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Understanding how consumers choose health insurance and the quality of those choices is crucial information for policymakers. This paper uses a choice experiment to evaluate choice quality and how this interacts with an important form of complexity—product bundling. The results indicate that consumers are likely to make choices that violate expected utility theory, use heuristic decision strategies, and overinsure relative to minimizing out-of-pocket costs. Product bundling is found to exacerbate all of these tendencies. The experimental approach used overcomes some limitations of revealed preference research in this area, such as the endogeneity of choosing bundled insurance. [ABSTRACT FROM AUTHOR]
