Decision-Making in Health Insurance Markets

Prior research on consumer behavior in health insurance markets has primarily focused on
individual decision making while relying on strong parametric assumptions about preferences. The aim of this dissertation is to improve the traditional approach in both dimensions. First, I consider the importance of joint decision-making in individual insurance
markets by studying how married couples coordinate their choices in these markets. Second, I investigate the robustness of prior studies by developing a non-parametric method to
assess decision-making in health insurance markets.
To study how married couples make choices in individual insurance markets I estimate
a stochastic choice model of household demand that takes into account spouses’ risk aversion, spouses’ expenditure risk, risk sharing, and switching costs. I use the model estimates
to study how coordination within couples and interaction between couples and singles affects the way that markets adjust to policies designed to nudge consumers toward choosing
higher value plans, particularly with respect to adverse selection.
Finally, to assess consumer decision-making beyond standard parametric assumptions
about preferences, I use second–order stochastic dominance rankings. Moreover, I show
how to extend this method to construct bounds on the welfare implications of choosing
dominated plans.