Article

Long-Term Care Insurance: Information Frictions and Selection

Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud

Abstract

This paper conducts a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against nancial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance. Our results are twofold. First, information frictions are pervasive. Second, measuring the welfare losses associated with frictions in a framework that also allows for selection, it is found that information frictions reduce equilibrium take-up and lead to large welfare losses while selection plays little role.

Keywords

Long-term care insurance, adverse selection, stated-preference, health, insurance;

Replaces

Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud, Long-Term Care Insurance: Information Frictions and Selection, TSE Working Paper, n. 19-1034, September 2019.

Reference

Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud, Long-Term Care Insurance: Information Frictions and Selection, American Economic Journal: Economic Policy, 2020, forthcoming.

Published in

American Economic Journal: Economic Policy, 2020, forthcoming