Adverse Selection and Inertia in Health Insurance Markets: When Nudging Hurts

• 成果类型: Article
• 署名作者: Handel, Benjamin R.
• 署名单位: University of California System; University of California Berkeley
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.103.7.2643
• 发表日期: 2013
• 页码: 2643-2682
• 关键词: Asymmetric information; switching costs; welfare; CHOICE; plans

摘要

This paper investigates consumer inertia in health insurance markets, where adverse selection is a potential concern. We leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia, and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk. We use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia. When aggregated, these improved individual-level choices substantially exacerbate adverse selection in our setting, leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection.