Selecting Well being Insurance coverage is So Sophisticated, 23% of Employees With Solely Two Decisions Picked the Worse One
By Trevor Collier, University of Dayton and Marlon L. Williams, University of Dayton
The Research Brief is a brief presentation of interesting academic work.
The big idea
Almost a quarter of workers faced with the choice of two employer-sponsored health insurance plans chose the one that made them financially worse off, despite offering the same free cost benefits, according to new, unpublished research we conducted. Using data from a major university in the Midwest that offered to subsidize one of two health insurance plans, we wanted to find out how difficult it is for people to make better choices when there are only two options. The plans were identical in every way except for their cost. One plan had much higher premiums but lower expenses such as deductibles and co-payments for the employee.
Our analysis found that 97% of the 2,300 employees would have been better off with the other plan, which had lower bonuses but higher cost sharing. Still, 23% opted for the higher premium plan. The average annual cost of choosing the wrong plan was over $ 2,000 according to our paper, which we plan to submit for publication shortly.
Which is not yet known
We still don’t know how to help individuals make better health insurance decisions.
Policy makers and doctors have been trying to do this for years – for example by using algorithms to give consumers a “smart default” option that best suits their needs – but with little luck.
Ultimately, our research shows that simplifying the choices one person must make on their own does not eliminate consumer mistakes when choosing insurance plans. We believe that a better – if not yet proven – way to improve choice is to provide employees with better search and analysis tools to help them make more informed decisions.
It seems like a great way to show people that they can save maybe over $ 2,000 a year to make a more informed decision.
Trevor Collier, Associate Professor of Economics at the University of Dayton; and Marlon L. Williams, Assistant Professor of Economics at the University of Dayton
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