Information Frictions in Health Insurance Marketplaces: Evidence from a Randomized Field Experiment

The Affordable Care Act dramatically expanded the use of regulated marketplaces to provide individuals with health insurance coverage. The efficiency of these marketplaces depends on the ability of consumers to choose plans that reflect their preferences, but inattention and information frictions may inhibit optimal choices. We conduct a 3-arm randomized intervention to test for the presence of frictions in plan choice and to see if certain strategies to communicate with consumers can reduce these frictions. We worked with the Colorado ACA marketplace, Connect for Health Colorado, to send simple, salient information about plan premiums to re-enrolling consumers. One study group received e-mails and letters containing generic information about the potential premium savings from shopping, while another group was sent similar but personalized materials that projected their savings based on their previous year’s income and household structure. A third group received no intervention materials and acted as a control. We track the effects of these letters on shopping behavior using administrative data from the marketplace. We test the effect of the generic and personalized information on whether an individual switches her plan, how much she pays in premiums, and her elasticity of plan choice with respect to premiums. The results of this study will provide reduced form evidence on the size of behavioral frictions in health insurance relating to plan premiums. The study will also provide evidence on inexpensive, effective strategies for Marketplaces and policymakers to help consumers select health plans that more closely reflect their preferences.