Anya Samek, an economist, has found that consumers make better choices among health plans when presented with a few simple calculations. So when she switched jobs last year and had to choose a plan herself, she tried entering the various plan features into a spreadsheet to replicate her tool. She gave up, determining the task too complicated.
I picked a plan because in my research I tend to show that high-deductible plans do better for people, said Ms. Samek, an associate professor at the University of California, San Diego. But its just a guess.
When Paul Krugman, the Nobel-winning economist and a New York Times columnist, started a teaching job at the City University of New York, he had a choice between one union health plan at The Times and an array of university options, which I found incomprehensible, he said in an email.
I asked H.R. at CUNY if they could explain the differences; they said no. So I went with The Times, precisely because it didnt require that I make a choice!
For most Americans, with or without a Ph.D in economics, right now is the time to pick your health insurance. Medicare beneficiaries can choose a Medicare Advantage plan or a Part D prescription drug plan. People with coverage at work can choose from the options their employers offer. People who buy their own insurance can make a choice on the Obamacare marketplace in their state. In Seminole County, Fla., right now, Obamacare customers can choose among 174 different health plans.
The range of choice is generally heralded as a good thing: Not everyone wants the same plan, the thinking goes, so offering multiple options helps people shop for the one that is best for them. That logic drove the creation of Medicare Advantage, with legislation passed by Republicans, and drove the design of Obamacare, with legislation passed by Democrats.
But it turns out in real life most people are terrible at picking the health plan that is right for them. Health insurance is a complicated financial product, and study after study has shown that people routinely pick bad plans, even choosing options that leave them worse off financially in every possible scenario. And, because people are so bad at choosing good plans, the market often sends weird signals to insurance companies, encouraging them to offer more of the wrong plans instead of the right ones.
People struggle to make good choices when it comes to all kinds of financial products, but health insurance is especially confusing, with its mix of technical benefits and fees. Many Americans dont understand terms like deductible or coinsurance very well. And few are good at predicting what sort of health care needs they will have in the coming year. Picking an ideal health plan requires combining all of these features knowing what you might use, what it might cost you, and how those expenses combine with the plans monthly premium.
Online brokerages have found that recommending certain plans has a huge effect on what people pick, a sign that few people are doing this complex math themselves. Noah Lang, the C.E.O. of Stride Health, which helps people shop for health plans including Obamacare plans, said so many people would pick the first plan presented to them that the company changed its website to offer a handful of recommended green plans. Last year, more than 70 percent of customers bought one of those plans.
People want advice, they want guidance, Mr. Lang said. And its pretty hard.
The people most likely to make bad choices appear to be those least able to afford it. A recent study in the Netherlands, which offers insurance to everyone through an Obamacare-like marketplace, found that only 5 percent of Dutch customers did a better job at choosing an ideal plan than they would have by choosing a plan at random. And the people in that top 5 percent tended to be have college degrees and jobs in technical fields. People with less education and income, who tend to be in worse health, were very likely to choose a plan that cost them more to cover their health care a situation that might leave them skimping on needed medicine or procedures.
But even highly educated Dutch professionals struggled. People who worked in the insurance industry and had advanced degrees made a good choice about 30 percent of the time. And only about 40 percent of trained statisticians the group with the best performance chose good plans for their needs.
In the United States, a working paper has found that many professionals who help people select health insurance are also bad at picking plans, performing substantially worse than a computer algorithm.
These people who are supposed to make the market work cant do it at all, said Jonathan Kolstad, an associate professor of economics at the University of California, Berkeley, who was a co-author on both studies. Professor Kolstad said the work had made him reconsider why we value markets for health insurance so highly when they are so hard to use.
Spot on. Im a pharmacist and I cant even count the amount of times a day I hear I wouldnt have picked this plan if I knew X. The administrative costs of our system alone make it more expensive than single-payer.