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You are here: Home / Anderson On Health Insurance / Choice architecture dominates choice

Choice architecture dominates choice

by David Anderson|  August 20, 20209:29 am| 24 Comments

This post is in: Anderson On Health Insurance, COVID-19 Coronavirus

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The University of North Carolina-Chapel Hill thought it could count on students making good choices in a choice environment that did not make good choices easy to make.

Notre Dame thought it could count on students making good choices in a choice environment that did not make good choices easy to make.

The University of Pittsburgh thought it could count on students making good choices in a choice environment that did not make good choices easy to make.

West Virginia University hopes that it can count on students making good choices in a choice environment that does not make good choices easy to make:

President Gordon Gee remains optimistic students will make responsible choices even after reported off-campus parties last weekend in Morgantown.

“We got a number of calls from students who wanted us to take action in that regard,” Gee stated, referencing the weekend parties during an interview on Metronews’ “Talkline” with Hoppy Kercheval.

I am not a sociologist. I am not a student of group dynamics.

However, in my research on insurance enrollment, we hvae found choice structures and defaults matter. In current research in progress, we find that enrollees in California who had the option to choose identical networks, insurers and plan types with both lower monthly premiums and less cost sharing frequently made the wrong choice. We have found that the presence of auto-enrollment options is associated with dramatically higher probabilities of re-enrollment in the next year in California. As we wrote at the Incidental Economist

More broadly, these findings speak to the fact that administrative barriers affect consumers’ health coverage. Changing administrative barriers in health care will dramatically change consumers’ choices, health insurance take-up, and the composition of risk pools….

Choice architecture, such as the ordering and ranking of plans on a webpage or the underlying rules that govern choices and defaults matter. Their design is critical to a well-functioning health insurance market predicated on consumers choosing highly complex bundles of services. Auto reenrollment lowers administrative burden by reducing search and information costs. However, automatically reenrollment acts against the idea of choice as a means to discipline the market.

Simplified choice sets — for instance, where the worst choices are weeded out and good choices highlighted — will produce higher levels of enrollment, financial protection, and satisfaction. In contrast, spotty information, lack of intelligent defaults, and administrative barriers depress all these.

Automatic reenrollment is just one attribute, albeit an important one, of a supportive health insurance choice environment.

The choice environment matters. If we as benign social planners want people en masse to make good choices in a vast portfolio of choices that can range from really good to really bad, the good choices need to be clear and they need to be easy to make. Conflicting messaging and significant ordeals and obstacles to make good choices will lead to some people to make the choices that they want to make and some of those choices will be bad.

The choice and the surrounding environment that determines the ease of particular choices matter for insurance selection and most likely matters for many other things as well.

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24Comments

  1. 1.

    randy

    August 20, 2020 at 9:51 am

    I confirm this result in a dozen different applications that have come to my notice in 70 years of life. And I have tried to apply it in fields like political science where I am sure it has no legitimate place. But it is part of my objection to signing petitions to put more and more issues on the ballot.

  2. 2.

    Bodacious

    August 20, 2020 at 9:56 am

    Ahhh, nicely pulled together. If selecting Medicare choices is any metric of general healthcare fluency , my retired engineer other half spent well over 3 days trying to weigh options and understand programs before signing up, and we have very limited options here. In addition, a person needed good online access to evaluated resource availability and location, and some level of math comprehension to compare options. The Part D – drug portion was a BIG black hole for him guessing what drugs he may need in the future based on his health history. It made us wonder how others with less resources do it. Once my COBRA is expired (July) I’ll be trying my hand at the open market as well.

  3. 3.

    David Anderson

    August 20, 2020 at 10:01 am

    @Bodacious: I’m reiterating something I’ve said elsewhere:

    If I had to buy a plan on the ACA individual market OR Medicare Advantage, I, an insurance expert who thinks about this shit every fucking day for fun and for business, am very confident that I will not make a horrendous choice.  I am also very confident that I will not make the optimal choice either prospectively or retrospectively.  My choice system is a satisficing search.

     

    And that is me, someone who thinks about this type of stuff every day.

  4. 4.

    randy

    August 20, 2020 at 10:15 am

    @David Anderson: New word! Satisfice to some (low) acceptability threshold satisfices me!

  5. 5.

    satby

    August 20, 2020 at 10:31 am

    And let’s not forget the audience for that choice matrix. From personal experience, college students at ridiculously overpriced private universities like Notre Dame are generally an entitled lot, and assume rules are for other people. Plus the anti-mask sentiment is strong in the toxic masculinity culture.

  6. 6.

    TomatoQueen

    August 20, 2020 at 10:33 am

    As a fed, my favorite time of year is Open Season. It’s six weeks or so, the helpful comparison tool offered free in previous years has been removed (fuck you unions, says management), and the plans change in niggily tiny ways every year without timely notice so you may or may not spot the differences in time to rethink. That faint sigh you hear is the sound of multiple employees mumbling “I got forty-bazillion cases to get done. Re-enroll.”

