US consumers don't understand health insurance, Carnegie Mellon research shows

Main Category: Health Insurance / Medical Insurance
Article Date: 03 Aug 2013 - 0:00 PDT Current ratings for:
US consumers don't understand health insurance, Carnegie Mellon research shows

This fall, as part of the 2010 Affordable Care Act (ACA), Americans will have a greater range of health care insurance options to choose from, including, for many, state-based plans. But will they make the right decisions? That's doubtful, according to a new study led by Carnegie Mellon University's George Loewenstein.

Previous research has shown that competition at the consumer level is only likely to result in reduced prices and improved quality when sufficient numbers of consumers make informed decisions. The study led by Loewenstein shows that consumers do not understand health insurance and therefore casts doubt on whether they will make the best decisions under the ACA.

Published in the Journal of Health Economics, the researchers report findings from two surveys of representative samples of Americans between the ages of 25 and 64 who have private health insurance and are the primary or shared decision maker for their own or their families' health care. Behavioral economists at the University of Pennsylvania, Stanford, Harvard and Yale universities and the University of Chicago, as well as professionals at a health insurance company participated in the research.

The first survey was designed, in part, to uncover how well the insurance holders understand four basic traditional health insurance concepts - deductible, copay, co-insurance and out-of-pocket maximum - as well as how well they believe they understand them. Analysis of responses revealed that while insured Americans felt confident about their own understanding of these concepts, their actual understanding was much lower; only 14 percent of all respondents accurately understood all four concepts.

The first survey also found that only 11 percent of respondents presented with a traditional insurance plan incorporating all four of these elements were able to compute the cost of a four-day hospital stay when given the information that should have enabled them to do so. Finally, the survey revealed that a simplified insurance plan that eliminated deductibles and copays - the two least well understood elements of insurance plan design - would appeal to consumers.

"It is strange, in my opinion, that the insurance market has evolved so, that so few individuals understand the fundamentals of the medical insurance plans they are insured under," said Loewenstein, the Herbert A. Simon University Professor of Economics and Psychology in CMU's Dietrich College of Humanities and Social Sciences. "Insurance plans incorporate all sorts of incentives designed to encourage customers to make specific types of decisions. What is the likelihood that they are going to respond to these incentives if they can't understand the most basic elements of plan design?"

Based on the finding that consumers had trouble understanding deductibles and co-insurance, the researchers then collaborated with the insurance professionals on the team to design a simplified insurance plan using only copays (no deductibles), which was later marketed to the insurer's customers. The second survey then compared the ability of respondents to compute costs under the simplified plan as compared with a traditional plan with similar copays. The survey also asked respondents to make hypothetical health care decisions based on the simplified and traditional insurance plans, such as whether to go to the emergency room or to an urgent care clinic with an earache. Half of the participants gave responses first using the traditional plan, then using the simplified plan, while the other half were exposed to the two plans in the reverse order. Finally, the second survey elicited respondents' preferences between the two plans. Both plans had the same premium.

Analysis of survey responses revealed that respondents were somewhat more likely to make lower cost choices, such as going to an urgent care clinic under the simplified plan, and were much better able to understand the cost ramifications of these decisions under the simplified plan. Examining consumer preferences, the researchers found that respondents were initially relatively indifferent between the two plans, but after attempting to compute costs of services under the two plans, their preferences shifted sharply in favor of the simplified plan.

"The ACA deals with the problem of consumer misunderstanding by requiring insurance companies to publish standardized and simplified information about insurance plans, including what consumers would pay for four basic services," noted lead author Loewenstein. "However, presenting simplified information about something that is inherently complex introduces a risk of 'smoothing over' real complexities. A better approach, in my view, would be to require insurance companies to offer truly simplified insurance products that consumers are capable of understanding."

Article adapted by Medical News Today from original press release. Click 'references' tab above for source.
Visit our health insurance / medical insurance section for the latest news on this subject.

In addition to Loewenstein, the research team included the University of Pennsylvania's Joelle Y. Friedman, Jonathan Kolstad and Kevin G. Volpp; Colchester Consulting Group's Barbara McGill; Stanford University's John Beshears; Yale University's James Choi; Harvard University's David Laibson and Brigitte Madrian; the University of Chicago's John List, and employees of the insurance company.

For more information, visit http://www.cmu.edu/dietrich/sds/people/faculty/george-loewenstein.html.

Carnegie Mellon University

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'US consumers don't understand health insurance, Carnegie Mellon research shows'

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US consumers don't understand health insurance, Carnegie Mellon research shows

Main Category: Health Insurance / Medical Insurance
Article Date: 03 Aug 2013 - 0:00 PDT Current ratings for:
US consumers don't understand health insurance, Carnegie Mellon research shows

This fall, as part of the 2010 Affordable Care Act (ACA), Americans will have a greater range of health care insurance options to choose from, including, for many, state-based plans. But will they make the right decisions? That's doubtful, according to a new study led by Carnegie Mellon University's George Loewenstein.

