Research

Endogenous spending and labor supply response to health shocks

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 Demand

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.

To Smooth or Not to Smooth: Consumption Responses to Life Insurance Payouts

with Tyler Welch

How Information Display Affects Health Insurance Decisions

The Impact of Decision Aids on Health Insurance Selection

Suboptimal health insurance choices impose substantial welfare costs on households, with enrollment patterns frequently violating financial dominance despite stakes exceeding thousands of dollars annually. We use a randomized field experiment with public university employees during open enrollment to evaluate whether decision aids that clarify these financial consequences affect enrollment patterns. The setting features a financially dominant high-deductible plan that saves money for all workers regardless of health spending, with typical savings around $2,000 annually, and a requirement to make an active choice confirming plan selection. We find that decision aids improve cost recognition by 22 percentage points. Yet they increase intended enrollment in the high-deductible plan by 6 percentage points and actual enrollment by only 2 percentage points, revealing substantial attenuation from understanding to behavior. Survey responses reveal that concerns about managing a health savings account, aversion to out-of-pocket costs, and reluctance to change from familiar plans limit the translation into enrollment. Treatment effects are largest among workers with limited prior plan engagement and vary substantially by liquidity constraints.

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.