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Article | Journal of Health Economics

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

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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;

Format: Print Find at Harvard Read Now

Citation:

Loewenstein, George, 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. "Consumers' Misunderstanding of Health Insurance." Journal of Health Economics 32, no. 5 (September 2013): 850–862.

About the Author

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John Beshears
Terrie F. and Bradley M. Bloom Associate Professor of Business Administration
Negotiation, Organizations & Markets

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  • Case | HBS Case Collection | March 2018

    Nudging Hand Hygiene Compliance at the Brigham and Women's Hospital

    John Beshears, Michael Luca, Alister Martin and Simin Gharib Lee

    Citation:

    Beshears, John, Michael Luca, Alister Martin, and Simin Gharib Lee. "Nudging Hand Hygiene Compliance at the Brigham and Women's Hospital." Harvard Business School Case 918-035, March 2018.  View Details
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  • Teaching Note | HBS Case Collection | March 2018

    GiveDirectly

    Joshua Schwartzstein and John Beshears

    Teaching Note for HBS No. 918-036.

    Citation:

    Schwartzstein, Joshua, and John Beshears. "GiveDirectly." Harvard Business School Teaching Note 918-040, March 2018.  View Details
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  • Case | HBS Case Collection | March 2018

    GiveDirectly

    John Beshears, Joshua Schwartzstein, Tiffany Y. Chang and Brian J. Hall

    How should nonprofits design compensation systems to attract and retain talent? GiveDirectly is a respected charitable organization with an unconventional approach. Instead of spending on traditional aid programs in areas such as health care and food access in developing countries, GiveDirectly transfers cash directly to the poor. As experiments have shown this approach to be an effective and efficient way to improve recipients’ life satisfaction, the organization has attracted considerable attention among donors and the media. Now, GiveDirectly is looking to grow, and it is contemplating how best to recruit talented employees and keep them motivated. In addition to offering salaries competitive with the private sector, GiveDirectly is considering linking employee compensation to organizational goals regarding the amount of cash transferred—an unusual strategy for a nonprofit.

    Keywords: nonprofits; charity; effective altruism; international aid; compensation; goals; bonuses; incentives; GiveDirectly; Compensation and Benefits; Motivation and Incentives; Goals and Objectives; Recruitment; Philanthropy and Charitable Giving;

    Citation:

    Beshears, John, Joshua Schwartzstein, Tiffany Y. Chang, and Brian J. Hall. "GiveDirectly." Harvard Business School Case 918-036, March 2018.  View Details
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