Improving Consumer Understanding of Short-Term Health Insurance: An Experiment

Abstract

Short-term health insurance policies—made available with longer durations during the Trump Administration—offer substantially fewer consumer protections than do Affordable Care Act (“ACA”)–compliant policies. Federal regulations require short-term policies’ sellers to disclose possible ACA noncompliance to prospective buyers. This controlled experiment finds, however, that the federally required disclosure does not substantially improve consumer understanding of these policies’ coverage limitations. The experiment also finds that an enhanced disclosure greatly improves this understanding. Importantly, consumers’ preferences for ACA-compliant policies also increased with their comprehension of the coverage differences. Thus, the study demonstrates not only that easily implemented changes in the federally required disclosure would improve consumer understanding of the coverage differences but also that the improved understanding matters to consumers. However, even the enhanced disclosure left many respondents mistaken about some key limitations of short-term policies, suggesting that policymakers should consider other strategies to protect buyers of short-term health insurance.