Consumer Choices on the Insurance Exchanges

Researchers at the Robert Wood Johnson Foundation attempt to glean lessons from consumer behavior in selecting health plans on the individual insurance exchanges.   (RWJ Report)   The authors look at plan choices in California, Rhode Island, New York, Maryland and Connecticut.  Price appears to be far and away the primary factor, but evidence suggests that for some, other factors are also important.  Even understanding price-related behavior is complicated, because the premium alone does not give the buyer a full picture of their out-of-pocket costs; you need to know deductibles and copays and you would like to have some idea of the services you are most likely to use, and what the cost-sharing is for those services.  In addition, network composition can affect out-of-pockets as well, since cost-sharing is typically higher for non-network providers.  The structure of subsidies affects choices as well–the second-lowest priced silver plan is the benchmark for subsidies, so insurers tend to try to price in that range. While the majority of consumers, about 80%, are choosing bronze, the cheapest, or silver plans, some are selecting more expensive alternatives, especially when offered by large well-known entities like Kaiser or Blue Cross.  This demonstrates the power of brand even in health care.  That power may be heightened by consumers reluctance to switch from established coverage to less expensive options.

Understanding consumer behavior is as important in health care as in other industries; perhaps more so, because a clear picture of consumer motivations can facilitate attempts to ensure that health-related choices are optimal.  We know that in general people’s behavior is often not rational, although it may reflect a certain evolved “human” logic.  Education and training can help consumers understand how their choices may be improved and technology can certainly make that process more real-time and effective.  Most exchanges have at least some rudimentary capability to help consumers understand important features like network and cost-sharing, but it is not clear how often these are used or if consumers really understand and can take into account the output of these tools.  Research aimed at understanding how to best give people relevant information and help them make use of it, has tremendous value in maximizing choices.