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  3. American Economic Review
  4. May 2012
  5. Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

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

  • Keith Marzilli Ericson
  • Amanda Starc
American Economic Review
vol. 102, no. 3, May 2012
(pp. 493–97)
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Abstract

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.

Citation

Ericson, Keith Marzilli, and Amanda Starc. 2012. "Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector." American Economic Review, 102 (3): 493–97. DOI: 10.1257/aer.102.3.493

JEL Classification

  • G22 Insurance; Insurance Companies
  • I18 Health: Government Policy; Regulation; Public Health
  • H75 State and Local Government: Health; Education; Welfare; Public Pensions
  • I13 Health Insurance, Public and Private