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Do Ordeals Work for Selection Markets? Evidence from Health Insurance Auto-Enrollment

Author

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  • Mark Shepard
  • Myles Wagner

Abstract

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.

Suggested Citation

  • Mark Shepard & Myles Wagner, 2022. "Do Ordeals Work for Selection Markets? Evidence from Health Insurance Auto-Enrollment," NBER Working Papers 30781, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30781
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    Cited by:

    1. Benjamin A. Olken & Rema Hanna & Phitawat Poonpolkul & Nada Wasi, 2024. "Willingness-To-Pay vs Administrative Hurdles: Understanding Barriers to Social Insurance Enrollment in Thailand," PIER Discussion Papers 223, Puey Ungphakorn Institute for Economic Research.

    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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