Can Automatic Retention Improve Health Insurance Market Outcomes?
There is growing interest in market design using default rules and other choice architecture principles to steer consumers toward desirable outcomes. Using data from Massachusetts’ health insurance exchange, we study an "automatic retention" policy intended to prevent coverage interruptions among low-income enrollees. Rather than disenroll people who lapse in paying premiums, the policy automatically switches them to an available free plan until they actively cancel or lose eligibility. We find that automatic retention has a sizable impact, switching 14% of consumers annually and differentially retaining healthy, low-cost individuals. The results illustrate the power of defaults to shape insurance coverage outcomes.
This paper was prepared for an AER Papers & Proceedings session presented in January 2021. We thank our discussant, Fiona Scott Morton, and Kate Ho, Marissa Woltmann, and Michael Norton for helpful comments. We thank the Massachusetts Health Connector for assistance in providing and interpreting the data. We gratefully acknowledge funding from Harvard’s Lab for Economic Applications and Policy, Harvard Kennedy School's Rappaport Institute for Public Policy, and Harvard's Milton Fund. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Adrianna McIntyre & Mark Shepard & Myles Wagner, 2021. "Can Automatic Retention Improve Health Insurance Market Outcomes?," AEA Papers and Proceedings, vol 111, pages 560-566.