Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:


New study shows that more than half of consumers will choose a health-care plan that costs too much

New research from Columbia Business School warns that consumers will make mistakes totaling $9 billion; offers prescriptions to help improve consumer experience using new state health-care exchanges

Right now, many consumers are signing up for healthcare via the new health insurance exchanges set up by the federal and state governments. Using simulated exchanges modeled on the design of the actual exchanges, alarming new research from Columbia Business School suggests that more than 80% of consumers may be unable to make a clear–eyed estimate of their needs and will unknowingly choose a higher cost plan than needed.

"Consumers' failure to identify the most appropriate plan has considerable consequences on both their pocketbooks as well as the cost of the overall system," says Professor Eric Johnson, co–author of the report and co–director of Columbia Business School's Center for Decision Sciences. "If consumers can't identify the most cost–efficient plan for their needs, the exchanges will fail to produce competitive pressures on healthcare providers and bring down costs across the board, one of the main advantages of relying upon choice and markets."

Johnson, a noted expert in the area of consumer behavior and how it applies to public policy, has spent the last year advising several state health exchange systems on their designs and structure as a member of an advisory board run by Pacific Business Group on Health.

The research, published in PLOS ONE and titled Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture, conducted six experiments asking people of varying education levels to choose the most cost–effective policy using websites modeled on the current exchanges.

The results lead to some startling conclusions, including:

•The average consumer stands to lose on average $611 — roughly half a week's salary for a family making $42,000 per year — by failing to choose the most cost-effective option for their needs.

•Because the federal government will subsidize many policies, American taxpayers could pay an additional $9 billion for consumer's mistakes in choosing more costly plans.

•Surprisingly, providing monetary incentives alone did not improve outcomes. Participants were offered $1 for every correct answer and entrance into a lottery that pays one winner $200, yet 79% of participants still chose the wrong plan, inadvertently adding $419 to the cost of their health insurance.

Johnson cautioned against misuse of the research: "Amid the political heat around the healthcare law, there's going to be a great propensity for some politicians to jump on this study and misinterpret these results. This research presents no empirical evidence that in any way is an argument for or against the Affordable Care Act itself. Instead, this is research about the difficulties and complexities in creating the actual delivery systems, which is being done in both blue and red states."

Prescriptions to Improve Outcomes

Through the research, Johnson and his colleagues identified several mechanisms that significantly improved outcomes for the consumer. These include:
•Estimate First; Peruse the Plans Second: Estimating your medical services before choosing a plan increases your chances of choosing the best plan.
•Educate: Including the use 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.
•Implement smart tools: Adding a calculator to the process improves your chances of choosing the right plan and reduces the size of errors by over $216.
•Implement other "smart defaults": Including a tool that defaults to the most cost-effective plan drastically improves a participant's chances at selecting the most cost-effective plan by 20%. Together, calculators and defaults reduce the average mistake saving consumers and the government $453.

•Limit the number of choices: Exchanges that limit their amount of choices in healthcare plans will help to avoid confusion among consumers (Utah offers 99 healthcare options for participants).

"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."

The paper, Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture, was authored by Eric J. Johnson, The Norman Eig Professor of Business Marketing at Columbia Business School; Ran Hassin, Hebrew University of Jerusalem; Tom Baker, University of Pennsylvania Law School; Allison T. Bajger, Columbia University; and Galen Treuer, University of Miami. Download the full report at

About Columbia Business School

Led by Dean Glenn Hubbard, the Russell L. Carson Professor of Finance and Economics, Columbia Business School is at the forefront of management education. The School's cutting-edge curriculum bridges academic theory and practice, equipping students with an entrepreneurial mindset to recognize, capture, and create opportunity in a competitive business environment. Beyond academic rigor and teaching excellence, the School offers programs that are designed to give students practical experience making decisions in real-world environments. The school offers MBA, Masters, and PhD degrees, as well as non-degree Executive Education programs. For more information, visit

Karen Paff | EurekAlert!
Further information:

More articles from Studies and Analyses:

nachricht Diagnoses: When Are Several Opinions Better Than One?
19.07.2016 | Max-Planck-Institut für Bildungsforschung

nachricht High in calories and low in nutrients when adolescents share pictures of food online
07.04.2016 | University of Gothenburg

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Etching Microstructures with Lasers

Ultrafast lasers have introduced new possibilities in engraving ultrafine structures, and scientists are now also investigating how to use them to etch microstructures into thin glass. There are possible applications in analytics (lab on a chip) and especially in electronics and the consumer sector, where great interest has been shown.

This new method was born of a surprising phenomenon: irradiating glass in a particular way with an ultrafast laser has the effect of making the glass up to a...

Im Focus: Light-driven atomic rotations excite magnetic waves

Terahertz excitation of selected crystal vibrations leads to an effective magnetic field that drives coherent spin motion

Controlling functional properties by light is one of the grand goals in modern condensed matter physics and materials science. A new study now demonstrates how...

Im Focus: New 3-D wiring technique brings scalable quantum computers closer to reality

Researchers from the Institute for Quantum Computing (IQC) at the University of Waterloo led the development of a new extensible wiring technique capable of controlling superconducting quantum bits, representing a significant step towards to the realization of a scalable quantum computer.

"The quantum socket is a wiring method that uses three-dimensional wires based on spring-loaded pins to address individual qubits," said Jeremy Béjanin, a PhD...

Im Focus: Scientists develop a semiconductor nanocomposite material that moves in response to light

In a paper in Scientific Reports, a research team at Worcester Polytechnic Institute describes a novel light-activated phenomenon that could become the basis for applications as diverse as microscopic robotic grippers and more efficient solar cells.

A research team at Worcester Polytechnic Institute (WPI) has developed a revolutionary, light-activated semiconductor nanocomposite material that can be used...

Im Focus: Diamonds aren't forever: Sandia, Harvard team create first quantum computer bridge

By forcefully embedding two silicon atoms in a diamond matrix, Sandia researchers have demonstrated for the first time on a single chip all the components needed to create a quantum bridge to link quantum computers together.

"People have already built small quantum computers," says Sandia researcher Ryan Camacho. "Maybe the first useful one won't be a single giant quantum computer...

All Focus news of the innovation-report >>>



Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

Agricultural Trade Developments and Potentials in Central Asia and the South Caucasus

14.10.2016 | Event News

World Health Summit – Day Three: A Call to Action

12.10.2016 | Event News

Latest News

Greater Range and Longer Lifetime

26.10.2016 | Power and Electrical Engineering

VDI presents International Bionic Award of the Schauenburg Foundation

26.10.2016 | Awards Funding

3-D-printed magnets

26.10.2016 | Power and Electrical Engineering

More VideoLinks >>>