Work

Heterogeneity in health insurance choice: An experimental investigation of consumer choice and feature preferences

Year: 2025

Type: article

Abstract: We investigate heterogeneity in health insurance choice using data from a controlled laboratory experiment. Participants make consecutive choices from sets of insurance plans that vary in premium, deductible, and complementary coverage of illnesses. We find that there is considerable heterogeneity in how much individuals are willing to pay for certain plan attributes. To better understand these differences, we account for individual risk preferences using a rank‐dependent expected utility (RDEU) model and assess the welfare effects of plan choices. At the aggregate level, we find welfare losses under both the normative RDEU model and the descriptive EV model. At the individual level, however, the results are more differentiated: for some individuals, choices are consistent with their RDEU preferences, whereas for others, choices do not fit either model, suggesting either decision errors or reliance on heuristics.

Source: Journal of Risk & Insurance

DOI: 10.1111/jori.70026

Authors: Benedicta Hermanns, Nadja Kairies‐Schwarz, Johanna Kokot, Markus Vomhof

Institutions: Universität Hamburg, Hamburg University of Technology, Düsseldorf University Hospital, Deutsches Diabetes-Zentrum e.V., Heinrich Heine University Düsseldorf

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,400

Funders: Deutsche Forschungsgemeinschaft, Bundesministerium für Bildung und Forschung