1257/aer.101.4.1180.
Bell, D. (1982), ‘Regret in Decision Making Under Uncertainty’, Operations Research, 30: 961981.
Bhargava, S., Loewenstein, G. and Sydnor, J. (2017), ‘Choose to Lose: Health Plan Choices from a Menu with Dominated Option’, The Quarterly Journal of Economics, 132(3): 13191372.
Botzen, W. W., Kunreuther, H. and Michel-Kerjan, E. (2015), ‘Divergence between individual perceptions and objective indicators of tail risks: Evidence from floodplain residents in New York City’, Judgment and Decision Making, 10(4): 365385.
Braun, M. and Muermann, A. (2004), ‘The impact of regret on the demand for insurance’, Journal of Risk and Insurance, 71: 737767.
Centers for Medicare and Medicaid Services (2017), ‘Health insurance exchange public use files’, Available at: https://www.cms.gov/cciio/resources/data-resources/marketplace-puf.html
Chaudhry, S. J., Hand, M. and Kunreuther, H. (2018), ‘Extending the Time Horizon: Elevating Concern for Rare Events by Communicating Losses Over a Longer Period of Time’, Working Paper. # 2018-06 (August).
HealthPocket (2017), Available at www.healthpocket.com.
Kaiser Family Foundation 2017. (2017), ‘Employer health benefits survey’, Available at: https://www.kff.org/health-costs/report/2017-employer-health-benefits-survey/
Ketcham, J. D., Lucarelli, C., Miravete, E., and Roebuck, M. C. (2012), ‘Sinking, swimming, or learning to swim in Medicare Part D’, American Economic Review, 102(6): 26392673.
Ketcham, J. D., Lucarelli, C., and Powers, C. A. (2015), ‘Paying attention or paying too much in Medicare Part D’, American Economic Review, 105(1): 204233 (page 206). doi:10.1257/aer.20120651.
Loomes, G. and Sugden, R. (1982), ‘Regret theory: an alternative theory of rational choice under uncertainty’, Economic Journal, 92: 805824.
McGuire, T. G. (2012), ‘The Demand for Health Insurance’, in Pauly, McGuire, , and Barros, , eds, Handbook of Health Economics Volume 2, Amsterdam: Elsevier, 317396.
Neipp, J., and Zeckhauser, R. (1985), ‘Persistence in the choice of health plans’, Advances in Health Economics and Health Services Research, 6: 4772.
Phelps, C. E. (1973), ‘The demand for health insurance: a theoretical and empirical investigation’, (R-1054-OEO), The RAND Corporation: Santa Monica, CA.
Samuelson, W. and Zeckhauser, R. (1988), ‘Status quo bias in decision making’, Journal of Risk and Uncertainty, 1: 729.

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed