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 When a fish becomes fluid
17.12.2018 | Institute of Science and Technology Austria

nachricht Some brain tumors may respond to immunotherapy, new study suggests
11.12.2018 | Columbia University Irving Medical Center

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: Data storage using individual molecules

Researchers from the University of Basel have reported a new method that allows the physical state of just a few atoms or molecules within a network to be controlled. It is based on the spontaneous self-organization of molecules into extensive networks with pores about one nanometer in size. In the journal ‘small’, the physicists reported on their investigations, which could be of particular importance for the development of new storage devices.

Around the world, researchers are attempting to shrink data storage devices to achieve as large a storage capacity in as small a space as possible. In almost...

Im Focus: Data use draining your battery? Tiny device to speed up memory while also saving power

The more objects we make "smart," from watches to entire buildings, the greater the need for these devices to store and retrieve massive amounts of data quickly without consuming too much power.

Millions of new memory cells could be part of a computer chip and provide that speed and energy savings, thanks to the discovery of a previously unobserved...

Im Focus: An energy-efficient way to stay warm: Sew high-tech heating patches to your clothes

Personal patches could reduce energy waste in buildings, Rutgers-led study says

What if, instead of turning up the thermostat, you could warm up with high-tech, flexible patches sewn into your clothes - while significantly reducing your...

Im Focus: Lethal combination: Drug cocktail turns off the juice to cancer cells

A widely used diabetes medication combined with an antihypertensive drug specifically inhibits tumor growth – this was discovered by researchers from the University of Basel’s Biozentrum two years ago. In a follow-up study, recently published in “Cell Reports”, the scientists report that this drug cocktail induces cancer cell death by switching off their energy supply.

The widely used anti-diabetes drug metformin not only reduces blood sugar but also has an anti-cancer effect. However, the metformin dose commonly used in the...

Im Focus: New Foldable Drone Flies through Narrow Holes in Rescue Missions

A research team from the University of Zurich has developed a new drone that can retract its propeller arms in flight and make itself small to fit through narrow gaps and holes. This is particularly useful when searching for victims of natural disasters.

Inspecting a damaged building after an earthquake or during a fire is exactly the kind of job that human rescuers would like drones to do for them. A flying...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

ICTM Conference 2019: Digitization emerges as an engineering trend for turbomachinery construction

12.12.2018 | Event News

New Plastics Economy Investor Forum - Meeting Point for Innovations

10.12.2018 | Event News

EGU 2019 meeting: Media registration now open

06.12.2018 | Event News

 
Latest News

When a fish becomes fluid

17.12.2018 | Studies and Analyses

Progress in Super-Resolution Microscopy

17.12.2018 | Life Sciences

How electric heating could save CO2 emissions

17.12.2018 | Power and Electrical Engineering

VideoLinks
Science & Research
Overview of more VideoLinks >>>