Research

When Work Injury Claims Don't Work: Welfare Consequences of Shifting Care Between Workers’ Compensation and Health Insurance

with Jonghwa Do and Tyler Welch

Older Americans and Life Insurance

The conventional academic literature suggests that demand for term life insurance should decline post-retirement as income protection becomes less necessary. Yet our study reveals that 30-40\% of individuals aged 65 and older maintain at least one term life policy, some even till their 80s. While employment status influences term life insurance holdings—both through income protection needs and employer-provided benefits—we find that a notable number of term life policyholders aged 65 and older hold policies despite having no life-contingent income sources, such as working income or retirement funds, to protect. This study investigates alternative rationales for holding term life insurance beyond income protection, including caregiving value, bequest motives, funeral expenses, and more. Additionally, we find that once individuals purchase term life insurance, it often becomes optimal for them to continue holding it after a short period, with this effect varying significantly by issue age. While these findings provide initial insights into older age term life insurance holdings, further analysis is needed to fully understand the relative importance of these various motivations, which we explore in this paper.

The Impact of Decision Aids on Health Insurance Selection

High-deductible health plans (HDHPs) often offer lower total costs than traditional plans, yet many eligible individuals choose not to enroll. To understand this gap, we study whether a simple decision aid can improve individuals’ comprehension of cost differences and influence their actual enrollment decisions. Leveraging a large-scale field experiment (N = 2,718) conducted during the open enrollment period, we examine whether two decision aids, a short educational video, and a simplified comparison graphic provided in addition to the video, can reduce complexity and enhance individuals’ understanding of health plan trade-offs. The experiment involved real plan choices, with participants deciding between a high-deductible health plan that was generally more cost-effective and a traditional alternative. We find that the decision aids substantially improved individuals’ understanding of plan features and cost differences. However, these improvements led to only modest increases in HDHP enrollment. This suggests that decision aids can help clarify plan differences but may not fully overcome behavioral frictions such as inertia, liquidity concerns, or risk aversion. Preliminary results also point to heterogeneous responses across individuals, motivating ongoing work to identify key characteristics driving variation in treatment effects.

Myopia and Moral Hazard in Health Insurance

Health insurance deductibles are designed to reduce medical spending by exposing consumers to higher upfront prices. I provide a formal analysis of what I term a ``deductible paradox”: within the standard forward-looking model of cost sharing, raising the deductible can paradoxically increase optimal spending for consumers who anticipate reaching the out-of-pocket maximum. When the model does predict a decline in utilization, it implies that small deductible increases should generate only modest reductions in spending. I test these predictions using quasi-experimental variation from Wisconsin’s introduction of a modest deductible in its previously zero-deductible health plan. Spending falls far more than the benchmark model can rationalize, with the largest reductions among high-risk enrollees who should respond least. To account for these patterns, I develop a behavioral dynamic model in which households respond myopically to spot prices and face billing delays. This behavioral model better matches both the magnitude and the risk gradient of the observed spending response, highlighting the central role of spot-price responses in shaping the impact of deductible changes.