Financial Literacy and Consumer Choice of Health Insurance: Evidence from Low-Income Populations in the United States

Abstract

Under the U.S. Affordable Care Act (ACA), many low income consumers will become eligible for government support to buy health insurance. Whether these consumers are able to take advantage of the support and to make sound decisions about purchasing health insurance will likely depend on their knowledge and skills in navigating complex financial products.This ability is frequently referred to as "financial literacy".We examined the level and distribution of consumers' financial literacy across income groups, using 2012 data collected in the RAND American Life Panel, an internet panel representative of the U.S. population. Financial illiteracy was particularly prevalent among individuals with incomes between 100-400% of the Federal Poverty Line, many of whom will be eligible for subsidies. In this group, the young, less educated, females, and those with less income were more likely to have low financial literacy. Our findings suggest the need for targeted policies to support vulnerable consumers in making good choices for themselves, possibly above and beyond the support measures already planned for in the ACA.

Effect of Financial Stress and Positive Financial Behaviors on Cost-Related Nonadherence to Health Regimens Among Adults in a Community-Based Setting

“…Researchers that found effects of financial literacy on health and health care decision making investigated financial literacy through measures that assess comprehension of financial concepts and numeracy skills based on mathematical computation (10–12). In our study, we examined a set of behaviors for effective financial management in the interest of long-term financial well-being that include saving, spending within means, and paying off debt.…”

“…Financial literacy is a set of skills and knowledge that allows individuals to make informed decisions with their financial resources (9), and it is associated with more frequent engagement in health-promoting behaviors (10–12). Studies show that social determinants of health that contribute to financial burden correlate with CRN (13,14).…”

Mediating Effect of Financial Behaviour on the Relationship Between Perceived Financial Wellbeing and Its Factors Among Low-Income Young Adults in Malaysia

“…Financial knowledge may encourage positive financial behaviours ( Lajuni et al, 2018 ; Baptista and Dewi, 2021 ; Chong et al, 2021 ), such as spending only on necessities ( Ibrahim et al, 2010 ; Farinella et al, 2017 ), paying bills on time, increasing savings and investing, managing credit cards wisely ( Lusardi et al, 2010 ; Laily, 2014 ), having a proper retirement plan ( Klapper and Panos, 2011 ) and getting personal and family health insurance coverage ( Kim et al, 2013 ; Bauhoff et al, 2020 ). On the other hand, negative financial behaviours are regularly causing financial issues, with poor financial knowledge being a significant cause ( Lusardi and Tufano, 2015 ; Sabri et al, 2020a ).…”

Analysing the Predictors of Financial Stress and Financial Well-Being among the Bottom 40 Percent (B40) Households in Malaysia

“…Poor financial behaviour can result in economic difficulties [62]. On the other hand, financial knowledge may encourage positive financial behaviours, such as spending just on necessities, paying bills on time, maximising savings and investing, and acquiring personal and family health insurance [63,64]. Conversely, poor financial behaviours frequently lead to financial problems, with weak financial knowledge being a major contributor [51].…”