The other day I was scanning a CNBC article by Dan Mangan entitled “How bad are we at buying health insurance? Very, very bad.” It caught my attention because in the first line he wrote, “Health insurance isn’t rocket science, but buying it may seem just as daunting.”
That reminded me of a blog I wrote back in August 2013, Understanding Health Insurance, It’s Not Rocket Science—or is it? My blog was based on the results of a survey conducted by Carnegie Mellon University. Their study revealed that very few people (14 percent) understood the 4 basic components of their health insurance: copay, deductible, coinsurance, and out-of-pocket maximum. And only 11 percent could actually compute the cost of a four-day hospital stay when given the necessary information to do so.
Now, fast-forward almost two years and it seems like our ongoing lack of knowledge and understanding on the subject of health insurance is impacting our ability to select the best options when given a choice of health insurance plans.
The CNBC article wrote about a new National Bureau of Economic Research working paper that examined health insurance plan selections at a company with 50,000 workers. When given a choice of prices on identical plans, each with the same coverage in and out of network, and same provider offerings, 65 percent of employees picked the wrong plan—even when there was only one financially logical choice.
The employees picked plans with higher monthly premium payments in order to obtain the lowest deductibles or out-of-pocket costs. Any savings that might have taken place due to the lower deductibles was more than made up for by their higher monthly premium payments. Their poor choices resulted in the needless spending of $373 each year for the average worker.
“Workers who opted for the highest deductible plan, $1000, more than recouped that potential cost from the lower premiums they actually paid,” said the working paper co-author Saurabh Bhargava, assistant professor of economics at Carnegie Mellon University. (Notice another connection between this article and my aforementioned blog?)
The unnamed company actually believed they were doing something good for their employees by giving them choices on how their plan was financially configured, now they offer only one, high-deductible plan, with a health savings account.
Mangan’s article also included information about another survey of 5,000 consumers by health-care benefits platform provider, Alegeus Technologies. This survey measured how consumer literate people were when shopping for health care providers or services.
On a scale of 1 to 100, with 100 being the highest level, health care consumers scored a 48. The good news is that their score was 7 percentage points higher than it was last year. The bad news is that consumers were much savvier when it came to shopping for other items: scoring 79 when purchasing electronics, 78 when buying a car, and 73 when shopping for travel deals.
Since shopping for the latest techno-gadget is a lot more fun than purchasing health insurance coverage, I can see how people become technology aficionados rather than insurance buffs, but when considering the cost of health insurance benefits and how they relate to doctor and hospital bills it’s important to understand your options. You never know, by making the best choice, you might save yourself enough money to buy yourself a new tablet.
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