Previous research has shown that competition at the consumer level is only likely to result in reduced prices and improved quality when sufficient numbers of consumers make informed decisions. The study led by Loewenstein shows that consumers do not understand health insurance and therefore casts doubt on whether they will make the best decisions under the ACA.

Published in the Journal of Health Economics, the researchers report findings from two surveys of representative samples of Americans between the ages of 25 and 64 who have private health insurance and are the primary or shared decision maker for their own or their families' health care. Behavioral economists at the University of Pennsylvania, Stanford, Harvard and Yale universities and the University of Chicago, as well as professionals at a health insurance company participated in the research.

The first survey was designed, in part, to uncover how well the insurance holders understand four basic traditional health insurance concepts - deductible, copay, co-insurance and out-of-pocket maximum - as well as how well they believe they understand them. Analysis of responses revealed that while insured Americans felt confident about their own understanding of these concepts, their actual understanding was much lower; only 14 percent of all respondents accurately understood all four concepts.

The first survey also found that only 11 percent of respondents presented with a traditional insurance plan incorporating all four of these elements were able to compute the cost of a four-day hospital stay when given the information that should have enabled them to do so. Finally, the survey revealed that a simplified insurance plan that eliminated deductibles and copays - the two least well understood elements of insurance plan design - would appeal to consumers.

"It is strange, in my opinion, that the insurance market has evolved so, that so few individuals understand the fundamentals of the medical insurance plans they are insured under," said Loewenstein, the Herbert A. Simon University Professor of Economics and Psychology in CMU's Dietrich College of Humanities and Social Sciences. "Insurance plans incorporate all sorts of incentives designed to encourage customers to make specific types of decisions. What is the likelihood that they are going to respond to these incentives if they can't understand the most basic elements of plan design?"

Based on the finding that consumers had trouble understanding deductibles and co-insurance, the researchers then collaborated with the insurance professionals on the team to design a simplified insurance plan using only copays (no deductibles), which was later marketed to the insurer's customers. The second survey then compared the ability of respondents to compute costs under the simplified plan as compared with a traditional plan with similar copays. The survey also asked respondents to make hypothetical health care decisions based on the simplified and traditional insurance plans, such as whether to go to the emergency room or to an urgent care clinic with an earache. Half of the participants gave responses first using the traditional plan, then using the simplified plan, while the other half were exposed to the two plans in the reverse order. Finally, the second survey elicited respondents' preferences between the two plans. Both plans had the same premium.

Analysis of survey responses revealed that respondents were somewhat more likely to make lower cost choices, such as going to an urgent care clinic under the simplified plan, and were much better able to understand the cost ramifications of these decisions under the simplified plan. Examining consumer preferences, the researchers found that respondents were initially relatively indifferent between the two plans, but after attempting to compute costs of services under the two plans, their preferences shifted sharply in favor of the simplified plan.

"The ACA deals with the problem of consumer misunderstanding by requiring insurance companies to publish standardized and simplified information about insurance plans, including what consumers would pay for four basic services," noted lead author Loewenstein. "However, presenting simplified information about something that is inherently complex introduces a risk of 'smoothing over' real complexities. A better approach, in my view, would be to require insurance companies to offer truly simplified insurance products that consumers are capable of understanding."

Article adapted by Medical News Today from original press release. Click 'references' tab above for source.
Visit our health insurance / medical insurance section for the latest news on this subject.

In addition to Loewenstein, the research team included the University of Pennsylvania's Joelle Y. Friedman, Jonathan Kolstad and Kevin G. Volpp; Colchester Consulting Group's Barbara McGill; Stanford University's John Beshears; Yale University's James Choi; Harvard University's David Laibson and Brigitte Madrian; the University of Chicago's John List, and employees of the insurance company.

For more information, visit http://www.cmu.edu/dietrich/sds/people/faculty/george-loewenstein.html.

Carnegie Mellon University

Please use one of the following formats to cite this article in your essay, paper or report:

MLA

University, Carnegie Mellon. "US consumers don't understand health insurance, Carnegie Mellon research shows." Medical News Today. MediLexicon, Intl., 3 Aug. 2013. Web.
3 Aug. 2013. APA

Please note: If no author information is provided, the source is cited instead.

'US consumers don't understand health insurance, Carnegie Mellon research shows'

Please note that we publish your name, but we do not publish your email address. It is only used to let you know when your message is published. We do not use it for any other purpose. Please see our privacy policy for more information.

If you write about specific medications or operations, please do not name health care professionals by name.

All opinions are moderated before being included (to stop spam). We reserve the right to amend opinions where we deem necessary.

Contact Our News Editors

For any corrections of factual information, or to contact the editors please use our feedback form.

Please send any medical news or health news press releases to:

Note: Any medical information published on this website is not intended as a substitute for informed medical advice and you should not take any action before consulting with a health care professional. For more information, please read our terms and conditions.

