Choice Architecture for Healthier Insurance Choices: Ordering and Partitioning Can Improve Decisions

51 Pages Posted: 11 Jul 2019

See all articles by Benedict G. C. Dellaert

Benedict G. C. Dellaert

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM)

Eric J. Johnson

Columbia Business School - Marketing

Tom Baker

University of Pennsylvania Law School

Date Written: July 1, 2019

Abstract

Health insurance decisions are a challenge for many consumers and influence welfare, health outcomes, and longevity. Two choice architecture tools are examined that can improve these decisions: informed ordering of options (from best to worst) and choice set partitioning. It is hypothesized that these tools can improve choices by changing:

(1) decision focus: the options in a set on which consumers focus their attention, and

(2) decision strategy: how consumers integrate the different attributes that make up the options.

The first experiment focuses on the mediating role of the hypothesized decision processes on consumer decision outcomes. The outcome results are validated further in a field study of over 40,000 consumers making actual health insurance choices and in two additional experiments. The results show that informed ordering and partitioning can reduce consumers’ mistakes by hundreds of dollars per year. They suggest that wise choice architecture interventions depend upon two factors: The quality of the user model possessed by the firm to predict consumers’ best choice and possible interactions among the ensemble of choice architecture tools.

Keywords: choice architecture, decision-making, consumer decision process, health insurance choice, consumer welfare

Suggested Citation

Dellaert, Benedict G. C. and Johnson, Eric J. and Baker, Tom, Choice Architecture for Healthier Insurance Choices: Ordering and Partitioning Can Improve Decisions (July 1, 2019). ERIM Report Series Reference. Available at SSRN: https://ssrn.com/abstract=3418231 or http://dx.doi.org/10.2139/ssrn.3418231

Benedict G. C. Dellaert (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Eric J. Johnson

Columbia Business School - Marketing ( email )

New York, NY 10027
United States

Tom Baker

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-746-2185 (Phone)

HOME PAGE: http://www.law.upenn.edu/cf/faculty/thbaker/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
25
Abstract Views
213
PlumX Metrics