Are people ready to shop for health insurance online?

Health insurance exchanges don’t open for business until Oct. 1, but one study says that people will have a hard time using them to shop for insurance.

The study — “Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture” — is already suggesting recommendations that could save consumers and the government more than $9 billion annually.

It was co-authored by University of Pennsylvania Law School professor Tom Baker, a health insurance expert, and colleagues at Columbia University, Hebrew University of Jerusalem, and the University of Miami. It was released Tuesday.

Insurance exchanges, a key component of the Affordable Care Act, are online portals where individual and small business owners can comparison shop for health coverage.

States have the option of running their own exchanges or using one developed by the federal government. Pennsylvania and New Jersey both chose to use the federal government exchange.

Baker and his co-authors believe millions of Americans will find it difficult to select the best health insurance coverage for their needs, unless relatively simple design features are incorporated into the state and federal web sites they will use to choose a policy. Their concern is the exchanges may not be designed in ways that provide consumers with the guidance they need to select the most cost-effective policies.

“Some states are trying very hard to use good choice architecture, but others are overwhelmed,” Baker, said. “I have high hopes for the federal web portal because we have been providing our research results to the Department of Health and Human Services, and we get the sense that they understand the essential message. My prediction is that it will take a couple of years to learn what works.”

In the study, Baker and the co-authors conducted a series of experiments to see how well or poorly respondents performed when asked to select the best health insurance policy for their needs. What they found was without aides, most participants had difficulty making good choices.

Subjects were asked to imagine they were choosing health insurance for a family of three with an anticipated number of doctor visits and out-of-pocket health-care costs over the next year. When four choice options were presented, the study subjects selected the best option 42 percent of the time. When the options increased to eight, the best one was selected 21 percent of the time — a result no different from chance.

If consumers cannot make informed choices, the researchers state, then the insurance exchanges — expected to be used by 20 million Americans — will not produce the desired competitive pressures on health plan costs.

With a little assistance, however, outcomes improved dramatically for typical consumers. Such help included providing people with “smart” default options that preselected the most cost-effective plan and a cost-calculator. Average errors costing individual consumers $533 dropped to $77.

“Consumers left to their own devices seem to make large errors when choosing health insurance,” the study authors noted. “The good news is that we have demonstrated that exchange designers can improve consumers’ performance markedly.”

In addition to Baker , the study’s authors included Eric J. Johnson of the Columbia Business School, Ran Hassin of Hebrew University, Allison T. Bajger of the Columbia University Dept. of Psychology, and Galen Treuer of the University of Miami.


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