Framing, Complexity, and Cognitive Load: Rethinking Incentive Structures for Health Insurance Consumers

Kairies-Schwarz et al. (2020) revealed that relative thinking and complexity, not just loss aversion, drive responses to insurance incentives. Bardy & Boes (2024) also found information framing to significantly affect consumer preferences. This project would experimentally manipulate both the complexity and the framing of insurance incentives (e.g., simple flat rebates vs. tiered cost-sharing, presented in intuitive vs. technical language) to measure their effects on insurance plan choice, adherence to care, and inefficient utilization. By also tracking cognitive load and health literacy, the study would identify which populations are most vulnerable to poor decisions under complex incentive structures. The novelty here is in modeling the interaction between psychological processing (cognitive load), information design, and economic incentives, rather than treating these as isolated factors. This could inform regulations to standardize insurance communication and prevent the exploitation of consumer confusion.

References:

1. Cost-sharing or rebate: The impact of health insurance design on reducing inefficient care. Nadja Kairies-Schwarz, Markus Rieger-Fels, Christian Waibel (2020). Frontiers in Behavioral Economics.
2. Does targeted information impact consumers’ preferences for value-based health insurance? Evidence from a survey experiment. Tess L C Bardy, Stefan Boes (2024). Health Economics Review.