Working Paper: NBER ID: w30781
Authors: Mark Shepard; Myles Wagner
Abstract: Are application hassles, or “ordeals,” an effective way to limit public program enrollment? We provide new evidence by studying (removal of) an auto-enrollment policy for health insurance, adding an extra step to enroll. This minor ordeal has a major impact, reducing enrollment by 33% and differentially excluding young, healthy, and economically disadvantaged people. Using a simple model, we show that adverse selection – a classic feature of insurance markets – undermines ordeals’ standard rationale of excluding low-value individuals, since they are also low-cost and may not be inefficient. Our analysis illustrates why ordeals targeting is unlikely to work well in selection markets.
Keywords: health insurance; autoenrollment; ordeals; public programs; adverse selection
JEL Codes: D90; I11; I13; I14; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Removal of autoenrollment (H55) | Increase in enrollment hassles (I23) |
| Increase in enrollment hassles (I23) | Decrease in health insurance takeup (G52) |
| Removal of autoenrollment (H55) | Decrease in health insurance takeup (G52) |
| Exclusion of lower-risk individuals (G52) | Higher-cost risk pool (G52) |
| Enrollment hassles (I19) | Inefficient targeting in selection markets (D49) |