Choice Under Uncertainty and the Demand for Health Insurance

This Note uses data on families' preferences for insurance to estimate and compare several models of decisionmaking under risk. By characterizing health insurance as a risky prospect and specifying structural models of prospect choice, the models estimated here differ from previous empirical models of health insurance demand in that they can be used to analyze choice among any number of arbitrarily defined plans. The ability to generalize beyond the number and type of plans present in the data is essential for policy analysis, because it permits the examination of policy options outside current experience.