  7. 7.

    oldster

    August 20, 2020 at 10:39 am

    Okay, so how do you suggest that universities construct the choice architecture?

     

    I’ve got a sort of stake in this. We retired to a small university town — it’s usually a good move. But now, said university town is about to let in hoards of students. If the contagion rips through them, it will eventually get into our retirement community. (There’s going to be some chain or another in a small town: an essential worker who cleans the frats also lives with a mechanic who fixes our golf-carts. Or whatever.)

     

    So I have been watching the university’s preparations with some attention. They have a testing regimen in place. They are making all students test and quarantine before returning to campus. All teachers on the campus will have to test twice a week. The university is spending a lot of time and money to get it right.

    And everyone knows that student behavior is the Achilles heel, the iceberg they hope to miss, the looming disaster. If the student’s can be cool for 2-3 weeks, then it will work. If not, then it will all come crashing down.

    So, what advice do you have for the university?

  8. 8.

    marklar

    August 20, 2020 at 10:43 am

    Nice framing, Dave.  I think the psychological term that corresponds to this is ‘status quo bias’.

    You’ve identified a problem, and I’m hoping that some of the posters will offer solutions, at least as it applies to reopening colleges.

    I’ll start.  My college (small, liberal arts college) is having First Year students on campus, and a hundred or so others (who have extenuating circumstances, or need to be on campus for Honors projects).

    I’m hoping that by only having First Year students, they haven’t yet established a ‘status quo’ regarding life on campus, so they might be more likely to adhere to the social distancing rules (although media depictions, older siblings, friends, etc. will likely have created some expectancies).  The college is already modeling distancing with stringent moving-in guidelines over 2 days. People have assigned times to arrive, to unpack their cars, and to have their two family ‘assistants’ leave.

    My concern is the 160-200 or so ‘upperclasspersons’  who are living off-campus. Hopefully, the first year students will not be tempted to attend the inevitable parties, although the attendance should be minimized by the relative lack of relationships between arriving first-year students, and students who have already been here for over a year.  If we can keep them away from the off-campus gatherings for the first weekend, the status quo of “remain on campus” can start to be formed.

    We’re in a giant social science experiment. I’m kicking myself for not getting IRB approval to track adherence, looking at how beliefs with what college life is supposed to be (and other variables like older siblings who have had a ‘college experience’) might predict adherence to the distancing rules.  Let’s hope somebody is systematically looking at this.

  9. 9.

    Bobby Thomson

    August 20, 2020 at 10:43 am

    My dad was a sociologist.  More important, I am a former college student.  The idea that college students will comply with rules against drinking in groups is so ridiculous it could only come from someone with no social intelligence or a college administrator.  But I repeat myself.

     

    ETA: And I wasn’t even one of the frequent partiers.  I did have eyes.

  10. 10.

    Eunicecycle

    August 20, 2020 at 10:55 am

    @Bodacious: I think your engineer other half did well to figure it out in 3 days. My IT husband and I took about 3 months! We do have a robust Medicare Advantage system here, but we had already narrowed it down to one insurance company. Still took a long time to try to spot the differences in the plans and whether to go MA or traditional.

  11. 11.

    Barbara

    August 20, 2020 at 11:32 am

    Well, I do think that the analogy between organizing a website/enrollment process and orchestrating the return of in-person classes breaks down in terms of complexity, at least, though there are obvious parallels. In the return to school, it isn’t the classes that are the problem but the out of class activities.

    It’s actually pretty easy not to go to a large party.  I attended the University of Virginia and lived in Charlottesville for five years and can count on one hand the number of large events I attended — but others probably attended large events dozens if not hundreds of times.  It’s less easy to modify such things as student food services, where students also congregate, but it’s probably not impossible.

    It’s not hard to close bars and prohibit/penalize group activities.  That’s not to say that there is authority among university officials to do those things.  But it’s just not that hard to deprive students of prime super spreading opportunities.  It’s just extremely disagreeable and so much easier to wag your finger at them about the need to make good choices.

    When you allow yourself to be led by stupid people you make yourself stupid. It was entirely predictable that a significant cohort of students would make bad and stupid choices, and it was incumbent on administrators to assume that possibility as part of their planning.  I assume that is your main point.  Administrators who were basically following the lead of the stupidest among us to make good choices are basically just as stupid as the students they are whining about

  12. 12.

    p.a.

    August 20, 2020 at 11:47 am

    Gee had a short, rocky time as Brown’s pres coming from, IIRC, Vandy. A Mormon in the liberal and/or Catholic hellhole of Providence…

  13. 13.

