Financial Literacy and Consumer Choice of Health Insurance: Evidence from Low-Income Populations in the United States

23 Pages Posted: 18 Sep 2013

See all articles by Sebastian Bauhoff

Sebastian Bauhoff

Center for Global Development

Katherine Grace Carman

RAND Corporation

Amelie C. Wuppermann

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Date Written: August 16, 2013

Abstract

Under the U.S. Affordable Care Act (ACA), many low income consumers will become eligible for government support to buy health insurance. Whether these consumers are able to take advantage of the support and to make sound decisions about purchasing health insurance will likely depend on their knowledge and skills in navigating complex financial products. This ability is frequently referred to as “financial literacy.” This paper examined the level and distribution of consumers’ financial literacy across income groups, using 2012 data collected in the RAND American Life Panel, an internet panel representative of the U.S. population. Financial illiteracy was particularly prevalent among individuals with incomes between 100-400% of the Federal Poverty Line, many of whom will be eligible for subsidies. In this group, the young, less educated, females, and those with less income were more likely to have low financial literacy. The findings suggest the need for targeted policies to support vulnerable consumers in making good choices for themselves, possibly above and beyond the support measures already planned for in the ACA.

Suggested Citation

Bauhoff, Sebastian and Carman, Katherine Grace and Wuppermann, Amelie C., Financial Literacy and Consumer Choice of Health Insurance: Evidence from Low-Income Populations in the United States (August 16, 2013). RAND Working Paper Series WR-1013. Available at SSRN: https://ssrn.com/abstract=2326756 or http://dx.doi.org/10.2139/ssrn.2326756

Sebastian Bauhoff (Contact Author)

Center for Global Development ( email )

2055 L Street NW
Washington, DC DC 20009
United States

HOME PAGE: http://scholar.harvard.edu/bauhoff/

Katherine Grace Carman

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Amelie C. Wuppermann

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

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