View the original article here

Purchasing Individual Medical Health Insurance 3 Essential Tips From the Medical Health Insurance Specialist

When you are purchasing individual medical health insurance, you'll most likely get overcome through the prices and options of health plans online. Medical health insurance has become one of the most costly products within the budgets of numerous people, but it is also among the best choices you are making for those who have some know-how choosing the best health arrange for your family. Here' provides you with the three Essential Tips which i advise my clients to make use of when buying individual coverage of health.

Tip 1: Don't take medical health insurance advice from someone that's totally unqualified to provide you with these tips!!

I am unable to stress this enough. It shocks me the number of sensible people take assistance with what medical health insurance to select from those who are totally unqualified to provide you with this critical advice. For instance, after i see medical health insurance messes, (that we see just about any day) and that i request where they were given their own health plan information, I inevitably hear such things as: "My buddy-in- law explained to select this health plan, he utilized to work on a healthcare facility.Inch or "I just read articles that states this is actually the best plan available." And so forth. Everyone's got a viewpoint by what health plan you need to choose. Just since they're your relative, or involved with some section of healthcare totally unrelated to insurance, does not necessarily mean they are fully aware the solutions for your individual needs and questions! Readily insurance specialist Prior to the problems show up! You've no clue the number of clients I've labored with arrived at me once they decided on a health plan on the internet and then have a coverage problem and expect me to repair it, I wish to let them know: you ought to have arrived at me for help before! Most insurance specialists get compensated through insurance service providers, so their services can you. Rely On Them!!

Tip 2: Determine your actual needs.

The 3 items to bear in mind when identifying your requirements are: budget, designs of physician and hospital visits, and prescription medication usage. Request yourself these questions: How often would you go to your physician? Do you opt for examinations only or do you opt for sick visits? The number of occasions are you currently within the hospital previously 24 months? Would you take regular medications? What exactly are they? Generic or Brands? This really is another area where the majority of my clients neglect. It's not easy to have maximum coverage in most of those areas in almost any affordable way, maximum coverage for that physician and hospital plus medications leaves a dent or dimple within the budget. However, most medical health insurance plans offer several version of the identical plan. For instance, if you have "health plan A" that provides maximum coverage for that physician, maximum coverage for that hospital, and maximum coverage for the prescription medications. But "health plan A" costs just like your mortgage. The good thing is "Health Plan A" probably also offers easy to customize options, meaning if after examining your requirements, you uncover that you simply rarely go to a hospital, you can change "health plan A' s" hospital coverage to moderate or perhaps minimal that will bring lower the premium a good deal. If these choices are confusing for you, again, any adverse health insurance specialist will have the ability to assist you to. They're already conscious of "health plan A' s" easy to customize features and may suit your must the right form of "health plan A". Any adverse health insurance specialist also can access versions of health plans that are not available as choices to the typical consumer purchasing .

Tip 3: Resist the need to in excess of-insure!!

After you have examined your requirements, resist the need to in excess of-insure! Probably the most common medical health insurance messes I see has ended-insurance. People believe that should they have maximum coverage for doctors, hospitals, and medications, they've "good" insurance. The simple truth is, many people who definitely are approved for individual medical health insurance will not need all of this coverage. A couple of things I counsel my clients to understand: Healthcare Reform and prevent-Loss. First, Healthcare Reform enables for maintenance services to become covered at 100%. For instance, should you only get examinations, why sign up for the program with 100% doctor's visit coverage? Sign up for the program having a lower premium and pay a $10 copay for the sick visit. The main difference in premium with this particular small detail is $hundreds of dollars! In addition, a few of these "maximum coverage" medical health insurance plans exclude such things as pregnancy. The final factor for you to do is pay a lot of money for "good" medical health insurance simply to uncover it will not cover something you require it for! Second, most medical health insurance plans possess a stop-loss included in them which essentially states that whenever your out-of-pocket costs achieve a specific amount, the program covers you at 100% for those services. And you do not need the "maximum coverage" arrange for this benefit. Your wellbeing insurance specialist may even personalize this stop-loss amount!

Then, choose your plan after following My 3 Essential Tips:

1. Don't take medical health insurance advice from someone unqualified to provide these tips. Seek any adverse health insurance specialist, they've analyzed and therefore are licensed to provide these tips and they are liberated to you. Rely On Them!!

2. Consider your actual needs. Request yourself questions so guess what happens your particular health plan needs are, that method for you to make certain you choose an agenda that fits them. In the end, if you do not understand what you really need inside a plan, how would you determine if you've run into the best fit?

3. Resist the need to in excess of-insure! Healthcare Reform has transformed the number of plans work and you'll have the ability to receive ample or superlative coverage without over-covering. And more importantly, with no hefty rates!

That's it, online medical health insurance consumers! I really hope it was useful!

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