When shopping for plans on health insurance exchanges, consumers make several mistakes, often choosing coverage that isn't cost-effective. In fact, more than 80 percent of consumers may unknowingly choose a higher cost plan than they need, according to a new study out of Columbia University.
The study authors conducted experiments where consumers chose insurance policies using websites modeled on current exchanges. "Our results suggest there is significant room for improvement," the authors said, explaining consumers place too high a priority on out-of-pocket costs and deductibles.
What's more, consumers don't realize their inability to pick cost-efficient plans, which could weaken the demands on insurers to price their plans competitively.
"Consumers' failure to identify the most appropriate plan has considerable consequences on both their pocketbooks as well as the cost of the overall system," Eric Johnson, co-author of the study and co-director of Columbia Business School's Center for Decision Sciences, said in a statement. "If consumers can't identify the most cost-efficient plan for their needs, the exchanges will fail to produce competitive pressures on healthcare providers and bring down costs across the board, one of the main advantages of relying upon choice and markets."
To help address consumers' inability to choose the most appropriate plan, Johnson and his co-authors suggest exchanges implement certain design tools, including just-in-time education like tutorials and pop-ups that explain basic insurance terms, smart tools that automatically defaults to the most cost-effective plan, and cost calculators.
"Designers of the exchanges should take heart and know that they can significantly improve consumer performance by implementing some easy, straightforward tools," Johnson said.