Monday, October 5, 2015
People are bad at choosing health plans, part 2
With open enrollment coming up for the Affordable Care Act marketplaces, as well as Medicare and some employer plans, I am reviewing the literature on how well people make plan choices. I concluded my first post, which focused on Medicare, with two stylized facts I claimed generalized beyond Medicare: (1) people are bad at choosing plans; (2) providing easy access to cost comparison information makes them better. This post and a forthcoming one back up that claim.
Through a series of six experiments, Columbia business professor Eric Johnson and colleagues directly tested consumers’ ability to make rational choices among health insurance plans. Without additional assistance from calculators or the setting of “smart” defaults, they found that consumers are just as likely to select the lowest cost plan as they are to select any other. Moreover, people have no idea how bad they are at this task.
Subjects for the six experiments differed; four focused on a population similar to state marketplace shoppers, one focused on workers, another on MBA students. All respondents passed a test of comprehension of health insurance policies, for instance correctly identifying what are a premium, co-pay, and deductible.