Article | Journal of Health Economics | Summer 2013

Consumers' Misunderstanding of Health Insurance

by George Loewenstein, Joelle Y. Friedman, Barbara McGill, Sarah Ahmad, Suzanne Linck, Stacey Sinkula, John Beshears, James J. Choi, Jonathan Kolstad, David Laibson, Brigitte C. Madrian, John A. List and Kevin G. Volpp

Abstract

We report results from two surveys of representative samples of Americans with private health insurance. The first examines how well Americans understand, and believe they understand, traditional health insurance coverage. The second examines whether those insured under a simplified all-copay insurance plan will be more likely to engage in cost reducing behaviors relative to those insured under a traditional plan with deductibles and coinsurance and measures consumer preferences between the two plans. The surveys provide strong evidence that consumers do not understand traditional plans and would better understand a simplified plan, but weaker evidence that a simplified plan would have strong appeal to consumers or change their healthcare choices.

Keywords: Insurance; Behavioral economics; Simplification; Insurance; Consumer Behavior; Health Care and Treatment; Cognition and Thinking; Insurance Industry; Health Industry; United States;

Citation:

Loewenstein, George, Joelle Y. Friedman, Barbara McGill, Sarah Ahmad, Suzanne Linck, Stacey Sinkula, John Beshears, et al. "Consumers' Misunderstanding of Health Insurance." Journal of Health Economics 32, no. 5 (Summer 2013): 850–862.