Now that the new health care exchange marketplaces are open for business under the Affordable Care Act, popularly known as Obamacare, that doesn't mean you should rush online and buy a new policy.
For starters, there are the predictable glitches with the websites offering the plans. That makes it hard for many consumers to navigate the system. But there may be bigger issues at play.
Researchers at the Columbia Business School set up simulated exchanges, modeled on the design of the actual exchanges, to see how consumers would use them. The researchers said they were alarmed to discover that 80% of the consumers enlisted in the test were unable to figure out what they needed and ended up choosing a more expensive plan.
"Consumers' failure to identify the most appropriate plan has considerable consequences on both their pocketbooks as well as the cost of the overall system," said Eric Johnson, a professor and co-author of the report. "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."
Johnson is well-acquainted with the system being put into place by the new law. He spent the last year advising several state health exchange systems on their design and structure. He serves as a member of an advisory board run by Pacific Business Group on Health.
The Columbia experiment consisted of six experiments in which consumers were told to choose the most cost-effective policy when they logged onto websites that were near-duplicates of the ones being operated by the real exchanges.
Johnson calls the results “startling.” The average consumer stands to lose $611 simply by failing to choose the most cost-effective option. That's bad for the consumers, but also taxpayers. Since the U.S. government is subsidizing costs that exceed a certain percentage of the policyholder's salary, the taxpayer will absorb a portion of the cost of that over-payment.
Johnson is well aware of how opponents of the Affordable Care Act might pounce on this research to make a political point but insists it in no way makes an argument for or against the program. Rather, he says it simply underscores the complexity of creating the delivery systems for health care policies.
Take it slow
The take away from the research may be that choosing a plan should not be done quickly and probably should not be done without some assistance. The ACA provides for qualified groups and individuals to serve as “navigators” for each exchange, helping consumers and answering their questions. Talking with one of these navigators – or at the very least doing some research before making a selection – may help with making a good decision.
Johnson and his team have some additional advice:
- Estimate your health care needs: How often do you go to the doctor? Once a year? Then why would you need a plan with no deductible and no co-pay? The monthly cost of such a plan would be a lot more than what you'd pay out of pocket for your annual visit.
- Get educated: Take advantage of 'just-in-time' education: tutorial links and pop-ups that explain basic terms like "deductibles" that might not be known to new buyers, increase your chances of choosing the best plan.
- Use available tools: Adding a calculator to the process improves your chances of choosing the right plan and reduces the size of errors by over $216, the researchers found.
What exchanges can do
Johnson says the exchanges can help consumers make better choices by tweaking the design of their sites and offering helpful tools.
"Designers of the exchanges should take heart and know that they can significantly improve consumer performance by implementing some easy, straightforward tools such as just-in-time education, smart defaults, and cost calculators," he said.
Consumers should also not rush into the marketplace because, chances are, they don't need to make a change from their present coverage. The marketplaces are mostly designed for people not currently covered by a health care policy – a number estimated at about 48 million.