When Buying Insurance on the Exchanges, It Helps to Have Help

New online marketplaces don't do enough to let consumers weigh their options, experts say

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Eric Johnson, co-director of Columbia University Business School's Center for Decision Sciences, and Tom Baker, professor of law and health sciences at the University of Pennsylvania, realized some time ago that "choice architecture" would matter on the exchanges. To test their hypothesis, the two academics and colleagues in New York, Miami and Jerusalem set up several experiments mimicking the decisions consumers have to make when shopping on the exchanges.

When asked to choose the lowest-cost health plan from among four or eight options, the study participants failed miserably, the study found.

"In fact they practically couldn't do it at all. They were practically throwing darts," said Johnson, who expects their paper to be published shortly in a peer-reviewed journal.

On average, consumers could potentially lose $611 annually by failing to choose the most cost-effective option, the study found. "People seem to put more weight on the out-of-pocket costs and the deductible than they do the premium," he explained.

When business school students were given the same task, they got it right 73 percent of the time, often with the aid of spreadsheets, the study found.

Ordinary consumers either don't know how to do the math or don't bother to do it, Johnson reasoned. The problem could be cured "just doing the math for people," he said.

Because many of the health plans that consumers will purchase on the exchanges will qualify for federal subsidies, peoples' bad decisions could end up costing taxpayers more than $9 billion annually, Johnson said.

The study also found that adding a cost calculator improved the chances of choosing the right plan and reduced the margin for error by an average of $216 annually. And using a "smart default" to indicate a person's best health-plan choice based on his or her specifications can also help, Johnson said.

Some exchanges more user-friendly than others

Currently, experts don't see many exchanges using these tools.

"They've obviously been busy just trying to get the lights on October 1st," Johnson said.

Blogging for Health Affairs, Krughoff and his colleagues suggest a list of ways to make health-plan choices easier. One recommendation: let users see the true insurance value of each plan. The exchanges should provide a single dollar-amount estimate of the average expected cost under each plan, Krughoff said. But based on visits to about half of the exchanges in the past two weeks, he found that few are doing so.

Several states, like Massachusetts, plan to add a cost-comparison tool, Krughoff said. And Kentucky has one allowing users to plug in data on their expected health-care uses, but it ignores the unexpected accidents and illnesses that insurance is designed to protect against, he explained.

But for the most part, "consumers will not have the tools that they need to make their best choices," he said.

City University of New York's Zarcadoolas, though, believes that consumer decision-making tools on the exchanges will improve over time. "This is a dynamic process where the sites are going to be constantly updated to be more accessible and more user-friendly," she said.

More information

The Henry J. Kaiser Family Foundation has tools and information to help consumers understand the Affordable Care Act.

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