Do Ordeals Work for Selection Markets? Evidence from Health Insurance Auto-Enrollment / Mark Shepard, Myles Wagner.

Format:

Book

Author/Creator:

Shepard, Mark.

Contributor:

National Bureau of Economic Research.

Wagner, Myles.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30781.

NBER working paper series no. w30781

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Are application hassles, or "ordeals," an effective way to limit public program enrollment? We provide new evidence by studying (removal of) an auto-enrollment policy for health insurance, adding an extra step to enroll. This minor ordeal has a major impact, reducing enrollment by 33% and differentially excluding young, healthy, and economically disadvantaged people. Using a simple model, we show that adverse selection - a classic feature of insurance markets - undermines ordeals' standard rationale of excluding low-value individuals, since they are also low-cost and may not be inefficient. Our analysis illustrates why ordeals targeting is unlikely to work well in selection markets.

Notes:

Print version record

December 2022.