At the Health Affairs Blog, Patrick O’Mahen and I lay out the challenging choice environment for people trying to buy insurance on Healthcare.gov. We know from the Medicare Advantage research space that choice quality crashes when people are faced with more than fifteen choices. The price of bad choice is most heavily borne by individuals with cognitive decline and limited resources. Overly burdensome choice complexity is a regressive tax.
We first looked at the number of unique plans that were subsidy eligible on Healthcare.gov from 2014-2021 on a population weighed basis so that a county with 2,000 residents and 2 plans counts weigh less than a county with a million residents and 65 plans. We sliced the universe into four buckets and considered 50 or more plans to be an OUCH indicator for plan choice. That is a lot of choice. And it is an amount of choice that varies considerably over time. 2021 had 45% of people on Healthcare.gov looking at 50 or more plans. This was similar to 2015 and 2016, but very different from 2018-2020.
I think there is a lot of very interesting work that can take this image as a jumping off point, but that is not where I’m going this morning.
Instead, Patrick and I propose that states and exchanges bear the burden of expertise by offering options where the individual puts in some basic criteria such as :
- Maximum premium to pay
- Have to have doctors/hospitals
- Current Drugs
- Measures of liquidity/assets (ability to afford a deductible etc)
And then from these sets of relatively clear preferences, expert decision support systems would be used to pick a pretty good if not perfect plan.
Another option is for states to integrate their exchange functionality with other state based social welfare databases so if other data systems indicate that an individual is eligible for a zero premium plan, the individual is placed into a zero premium plan with the option to opt out.
In both these cases, the entity that is able to handle complexity and expertise bears the cost of complexity instead of the individual. These steps would likely increase enrollment and improve the risk pool as the hassle and attention costs of enrollment can be waived away for individuals who are likely to be relatively low users of healthcare services. I think that expert decision support and the assumption of administrative burden by the state is where most of the action will be over the next couple of years as these frictions dominate modest changes in net premiums that rejiggering subsidy regimes can do. I also think that the choice environment is likely to get more crowded in 2022-2023 and beyond as the large national insurers are re-entering the markets en masse and the current insurers are either holding constant or expanding their service areas.
Sidenote 1: Exhibit 1 in a wide variety of forms has been the image/graphic/exhibit that has been lodged between my eyes the most for the past six months.