Anna Odegaard, Why People Hate to Shop For Health Insurance

Most people would rather file their taxes than shop for health insurance.  And the person they trust the most for advice on choosing a health plan is, for better or worse, their mother.  Such are the findings of studies by the Consumers Union, the policy and action arm of Consumer Reports.

On May 14^th, Lynn Quincy of the Consumers Union presented highlights from three recent consumer testing studies to a work group that is helping design the Minnesota Health Insurance Exchange.   The Exchange, which will launch in 2014, is a critical element of health reform.  Over one million Minnesotans are expected to use it to compare and purchase health plans and determine whether they’re eligible for public insurance programs or tax credits to make their health insurance more affordable.  A well-built Exchange can also offer increased protections and security to people buying insurance by making sure insurance companies play by the rules, and offer affordable, quality plans.

The studies found that people dread shopping for health insurance.  This may be obvious, but the implications are complex.  Because people want to get it over with, they take short cuts when comparing health plans, Quincy explained, and the short cuts often lead to uninformed choices.  Bad choices can result in people not having the insurance they need when they get sick.  And that, along with poor insurance options, can lead to inadequate care, unpayable bills, and for too many, even bankruptcy.

Here are some of the reasons people hate shopping for health insurance, according to the Consumers Union, and how the Exchange can try to help:

1. People can’t assess the value of different plans.  Most people don’t just want the cheapest plan, they want the plan with the best value –  the one that offers the best coverage for the price. But most consumers find it hard to assess the value of different plans.  This is because the jargon is difficult (what is the difference between coinsurance, cost-sharing and co-pays?), the concepts aren’t clear (who pays 20%, the patient or the plan?), and many cost-sharing amounts are unknowable at the time people are purchasing health insurance.

2. People need a manageable number of choices.  The studies typically asked people to compare just two health plans at a time.  Even with that limited set of choices, people had trouble assessing value, for the reasons described above.  The report concludes that comparing a large number of plans, all with varying features is “an impossible cognitive task.”  It’s not surprising, then, that behavioral research shows that an abundance of plan options does not help people make better choices, and that people generally prefer fewer choices that are truly different from each other to an unlimited number of choices.

3. People don’t trust insurance companies.  Even when people have access to good information about health plans, they don’t act on that information if they don’t trust the source.  And most people do not trust information they get from insurance companies.  They believe insurers are “tricky,” and they worry that important details will be hidden in fine print.  Many people don’t even trust what their employer has to say about the health plans they offer.  Who do people trust to give good advice about choosing a health plan?  Their mothers.  But let’s face it, our moms are as likely to have trouble understanding plans as everybody else!

So how can the Exchange help?  The Consumers Union recommends 3 priorities:

First of all, an Exchange could help people assess the value of plans by displaying the “true insurance value” of each plan: how plans compare on total annual cost (premiums plus out-of-pocket costs) based on average health care expenses of populations similar to the person applying in age, family composition, and other characteristics.  That way people can compare one meaningful variable across plans, rather than trying to calculate premiums, co-pays, deductibles and coinsurance for each plan themselves.

Second,  an Exchange could choose to offer a manageable number of plans with meaningful differences between them.  It can do this by limiting the number of plans on the Exchange to the best value plans on the market and reducing the number of features that can vary between plans.  This will help consumers avoid “choice paralysis,” the condition where an overload of choices leads consumers to make decisions that aren’t in their best interest.

Third, the Exchange will need to work hard to earn the people’s trust.  Better yet, it should work to earn the trust of our mothers.

This will be an ongoing endeavor, and the best strategy for success will be to ensure that consumers have a powerful voice in the policy-making process.  First steps should include keeping insurers off the Exchange’s board of directors, partnering with trusted community organizations to help people navigate the Exchange, and bargaining with insurers on behalf of consumers for high-quality plans at good prices.  If it can do this, shopping for health insurance on the Exchange could be more fun than filing your taxes, and truly improve access to quality health care in Minnesota.

Anna Odegaard

Anna Odegaard is a policy professional with SEIU Healthcare Minnesota.