Demand for Health Insurance
A large literature studies demand for health insurance by examining how individuals respond to coverage and how they make insurance choices under uncertainty. Experimental evidence from the RAND Health Insurance Experiment established that insurance generosity substantially affects healthcare utilization, providing early causal evidence on moral hazard and the role of cost sharing in shaping demand (Aron-Dine, Einav, and Finkelstein (2013)). More recent experimental work from the Oregon Medicaid lottery confirms that gaining insurance coverage increases utilization and improves financial security, with more nuanced effects on health outcomes (Finkelstein et al. (2012)). Together, these studies show that insurance coverage meaningfully changes behavior, while also highlighting that observed demand reflects both preferences and the structure of insurance contracts. While moral hazard and utilization responses are central to understanding insurance demand, these mechanisms are well covered elsewhere (see Einav and Finkelstein (2018) for a comprehensive treatment) and are not the primary focus here.
Beyond responses to coverage, a growing body of work documents systematic frictions in health insurance choice. Individuals frequently select plans that are dominated given their realized healthcare needs, suggesting that limited attention, complexity, and misperceptions play an important role in insurance demand (Abaluck and Gruber (2011); Jonathan D. Ketcham et al. (2012); Jonathan D. Ketcham, Kuminoff, and Powers (2016); Abaluck and Gruber (2016)). This evidence has motivated recent research on whether low-cost policy interventions can improve insurance choices when decision-making is distorted by costly cognition. For example, default plan assignments in public drug insurance settings have been shown to strongly influence enrollment and utilization, with important implications for welfare and market design (Brot-Goldberg et al. (2023)).
Potential papers for presentation today include:
- Aron-Dine, Einav, and Finkelstein (2013) — RAND Health Insurance Experiment and utilization responses
- Finkelstein et al. (2012) — Oregon Medicaid lottery and the effects of insurance coverage
- Brot-Goldberg et al. (2023) — defaults, costly cognition, and insurance choice