An Experimental Investigation of Health Insurance Policy and Behavior

Authors

J. Dustin Tracy, Chapman UniversityFollow
Hillard Kaplan, Chapman UniversityFollow
Kevin A. James, Chapman UniversityFollow
Stephen Rassenti, Chapman UniversityFollow

Document Type

Article

Publication Date

9-26-2020

Abstract

We introduce a new experimental approach to measuring the effects of health insurance policy alternatives on behavior and health outcomes over the life course. Cash-motivated subjects are placed in a virtual environment where they earn income and allocate it across multi-period lives. We compare behavior across age, income and insurance plans—one priced according to an individual’s expected cost and the other uniformly priced through employer-implemented cost sharing. We find that 1) subjects in the employer-implemented plan purchased insurance at higher rates; 2) the employer-based plan reduced differences due to income and age; 3) subjects in the actuarial plan engaged in more health-promoting behaviors, but still below optimal levels, and did save at the level required, so did realize the full benefits of the plan. Subjects had more difficulty optimizing choices in the Actuarial treatment, because it required more long term planning and evaluating benefits that compounded over time. Contrary, to model predictions, the actuarial priced insurance plan did not increase utility relative to the employer-based plan.

Comments

Working Paper 19-16

Previously titled: "An Experimental Investigation of Income, Insurance, and Investments in Health over the Life Course"

This paper later underwent peer review and was published as:

Recommended Citation

Tracy, J.D., Kaplan, H., James, K.A., and Rassenti, S.J. (2020). An experimental investigation of health insurance policy and behavior. ESI Working Paper 19-16. Retrieved from https://digitalcommons.chapman.edu/esi_working_papers/274/