Health Insurance Enrollment: A Superhuman Decision

Open enrollment for health insurance began November 16 and the decision isn’t any easier than last year. On the contrary, not only are premiums higher and benefits lower, there’s greater uncertainty about the future of the Obama health care act.

On a cold, cloudy Sunday afternoon, I analyzed my health insurance choices. Our choices and the way we’re asked to make them, are unjust, maddening, frustrating and disrespectful. No wonder 81% of the American public hate their health insurance.

First, see below how the choices are presented in the New York Marketplace. There are 14 pages, each with ten plans. Each plan is described in what looks like a foreign language. What is an ‘ST’ or an ‘INN’? Some plans have an ‘X’. That doesn’t sound like a good thing…

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Then, there are the “metal levels.” They’re supposed to reflect a trade-off between low premium/high co-pays (bronze) vs. high premiums/low co-pays (platinum). The former is supposed to be better if you want minimal coverage; the latter if you use “a lot of care.” If you care, as I do, about the total cost of healthcare, insurance premiums plus out-of-pocket payments, metal levels can be misleading.

The choice and information overload gets even worse if you try a side-by-side comparison. You’ll see a variety of co-pays, coinsurance, individual and family deductibles, and individual and family out-of-pocket maximums: about 70 rows of data. Multiply by 140 plans on the New York marketplace and you get nearly 10,000 data points.

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This goes on for three more pages. Good luck, if you’re human.

A mere human can’t possibly analyze all this information and make a rational decision that minimizes her total cost. No, a real human will respond to choice overload with (biased) short-cuts (heuristics), procrastination and a general feeling of unhappiness. They’ll use the default (NY State will have you continue your current plan). Or maybe they’ll pick the lowest premium plan or their favorite metal (gold sounds nice, and it seemed to work out OK last year). One Decision Fish customer says she does what other women do since they’re more likely than men to choose carefully. While understandable, these decision strategies are likely to lead to expensive mistakes.

“Most people just look at the premiums. Then the [lack of] benefits just eats ’em alive” — BlueCross BlueShield advisor

To make a rational decision, you really need to calculate your total cost of medical care, including premiums and out-of-pocket payments, for many of the plans. Ideally, you’ll do this under an expected case and a worst case doctor and medication scenarios. The chart below is a sample analysis: each point represents one health plan. Its position depends on its expected cost (vertically) and its worst case cost (horizontally). The best plans are in the lower left corner. It looks like plan six is the best choice for me: it has the lowest base case and the second lowest worst case cost.

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Don’t rely on ‘metals’ to make your decision. Unfortunately, the only way to do it right is by running the numbers. In our case, policies 6 or 7 are the best choices.

It’s just plain wrong to ask 11 million New Yorkers (not to mention 178 million Americans) make such an important decision without appropriate decision tools. Even in corporate settings, in my experience, it’s hard to get relevant analysis. In our case, the analysis allowed us to save about $2,000, while reducing our worse-case risk. If you believe the government or employers should have a role in creating a well-functioning market for health insurance, they can’t avoid the responsibility for providing meaningful decision support.

Insurers, too, are missing out on an low-cost way to differentiate their offering. Even Oscar, known for its focus on user experience, doesn’t offer a calculation of total healthcare costs by policy. (Or, maybe insurers believe that better customer decisions will hurt their bottom lines?)

“The health insurance “service void” creates a gaping opportunity for better products and services.” — Dave Johnson1

$2,000 is a lot of money. Choosing wrong is especially dangerous to the 47 percent of Americans that lack even a $400 rainy day fund. Here’s my offer: if you’re among those 47 percent and a New York State resident looking for insurance on the exchange, I’ll happily put my model to work for you for free.2

How do you handle the unreasonable demands of benefits selection? Comment below, sign up for email updates and share this with anyone who wants to make better decisions.

1See November Indigestion: The Idiocy and Promise of Benefit Selection.

2For a limited time. Terms and conditions apply. This is not advice.