    JMS

    August 20, 2020 at 11:47 am

    In the Pitt instance, this announcement is surprising only in that I already thought all classes were online for the foreseeable future or at least until the Pittsburgh campus can get to a level 1 “operating posture”. I wouldn’t necessarily lump it in with the other cases. The real issue, that I’ve discussed with my sophomore daughter, is that the only mitigation that has been used for off campus drunken parties seems to be scolding and threats. As we know from vaccine deniers and Bernie hold outs, scolding is the least effective choice architecture, but the alternatives take a lot more work. Maybe limit the amount of alcohol that can be sold at a time? It has to be something that doesn’t rely on willpower. We’ll see what happens this fall.

  14. 14.

    Barbara

    August 20, 2020 at 11:57 am

    @JMS: I don’t know about Pitt, but in a lot of campuses, the frat houses are not owned by or even on university property.  They are no different from other private housing.  In a case like that, the university would have to work with the city or county where the house is located to proactively limit serving alcohol without a license, just as the location would presumably be doing for other private residences where such activities result in super spreading events. The university could tell frats and sororities (a vastly lesser issue IME) that if they have parties they won’t receive official recognition and won’t be allowed to recruit on campus for the foreseeable future.  I want fraternities and sororities to die anyway, so my views are probably not going to get any traction.  My point simply is that it’s not as if they don’t know what needs to be done.  They just don’t want to do it.

  15. 15.

    lowtechcyclist

    August 20, 2020 at 1:07 pm

    @oldster: I’m not Dave, but my advice would be to have classes entirely online for the 2020-2021 academic year.  (Even if Biden wins, it’s going to take most of 2021 to bring the virus under some semblance of control.)  Lab courses would just have to wait a year.

    Seriously, if K-12 classes are moving online for many school systems, then colleges can do it too.  College students should be more able to exercise the self-discipline to learn that way than my middle-school son is, and college professors should be at least as able to adapt to teaching in an online environment as K-12 teachers are, and probably have more support staff to help them get there.

    I have to assume that money is the driving force behind colleges’ not going all-virtual this fall.  It’s hard to think of any other compelling logic.

  16. 16.

    Alex

    August 20, 2020 at 1:09 pm

    The students will add 50% to our town’s population. The university says that even if they go all online, the off-campus students will mostly return because they have leases. And I do understand why they might need a couple dorms open for international students, grad students, folks aging out of foster care, people from rural areas with no internet. But I just don’t see the reasoning for opening all the dorms and not encouraging off-campus kids to stay away. One of the main reasons our public schools had to go all-online even for kindergarten is because the university students are expected to bring virus from areas with higher prevalence, and the university isn’t even going to try to test despite a wide range of testing options. Even if they really want to only use PCR, they have labs on campus and in the health system and they aren’t trying to ramp up that capacity!

  17. 17.

    oatler.

    August 20, 2020 at 1:14 pm

    choice choice choice, the boys are maaarching !

  18. 18.

    Annie

    August 20, 2020 at 1:15 pm

    @lowtechcyclist:

    If college students have enough self discipline to take online classes, Why don’t they have enough self discipline to wear masks?

  19. 19.

    Another Scott

    August 20, 2020 at 1:27 pm

    @oldster: COVID-101 has some thoughts.

    https://covid-101.org/science/college-this-fall/

    It all seems sensible.

    Cheers,
    Scott.

  20. 20.

    BCHS Class of 1980

    August 20, 2020 at 2:17 pm

    As The Blogfather can attest, the idea of getting WVU students not to party is risible (See! I know big words too!). My niece just told me about several students getting thrown out of her apartment complex because of garden-variety loud parties. Also WVU does not have a campus per se; it has metastasized throughout Morgantown and Mon County. I foresee several outbreaks in their future.

  21. 21.

    EmbraceYourInnerCrone

    August 20, 2020 at 2:54 pm

    @Bodacious: I am dreading having to do that in a few years

  22. 22.

    Barbara

    August 20, 2020 at 3:01 pm

    @BCHS Class of 1980: The idea of getting people not to drive drunk is risible. The idea of getting people to wear seat belts is risible.

    And yet, here we are, light years away from where we were when people guffawed about wearing seat belts and being expected not to drive after drinking.  Yes, the suddenness of the change makes this situation very different, but what that means is that the administrators who are in charge of making the experience safe have to show more gumption and more determination, and not give up right from the get go, “well partiers gonna party watcha gonna do oh well we tried I guess it’s time for everyone to go back home to mommy and daddy.”

    In this case, you are largely getting exactly what you asked for.  It’s hard to have any sympathy when they aren’t even trying.

  23. 23.

    Brachiator

    August 20, 2020 at 3:17 pm

    @marklar:

    My college (small, liberal arts college) is having First Year students on campus, and a hundred or so others (who have extenuating circumstances, or need to be on campus for Honors projects).

    It would be good to see how this works out. I hope that folks will report on this later.

  24. 24.

    RSA

    August 20, 2020 at 5:35 pm

    I still get notices from my former large public university:

    August 18: One COVID-19 cluster in off-campus housing (with a party having been reported on August 6)

    August 19: Two clusters in separate sorority houses.

    August 20: Classes go all-online.

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