Nudging Take-up of Subsidized Insurance: Evidence from Massachusetts

Incomplete take-up of free and low-cost health insurance remains a puzzle. Failure to enroll in coverage has consequences for the uninsured as well as the health care providers and state budgets that bear the costs of uncompensated care. Moreover, if the marginal enrollee is healthier on average, increasing enrollment may improve competition and reduce premiums in the market by improving the risk pool. Research from other contexts suggests that behavioral frictions or mistakes may play an important role in determining whether households complete the enrollment process.

We conducted a randomized trial to test “nudges” (letters sent by postal mail) that could increase enrollment in the Massachusetts Health Connector, the state marketplace through which eligible residents can obtain subsidized private coverage. Nudges were targeted to households that were determined eligible for nancial assistance but—for unknown reasons—failed to enroll in an insurance plan. Our study design employs three treatment arms: a generic reminder letter, a personalized reminder letter, and a personalized reminder letter with a simplified (check-the-box) enrollment option.

Enrollment in the Connector involves typically involves a complicated process including calling a number to retrieve a password and then lling out a series of forms on a website. Our intervention tests whether the onerous process acts as a barrier to enrollment, and, if so, who is screened out of insurance. We focus our attention on two characteristics of the marginal enrollees: (1) health status and (2) valuation of insurance. For health status, we use health information from the Massachusetts All-Payer Claims Database, and we use this information to characterize the extent to which there is adverse selection into the market on this margin. For valuation of insurance, we use exogenous variation in the price of insurance in the Connector caused by discontinuous changes in subsidy amounts at particular income thresholds to estimate willingness-to-pay for insurance for different populations. We then assess whether the marginal consumers have higher or lower WTP for insurance relative to consumers who don’t enroll with or without the nudge and consumers who enroll with or without the nudge, allowing us to assess the targeting value of the nudge.