Table 2.

How Moral Hazard Matters: An Example

	Plan Type	Total Expenditures	Out-of-Pocket Expenditures	Income	Ratio of OOP to Income (C)/(G)	Threshold (10%) Underinsurance Measure
Panel A	(A)	(B)	(C)	(G)	(H)	(I)
Household X	Generous	5,000	1,500	15,000	0.10	Yes
Household Y	Stingy	3,500	1,400	15,000	0.093	No
	Plan Type	Total Expenditures	Out-of-Pocket Expenditures	Cost-Sharing (C)/(B)	Expected Total Expenditures if Had a Generous Plan	Expected OOP Expenditures: Spending from Generous Plan but Cost-Sharing from Own Plan (D)*(E)	Income	Ratio of Expected OOP to Income (F)/(G)	Adjusted Threshold (10%) Underinsurance Measure
Panel B	(A)	(B)	(C)	(D)	(E)	(F)	(G)	(H)=(F)/(G)	(I)
Household X	Generous	5,000	1,500	0.3	5,000	1,500	15,000	0.100	Yes
Household Y	Stingy	3,500	1,400	0.4	5,000	2,000	15,000	0.133	Yes

Note: Household X and household Y are identical except for their plan type (generous; stingy). Underinsurance is defined here as having out-of-pocket expenditures that exceed 10% of household income.