Consumers and the promise of health insurance exchanges

Prior to the enactment of the Affordable Care Act (ACA), consumers in all but two states — Massachusetts and Utah — looking to learn about and purchase health insurance on their own, faced a difficult and complex search process. They could call multiple insurance companies directly to learn about different plan options, which is time consuming. Or, consumers could go online to a health insurance portal to obtain quotes from a variety of health plans, and then attempt to sort through and compare options that differ from one another on many parameters. In some states with fewer insurance regulations, the choices offered have significant gaps in coverage. Studies of consumer behavior find high-stakes circumstances such as these often lead individuals to make poor decisions, or to not make a decision at all. For health insurance, this means consumers can end up in health plans that do not meet their needs, or even worse, uninsured.

One of the most innovative and promising features of the ACA is the creation of Health Insurance Exchanges that will serve as marketplaces where individuals, families, and small businesses can purchase health insurance. In 2022, twenty-five million people are expected to purchase health insurance through Exchanges. Exchanges will offer a single website for residents of each state to find, compare, and select health plans. Consumers can trust that the health benefits offered by Exchange plans meet minimum standards of coverage and quality as all the plans are required to cover at least the federally-determined essential health benefit. Plans will be grouped into metallic tiers and depicted side-by-side which should reduce the time needed to sort through options. Finally, people with incomes below 400 percent of the federal poverty level will be eligible for federal subsidies to help them purchase insurance through the Exchange, making Exchange plans cheaper for them than plans offering equivalent coverage outside the Exchange. One promise of Exchanges is that they will make the process of purchasing health insurance dramatically easier and more transparent. However, questions about whether consumers are able to navigate an Exchange, whether they are satisfied with their Exchange health plan, and what might improve this consumer experience have, to date, been largely unanswered. In a new article published in the January 2013 issue of Health Affairs, my four coauthors and I examined the experiences of a sample of consumers who purchased health plans from a single carrier through the Massachusetts Exchange, the Health Connector, to begin to answer these questions.
 
For the majority of people in the study, the Connector provided the only marketplace used; this suggests that the Massachusetts Exchange is an important mechanism for coverage for many, including those who were previously uninsured. We also found, however, that a subset of people struggled with selecting their health plan. More than 40 percent found it difficult to understand the information on plans during enrollment. Although approximately one-third of people had help selecting plans, most commonly from friends or family members, one-fifth wished they had had help narrowing plan choices. Not receiving needed help in selecting plans had important consequences. Respondents who wished they had help selecting a health plan were more likely to report negative experiences related to plan understanding, satisfaction with affordability and coverage, and unexpected costs.
 
What does this mean for the design of Exchanges across the country? This effort is just beginning. One question is the extent to which Exchanges draw on lessons from behavioral economics, which finds that consumer decisions are affected by how information and choices are presented, and take a more “active” role in structuring plan choices with the aim of helping consumers make better choices. However, even Exchanges that adopt a more “clearinghouse” style and offer all qualified plans still share the goal of creating a transparent and navigable marketplace. Exchanges need to provide additional resources and tools to help consumers make good health plan choices as they seek affordable coverage. Since the time of our survey, the Connector has made the selection process easier, including standardizing plan benefits across metallic tiers and adding a search function for providers in a plan’s network. In addition, the ACA requires Exchanges to include tools such as a cost calculator that can be used to estimate out-of-pocket costs in a plan and a Navigator program that provides access to experts who can help consumers understand and select plans. It will be important for states and the federal government to invest adequate resources into building this functionality if we hope to achieve the promise of Exchanges.

Sinaiko is a postdoctoral research fellow in the Department of Health Policy and Management at the Harvard School of Public Health.

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