Reducing Ordeals through Automatic Enrollment: Evidence from a Health Insurance Exchange

Jul 10, 2023

Incomplete health insurance enrollment is a persistent U.S. challenge despite large subsidies. We ask whether hassles built into enrollment systems matter for insurance take-up and targeting. Studying removal of an auto-enrollment policy, we find that a small hassle – a requirement to actively select a health plan to enroll – reduces take-up by 33%, a major impact equivalent to $470 (57%) higher enrollee premiums. Hassles differentially screen out younger, healthier, and poorer people – groups with both low value and costs of insurance. We show that this value-cost correlation – a standard feature of insurance, where risk drives both – may undermine the classic rationale for ordeals' favorable targeting.

We thank Amina Abdu, Kendra Singh, Mike Yepes, and Olivia Zhao for excellent research assistance. We thank Jason Abaluck, Manasi Deshpande, Keith Ericson, Ben Handel for thoughtful and constructive discussant comments. For helpful feedback and suggestions, we thank Hunt Allcott, Marcella Alsan, Chris Avery, Peter Blair, Zarek Brot-Goldberg, Sam Burn, Amitabh Chandra, Leemore Dafny, Amy Finkelstein, Peter Ganong, Josh Gottlieb, Jon Gruber, Gordon Hanson, Nathan Hendren, Alex Imas, Tim Layton, Amanda Kowalski, Lee Lockwood, Brigitte Madrian, Sendhil Mullainathan, Matthew Notowidigdo, Carol Propper, Wesley Yin, Richard Zeckhauser, and seminar participants at the AEA meetings, ASHEcon, Boston-Area IO Conference, Covered California, Harvard Kennedy School, Harvard-MIT-BU Health Economics, Imperial College London, Massachusetts Health Connector, Queen Mary University, USC Schaeffer, and NBER Health Care and Public Economics meetings. We thank the Massachusetts Health Connector (particularly Michael Norton and Marissa Woltmann) for assistance in providing and interpreting the data. We gratefully acknowledge data funding from Harvard's Lab for Economic Applications and Policy and research support from Harvard Kennedy School's Rappaport Institute for Public Policy and Harvard's Milton Fund. The research protocol was approved by the IRBs of Harvard University and the NBER. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

The data cost for this projected was covered by funding from the Lab for Economic Applications and Policy (LEAP) at Harvard University. I acknowledge funding support from National Institute on Aging Grant No. T32-AG000186 (via the National Bureau of Economic Research). I have not received any financial support from an interested party in this research. I am not an officer, director, or board member of any relevant non-profit organizations or profit-making entities.

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