By Tom Risen
Going through health care plans at work can be complicated, so Americans might accidentally pay for $9 billion more in health care benefits than they need when new state health care exchanges open on Tuesday as part of the Affordable Health Care Act, a new study shows.
Health care insurance exchanges are slated to open on Tuesday to offer people an online venue to shop through a list of health insurance options and see if they qualify for federal subsidies. Millions of Americans will buy health insurance for the first time. A new study by Columbia University's School of Business shows that approximately 79 percent of Americans may overestimate how many health benefits they need to buy when those exchanges become available, says Eric Johnson, the Norman Eig professor of business.
The study co-authored by Johnson gave people the chance to shop for health insurance using a simulated example of the health exchanges and a pre-selected health-care profile including the number of times they would need to visit the doctor in a certain year. Approximately 79 percent spent too much money, Johnson says, meaning that an American earning $42,000 per year could lose an average of $611 annually by overspending on health care.
"Buying health insurance can be a daunting task, especially if you are buying for the first time," Johnson says. "If consumers can't identify the most cost-efficient plan for their needs, the exchanges will fail to produce competitive pressures on health care providers and bring down costs across the board, one of the main advantages of relying upon choice and markets."
Approximately 71 percent of Americans say they only "sometimes or rarely" understand changes made to their health care policies, yet 90 percent choose the same coverage every year, according to a separate survey conducted in August 2013 by insurer Aflac.
Johnson offered a few tips to help Americans deal with some of confusion he encountered in his study. Making sure websites help organize and filter through the options on a health exchange is one way to simplify the process, Johnson says. Some states will offer dozens of health insurance options to choose from on the new exchanges; Utah, for example, will offer approximately 99 options. Using that filtering system to suggest an affordable option as a default could also help, he says.
"The more insurance options that are out there means competition, which is a good thing, but it can make it hard for people to choose," Johnson says. "If I had a good idea of what your costs were, or if you told me you had a chronic condition, I could pre-check and highlight options that would be good for you to start with."
Making calculator widgets available on the state websites could also help people calculate the health care costs they spent in the current year and allow them to estimate what plan might be well-suited to cover similar expenses, or could offer an affordable way to prepare for a worst-case scenario depending on their condition, Johnson says. Explanations of insurance terms including "deductibles" and other "just-in-time" education features on the website could also help users navigate the health exchanges, he says.