Working Paper: NBER ID: w26153
Authors: Richard Domurat; Isaac Menashe; Wesley Yin
Abstract: We experimentally varied information mailed to 87,000 households in California's health insurance marketplace to study the role of frictions in insurance take-up. Reminders about the enrollment deadline raised enrollment by 1.3 pp (16 percent), in this typically low take-up population. Heterogeneous effects of personalized subsidy information indicate systematic misperceptions about program benefits. Consistent with an adverse selection model with frictional enrollment costs, the intervention lowered average spending risk by 5.1 percent, implying that marginal respondents were 37 percent less costly than inframarginal consumers. We observe the largest positive selection among low income consumers, who exhibit the largest frictions in enrollment. Finally, the intervention raised average consumer WTP for insurance by $25 to $54 per month. These results suggest that frictions may partially explain low measured WTP for marketplace insurance, and that interventions reducing them can improve enrollment and market risk in exchanges.
Keywords: Behavioral Frictions; Health Insurance; Marketplace Enrollment; Field Experiment
JEL Codes: D03; I11; I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reminder letter (Y20) | increased enrollment (I23) |
| personalized subsidy information (H20) | systematic misperceptions about program benefits (D91) |
| increased enrollment (I23) | lowered average spending risk (G11) |
| increased enrollment (I23) | higher average consumer willingness to pay (D11) |
| reminder letter (Y20) | lowered average spending risk (G11) |
| personalized subsidy information (H20) | raised average consumer willingness to pay (D11) |