Sources of Inertia in Health Plan Choice in the Individual Health Insurance Market

We decompose inertia in health plan choice in the individual health insurance market into three sources: inattention to alternatives, hassle costs related to switching, and tastes for provider continuity. Administrative 2014-2018 data from California’s Health Insurance Marketplace show that 83% of returning households select their default health plans. Using a default-consideration framework, we find that roughly three quarters of default plan selections are due to inertia, nearly 90% of which are due to inattention, hassle costs, and their interaction with one another. We validate our identification of inattention using information on whether households made active plan selections.