Meyerman asked a great question in comments yesterday:
Who else, besides the insured, has the incentives to help the insured make the right choice? Other than policy researchers like yourself, is there anyone invested in getting people the best value for their money.
There are few viable business cases to help people find optimal choices. There are decent business cases for a lot of actors to help people find decent choices the first time, but few long lasting business cases for consistent great choice.
We’ve talked about this before in the context of dominated plan avoidance:
more importantly, why is this systematically the case instead of a matter of individual inertia or failings?
I think the short answer is that there is no one making money on good choice selection.
An agent either gets a flat commission per month enrolled or a percentage of sold premium. If they are given a flat commission, then the extra work to move someone out of their default plan and into a new plan only pays off if the person first recognizes that the agent did them a solid and then comes back in future years. This is a highly discounted revenue stream for the ACA individual market as a lot of people move in and out of the marketplace. If the agent is paid as a percentage of premium, their short run incentive is to place people into the highest premium plan possible. There are very few agents who are explicitly paid on the basis of avoiding dominated choices.
An insurer makes money when people are making dominated choices. In the California example above, the dominated choice was likely an 80% AV Gold plan with a higher premium than the 87% or 94% CSR Silver plans. When someone chooses a dominated plan in this setting, the insurer sees both higher revenue and lower claims pay-out due to both the static effect of more cost-sharing and the dynamic effect of less utilization due to the additional cost-sharing. There is no insurer side incentive in the short run to call members to get them to switch to the superior, dominating plan.
Insurance agents whose business model is to get long term, repeat business are likely to attempt to get their clients into good for the client plans every year. Insurers who are looking at a market that has a 30% to 40% evaporation rate every year have a hard time seeing a positive case to improve plan choice which usually means a reduction in premium revenue and an increase in insurer side claims exposure. This only makes business sense if these actions keep profitable members from switching insurers or getting out of the entire line of business over several years. And that is one hell of a hard argument to make on a pragmatic basis in most cases.
State, federal and private exchange operators can use a combination of smarter defaults, non-trapping choice architecture and a lot of pokes to facilitate people to make good for them choices. The big challenge is that many people will make an initial choice and even with pokes and outreach from an exchange that is trying to keep choice quality high by getting people to make repeated active choices, there are few additional active choosers. Steps such as turning off automatic re-enrollment would force people to make an active choice but at the cost of massive enrollment losses.
Right now, there are few strong incentives to implement systems of active and passive choice architecture that aim to improve prolonged choice quality.