You’re Probably Paying Too Much for Your Health Insurance “¦ and It’s Your Fault

New research suggests consumers continually pick more expensive plans than they need.

MIAMI, FL - DECEMBER 23: Certified Enrollment Specialist, Julienne Fontes, (R) helps Elva Garcia (L) and Jorge Codevila through the options available to them under the Affordable Care Act at a Miami Enrollment Assistance Center on December 23, 2013 in Miami, Florida. In a symbolic gesture ,U.S. President Obama signed up in the federal health care insurance. The goverment announced today that people will have a grace period exending into tomorow to enroll for a plan that would start January 1st. 
National Journal
Clara Ritger
Add to Briefcase
Clara Ritger
Dec. 24, 2013, midnight

Health in­sur­ance shop­pers do a ter­rible job of pick­ing the plan that will serve them best, ac­cord­ing to a new study.

The study presen­ted sub­jects with health in­sur­ance web­sites that mir­ror the ex­changes set up by the Af­ford­able Care Act and asked them to pick a plan. The res­ults were not pretty: Left to their own devices, con­sumers who se­lec­ted their own plans ended up only slightly bet­ter off than they would have had their plans been as­signed ran­domly.

When giv­en four op­tions, the con­sumers chose the most cost-ef­fect­ive plan only 42 per­cent of the time. When giv­en eight op­tions, the suc­cess rate plummeted to 21 per­cent — a rate in­dis­tin­guish­able from ran­dom as­sign­ments.

The re­search­ers then re­peated the study, but this time with ad­ded “cost cal­cu­lat­ors” on the mock web­site aimed at help­ing con­sumers. Even then, shop­pers picked the most cost-ef­fect­ive op­tion only 47 per­cent of the time, typ­ic­ally choos­ing plans that would cost them an ex­tra $364.

In a fi­nal it­er­a­tion, re­search­ers offered the shop­ping choices to M.B.A. stu­dents en­rolled in a con­sumer fin­ance class. In this pool — where more than half of the sub­jects came from con­sult­ing or fin­an­cial-ser­vices re­lated fields — con­sumers made the most cost-ef­fect­ive choice 73 per­cent of the time, and the av­er­age mis­take dropped to $126.

Doubts about shop­pers’ abil­ity rep­res­ent a chal­lenge for Obama­care, which is aimed at curb­ing the coun­try’s ex­pand­ing health costs while al­low­ing con­sumers to pick their own plans on the on­line ex­changes.

“If con­sumers can’t identi­fy the most cost-ef­fi­cient plan for their needs, the ex­changes will fail to pro­duce com­pet­it­ive pres­sures on health care pro­viders and bring down costs across the board, one of the main ad­vant­ages of re­ly­ing upon choice and mar­kets,” said Eric John­son, a Columbia Uni­versity busi­ness school pro­fess­or who coau­thored the study.

But why did con­sumers fail to pick the prop­er plan?

The re­search­ers con­cluded that while the math is daunt­ing, the fact that the cost cal­cu­lat­ors did little to im­prove out­comes sug­gests there’s more to the prob­lem.

Con­sumers tend to over­weigh the im­port­ance of premi­ums and un­der­es­tim­ate the costs from de­duct­ibles and out-of-pock­et con­tri­bu­tions, the re­search­ers wrote. Low premi­um pay­ments are at­tract­ive, but for someone who uses a lot of health ser­vices, the high de­duct­ible that of­ten ac­com­pan­ies the low premi­um means the con­sumer will pay the full cost of care un­til he or she reaches the de­duct­ible, when in­sur­ance kicks in and starts to share a por­tion of those ex­penses.

The re­search­ers say the dam­age done by poor con­sumer choices can be at least partly off­set by well-de­signed ex­changes.

“The bad news: Con­sumers left to their own devices seem to make large er­rors when choos­ing health in­sur­ance, sug­gest­ing that they will se­lect op­tions that are not cost ef­fi­cient and they seem to be un­aware of their fail­ure,” they wrote. “The good news is that we have demon­strated that ex­change de­sign­ers can im­prove con­sumers’ per­form­ance markedly through the use of just-in-time edu­ca­tion, smart de­faults, and cost cal­cu­lat­ors.”

Spe­cific­ally, the re­search­ers urge the web­sites to sort plans by cost, to present “qual­ity cues,” or to lim­it the num­ber of choices presen­ted to plans that meet cer­tain cri­ter­ia of cost ef­fect­ive­ness.

Along with John­son, re­search­ers from Columbia’s psy­cho­logy de­part­ment, the Uni­versity of Pennsylvania, the Hebrew Uni­versity of Jer­u­s­alem, and the Uni­versity of Miami worked on the study.

What We're Following See More »
WITH LIVE BLOGGING
Trump Deposition Video Is Online
1 days ago
STAFF PICKS

The video of Donald Trump's deposition in his case against restaurateur Jeffrey Zakarian is now live. Slate's Jim Newell and Josh Voorhees are live-blogging it while they watch.

Source:
SOUND LEVEL AFFECTED
Debate Commission Admits Issues with Trump’s Mic
1 days ago
THE LATEST

The Commission on Presidential Debates put out a statement today that gives credence to Donald Trump's claims that he had a bad microphone on Monday night. "Regarding the first debate, there were issues regarding Donald Trump's audio that affected the sound level in the debate hall," read the statement in its entirety.

Source:
TRUMP VS. CHEFS
Trump Deposition Video to Be Released
1 days ago
THE LATEST

"A video of Donald Trump testifying under oath about his provocative rhetoric about Mexicans and other Latinos is set to go public" as soon as today. "Trump gave the testimony in June at a law office in Washington in connection with one of two lawsuits he filed last year after prominent chefs reacted to the controversy over his remarks by pulling out of plans to open restaurants at his new D.C. hotel. D.C. Superior Court Judge Brian Holeman said in an order issued Thursday evening that fears the testimony might show up in campaign commercials were no basis to keep the public from seeing the video."

Source:
A CANDIDATE TO BE ‘PROUD’ OF
Chicago Tribune Endorses Gary Johnson
1 days ago
THE LATEST

No matter that his recall of foreign leaders leaves something to be desired, Gary Johnson is the choice of the Chicago Tribune's editorial board. The editors argue that Donald Trump couldn't do the job of president, while hitting Hillary Clinton for "her intent to greatly increase federal spending and taxation, and serious questions about honesty and trust." Which leaves them with Johnson. "Every American who casts a vote for him is standing for principles," they write, "and can be proud of that vote. Yes, proud of a candidate in 2016."

NEVER TRUMP
USA Today Weighs in on Presidential Race for First Time Ever
1 days ago
THE DETAILS

"By all means vote, just not for Donald Trump." That's the message from USA Today editors, who are making the first recommendation on a presidential race in the paper's 34-year history. It's not exactly an endorsement; they make clear that the editorial board "does not have a consensus for a Clinton endorsement." But they state flatly that Donald Trump is, by "unanimous consensus of the editorial board, unfit for the presidency."

Source:
×