Institutional Affiliation: Carnegie Mellon University
|Do Individuals Make Sensible Health Insurance Decisions? Evidence from a Menu with Dominated Options|
with , : w21160
The recent expansion of health-plan choice has been touted as increasing competition and enabling people to choose plans that fit their needs. This study provides new evidence challenging these proposed benefits of expanded health-insurance choice. We examine health-insurance decisions of employees at a large U.S. firm where a new plan menu included a large share of financially dominated options. This menu offers a unique litmus test for evaluating choice quality since standard risk preferences and beliefs about one’s health cannot rationalize enrollment into the dominated plans. We find that a majority of employees – and in particular, older workers, women, and low earners – chose dominated options, resulting in substantial excess spending. Most employees would have fared better had the...
|That Which Makes Life Worthwhile|
in Measuring the Subjective Well-Being of Nations: National Accounts of Time Use and Well-Being, Alan B. Krueger, editor