Policy Choice and Product Bundling in a Complicated Health Insurance Market: Do People Get It Right?
58 Pages Posted: 28 Oct 2016
Date Written: October 24, 2016
This paper evaluates health insurance policy selection and how this interacts with product bundling by using a discrete choice experiment closely calibrated to the Australian private health insurance market. The experimental approach overcomes some limitations of revealed preference research in this area. The results indicate that consumers are likely to make choices that violate expected utility theory, use heuristic decision strategies, and over-insure relative to minimising out-of-pocket costs. Decision quality is significantly lower when choosing a bundled hospital/ancillaries health insurance policy (compared to stand-alone ancillaries cover), which is the policy type most consumers purchase in Australia.
Keywords: Health Insurance, Heuristics, Choice Consistency, Discrete Choice Experiment, Latent Class Logit
JEL Classification: I13, D81, D03
Suggested Citation: Suggested Citation