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

Abstract

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

Kettlewell, Nathan, Policy Choice and Product Bundling in a Complicated Health Insurance Market: Do People Get It Right? (October 24, 2016). UNSW Business School Research Paper No. 2016-16, Available at SSRN: https://ssrn.com/abstract=2858699 or http://dx.doi.org/10.2139/ssrn.2858699

Nathan Kettlewell (Contact Author)

University of Sydney ( email )

Rm 370 Merewether (H04)
The University of Sydney
Sydney, NSW 2006 2008
Australia

HOME PAGE: http://sydney.edu.au/arts/economics/staff/profiles/nathan.kettlewell.php

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