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

20.12.2013
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 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2291598.

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 http://www.gsb.columbia.edu.

Karen Paff | EurekAlert!
Further information:
http://www.columbia.edu

More articles from Studies and Analyses:

nachricht Study relating to materials testing Detecting damages in non-magnetic steel through magnetism
23.07.2018 | Technische Universität Kaiserslautern

nachricht Innovative genetic tests for children with developmental disorders and epilepsy
11.07.2018 | Christian-Albrechts-Universität zu Kiel

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: New interactive machine learning tool makes car designs more aerodynamic

Scientists develop first tool to use machine learning methods to compute flow around interactively designable 3D objects. Tool will be presented at this year’s prestigious SIGGRAPH conference.

When engineers or designers want to test the aerodynamic properties of the newly designed shape of a car, airplane, or other object, they would normally model...

Im Focus: Robots as 'pump attendants': TU Graz develops robot-controlled rapid charging system for e-vehicles

Researchers from TU Graz and their industry partners have unveiled a world first: the prototype of a robot-controlled, high-speed combined charging system (CCS) for electric vehicles that enables series charging of cars in various parking positions.

Global demand for electric vehicles is forecast to rise sharply: by 2025, the number of new vehicle registrations is expected to reach 25 million per year....

Im Focus: The “TRiC” to folding actin

Proteins must be folded correctly to fulfill their molecular functions in cells. Molecular assistants called chaperones help proteins exploit their inbuilt folding potential and reach the correct three-dimensional structure. Researchers at the Max Planck Institute of Biochemistry (MPIB) have demonstrated that actin, the most abundant protein in higher developed cells, does not have the inbuilt potential to fold and instead requires special assistance to fold into its active state. The chaperone TRiC uses a previously undescribed mechanism to perform actin folding. The study was recently published in the journal Cell.

Actin is the most abundant protein in highly developed cells and has diverse functions in processes like cell stabilization, cell division and muscle...

Im Focus: Lining up surprising behaviors of superconductor with one of the world's strongest magnets

Scientists have discovered that the electrical resistance of a copper-oxide compound depends on the magnetic field in a very unusual way -- a finding that could help direct the search for materials that can perfectly conduct electricity at room temperatur

What happens when really powerful magnets--capable of producing magnetic fields nearly two million times stronger than Earth's--are applied to materials that...

Im Focus: World record: Fastest 3-D tomographic images at BESSY II

The quality of materials often depends on the manufacturing process. In casting and welding, for example, the rate at which melts solidify and the resulting microstructure of the alloy is important. With metallic foams as well, it depends on exactly how the foaming process takes place. To understand these processes fully requires fast sensing capability. The fastest 3D tomographic images to date have now been achieved at the BESSY II X-ray source operated by the Helmholtz-Zentrum Berlin.

Dr. Francisco Garcia-Moreno and his team have designed a turntable that rotates ultra-stably about its axis at a constant rotational speed. This really depends...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Within reach of the Universe

08.08.2018 | Event News

A journey through the history of microscopy – new exhibition opens at the MDC

27.07.2018 | Event News

2018 Work Research Conference

25.07.2018 | Event News

 
Latest News

Early opaque universe linked to galaxy scarcity

15.08.2018 | Physics and Astronomy

Molecular switch detects metals in the environment

15.08.2018 | Materials Sciences

Seeing on the Quick: New Insights into Active Vision in the Brain

15.08.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>