An investigation of health insurance policy and behavior in a virtual environment

Abstract

We introduce a new experimental approach to measuring the effects of health insurance policy alternatives on behavior and health outcomes over the life course. In a virtual environment with multi-period lives, subjects earn virtual income and allocate spending, to maximize utility, which is converted into cash payment. We compare behavior across age, income and insurance plans—one priced according to an individual’s expected cost and the other uniformly priced through employer-implemented cost sharing. We find that 1) subjects in the employer-implemented plan purchased insurance at higher rates; 2) the employer-based plan reduced differences due to income and age; 3) subjects in the actuarial plan engaged in more health-promoting behaviors, but still below optimal levels, and did save at the level required, so did realize the full benefits of the plan. Subjects had more difficulty optimizing choices in the Actuarial treatment, because it required more long term planning and evaluating benefits that compounded over time. Contrary, to model predictions, the actuarial priced insurance plan did not increase utility relative to the employer-based plan.

Policy barriers to the adoption of digital health interventions in the management of chronic type 2 diabetes among African-American adults in the United States

“…Adoption is further hindered by the lack of alignment between other organizational actors in the network, such as insurance payers and hospitals. Even though models have shown that preventative programs can improve outcomes, reliance on actuarial models, misaligned incentives between the insurance industry and providers, and short-term views all contribute to reluctance on the part of insurance companies to support new protocols and preventative methods (Tracy et al, 2021;Goldman et al, 2004;Cichon et al, 1999;Herzlinger, 2006;Horne & Savage, 2020). The voters and the patient population are also not informed enough to be active advocates of its evolution (Hermes et al, 2020).…”