Study: Consumers don't understand insurance basics

Many health industry experts have warned that consumers don't understand the health reform law's provisions, and a new study says that's because consumers don't even understand how insurance works.

Carnegie Mellon University surveyed 202 adults, finding only 14 percent correctly understood four basic insurance concepts--deductibles, copays, co-insurance and out-of-pocket maximums, according to a study published in the Journal of Health Economics.

When asked to calculate how much a hospital stay would cost them based on a sample health plan, only 11 percent of survey respondents calculated the correct amount. "And people were off by a lot--thousands of dollars," lead researcher George Loewenstein, economics and psychology professor at Carnegie Mellon, told NPR Shots.

The survey concluded a simple health plan without deductibles and copays, which were the two least understood insurance concepts, would appeal best to consumers.

"It is strange, in my opinion, that the insurance market has evolved so, that so few individuals understand the fundamentals of the medical insurance plans they are insured under," Loewenstein said last week in a statement.

The survey demonstrates that although the healthcare reform law aims to simplify health plans and consumer choices, "actually presenting people with simple information about something that is inherently complex has problems," Loewenstein noted to Shots. That's why he recommended insurers "simplify the underlying product."

To learn more:
- here's the Carnegie Mellon statement and study
- read the NPR Shots article

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