Working Paper: NBER ID: w26118
Authors: Faical Akaichi; Joan Costafont; Richard Frank
Abstract: We examine evidence from two unique discrete choice experiments (DCE) on long term care insurance and several of its relevant attributes, and more specifically, choices made by 15,298 individuals in the United States with and without insurance. We study the valuation of the following insurance attributes, namely daily insurance benefit, insurance coverage, the compulsory and voluntary nature of the insurance policy design, alongside the costs (insurance premium) and health requirements. This paper investigates respondents’ preferences and willingness to pay (WTP) for these care insurance’s attributes using a random parameter logit model, and assess the heterogeneity of choice responses using demographic, socioeconomic and attitudinal motivations to segment response to insurance choices. We find that an increase in the insurance premium by an additional $100 would reduce insurance uptake by 1pp. Insurance policy uptake is higher when it provides benefits for the lifetime (the monthly marginal WTP being $178.64), and voluntary (the monthly marginal WTP increases by an extra $74.71) as opposed to universal, and when it forgoes health checks (the monthly marginal WTP increases by an extra 28US$).
Keywords: long term care insurance; discrete choice experiment; willingness to pay
JEL Codes: I13; I18; I31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| insurance premium (G52) | insurance uptake (G52) |
| lifetime benefits (J32) | insurance uptake (G52) |
| voluntary insurance (G52) | insurance uptake (G52) |
| absence of health checks (I12) | insurance uptake (G52) |