Last fall, the New York Times published an article called “Why Consumers Often Err in Choosing Health Plans” that presented some very interesting research on how well Americans actually understand their health care plans (spoiler: not well) and how they actually go about making health care decisions (you’ll have to read to find out).
If you’ve ever been curious about how your employees are likely feeling (and thinking) during open enrollment, and how you might help them out, it’s definitely worth your time.
Speaking of time…here’s a rundown of some of the high points you can read in two minutes:
#1. Most Americans struggle to understand basic health care terms and their own plans
According to a study by Saurabh Bhargava, a Carnegie Mellon economist, and his colleagues, 71 percent of people couldn’t identify fundamental cost-sharing features of health insurance plans. This type of illiteracy was highly predictive of mistakes like overpaying for a lower deductible.
Another study found that less than a third of respondents could correctly answer questions about coverage features of their own plan. Yet another found that only a minority of workers at a large firm could answer questions about plan characteristics or their own, recent health care spending.
#2. Health care consumers who don’t really understand their options are easily swayed by superficial criteria, like plan names and the order in which options are presented
From the article: “Plan labels – like the ‘gold,’ ‘silver’ or ‘bronze’ – can fool people. To some, ‘gold’ sounds better than ‘bronze,’ even if it isn’t. In one study, people were asked to select hypothetical plans with these labels, but the researchers reversed the meaning of ‘gold’ and ‘bronze’ for half of them. It didn’t matter. Most people picked ‘gold’ anyway.”
Also: “Consumers tend to select plans near the top of a list.”
#3. People think differently about premiums than they do about co-pay and deductibles
From the article: “…participants had a stronger aversion to an increase in costs in deductible or co-pay than to the same increase in premium. Because a dollar is a dollar, no matter how you spend it, this is another indication of irrational decision making.”
#4. According to a Columbia University study, without significant decision support, a health care consumer’s likelihood of picking the most affordable plan for them is no better than chance.
Yep, you read that right.
From the article, a description of the study: “The researchers conducted a series of experiments on people similar to those who would shop for marketplace coverage. Each study participant was asked to presume he’d use a certain amount of health care and, based on that, to choose the lowest-cost plan from among eight choices, which varied by premium, doctor co-pay and deductible. Only 21 percent could accomplish this task, a figure not statistically different from chance. The annual cost of errors was about $250.”
#5. However, when given cost comparison tools, the ability of this group to choose the lowest-cost plan was dramatically improved
From the article: “When study subjects were provided with a tutorial or with a calculator that revealed the full cost of each plan, or if they were placed in the lowest-cost plan by default (from which they could voluntarily switch), their chance of selecting the cheapest plan was much higher, upward of 75 percent in some experiments.”