Insurance exchange design could save individuals, government $9 billion

Smart design of health insurance exchanges that will enable Americans to purchase individual coverage under the Affordable Care Act could save consumers and the government more than $9 billion annually, according to a new collaborative study.

The study, "Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture," examined, via a series of experiments, the ability of consumers to choose the best health insurance plan for their needs with no assistance. Most participants struggled to make the most cost-effective choices for themselves and their families.

"Consumers left to their own devices seem to make large errors when choosing health insurance … and they seem to be unaware of their failure," the researchers said. "If consumers cannot identify cost-efficient plans, then the exchanges will not produce competitive pressures on health plan costs, one of the main advantages of relying upon choice and markets."

The researchers--from the University of Pennsylvania Law School, Columbia University, Hebrew University of Jerusalem and the University of Miami--said, however, that tweaks to the designs of the exchanges that use "just-in-time education, smart defaults and cost calculators" could "improve consumers' performance markedly."

"This sizable impact is more significant since the improvement is largely a function of psychological factors that can be implemented inexpensively by being built into the choice engines powering the exchanges," the researchers said.

In a letter to Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner this week, Senate Republican Leader Mitch McConnell (Ken.) called for a delay in the opening of the exchanges. McConnell cited security concerns with the data hub that will connect state health insurance exchanges with federal agencies.

"Given the compressed time frame between the conclusion of the system testing and the scheduled opening of the exchanges, I am asking you to delay opening the exchanges until the Inspector General can guarantee the safety of the exchanges," McConnell said. "While I have grave concerns about this law under any circumstance, Americans should not be forced into the exchanges, and certainly not without these assurances."

Legislation introduced last month by Rep. Pat Meehan (R-Pa.) calls for a one-year delay in the launch of the data hub, citing concerns similar to McConnell's.

To learn more:
- here's the study (.pdf)
- read McConnell's letter (.pdf)