Obamacare Obstacle: Consumers' Confusion When Picking a Plan

by Matthew Wayt, California Healthline Editor

TOPIC ALERT:

HealthCare.gov would like you to answer a few questions before considering policies offered through the new health insurance exchanges.

For many, the problems start there.

Recent surveys show that U.S. residents are confused by Obamacare -- and, more generally, by health insurance -- which has led some observers to question whether the exchanges' open enrollment period will proceed smoothly or be too overwhelming for those who would benefit most from the reform law.

Many health care experts see the health insurance exchanges as the most crucial component of the health reform law.

Supporters hope that the exchanges -- which primarily will serve individuals and small businesses -- will function similarly to websites like Amazon and Expedia, allowing users to choose among various health plans through an easily navigable online store.

Open enrollment begins Oct. 1, and if survey findings are any indication, it could be a very confusing time for those buying insurance.

Surveys Reveal Confusion

A majority of U.S. residents do not understand high-deductible health plans or health savings accounts, two common health insurance products, according to a recent Fidelity Investments survey.

Fidelity surveyed a nationally representative sample of 1,836 U.S. adults ages 25 to 62, with a household income of $25,000 or more. Survey respondents were responsible for making health insurance decisions in their households.

According to the survey, only one-third of respondents said they understand how an HSA works, while only 23% said they understand how HSAs and flexible spending accounts differ.

Considering those findings, "it's hard to imagine a large majority of Americans fully grasping any health insurance regime," Austin Frakt writes on The Incidental Economist blog.

A separate survey by InsuranceQuotes.com looks at whether consumers understand provisions in the ACA.

The survey -- conducted by Princeton Survey Research Associates International and released in June -- found that 58% of respondents were unsure whether they would qualify for federal subsidies to purchase health plans under the ACA.

In addition, 68% of respondents with annual incomes of $30,000 or less -- those most likely to be eligible for a subsidy -- said they did not know whether they could receive financial assistance.

Christine Barber -- a senior policy analyst for health care advocacy group Community Catalyst -- said, "The tax credits are really hard for people to understand." Besides figuring out if they qualify, many individuals also have trouble evaluating how the credits would work within their personal budgets, she added.

Mystified in Massachusetts

Confusion in Massachusetts, where residents already purchase insurance through a portal under the state's health care overhaul, is a sign of things to come for the ACA, according to some observers.

The comparison is apt, as many experts say the state's 2006 health reform law was a model for the ACA.

A December 2012 Health Affairs study found that more than 40% of those using the state's Health Connector portal found information about health plans difficult to understand and wanted help narrowing their options.

In addition, those who said they were confused when shopping for plans had lower levels of satisfaction with the coverage they ultimately selected.

Research has shown that consumers can place too much emphasis on plan deductibles. According to Ted vonGlahn, a senior director at the Pacific Group on Business Health, this situation could lead individuals to spend more than necessary on premiums.

He said, "Because the deductible is hard to understand, you try and step back and make a comparison in your head of your costs," adding, "It's almost impossible for most people to distill that into Plan A will probably cost me X and Plan B will probably cost me Y."

Since launching its Connector portal, Massachusetts has taken steps to educate consumers, such as by releasing a series of videos explaining terms such as "deductible" and "co-insurance."

Health Insurance in the Golden State

Are experts worried about similar problems within Covered California, the Golden State's health insurance exchange?

Anthony Wright -- executive director of consumer advocacy group Health Access California -- told California Healthline that the new insurance market will be a vast improvement over the current one.

"It's hard to be worse than the status quo," he said, explaining, "The current process leaves people all alone to face big insurers, but Covered California is a better situation because it has bargaining power" to compel benefits to be standardized.

He continued, "It is impossible to make comparisons between plans in the current market, but Covered California will provide apples-to-apples comparisons. A [gold-level] plan from Anthem will have the same benefit structure as a gold plan from Kaiser or Health Net. That's a revolution."

Wright said, "I'm not saying it's going to be simple. Insurance is inherently not simple, but what the exchange will provide will be significantly simpler than what is currently offered."

Options for Assistance

If California residents are confused, help is not far away, according to Wright. He noted that consumers can visit the Covered California website, call exchange service centers around the state or seek in-person assistance through community organizations for additional information.

Consumers in other states will have another option for help with using state exchanges: health insurance navigators.

Under the ACA, the 37 exchanges that will be operated solely by or in partnership with the federal government are required to have at least two certified navigator entities, one of which must be a not-for-profit.

According to the law, navigators must provide "fair, impartial and accurate information that assists consumers with submitting the eligibility application, clarifying distinctions among [qualified health plans] and helping qualified individuals make informed decisions during the health plan selection process." They also must provide additional assistance to consumers with disabilities, limited English proficiency or who are unfamiliar with health insurance.

Last week, HHS Secretary Kathleen Sebelius announced that 105 groups nationwide will receive federal grants totaling $67 million under the ACA to serve as navigators.

Meanwhile, a new study released by the University of Pennsylvania Law School suggests a far simpler solution that could elucidate the exchanges for consumers: Simplify the websites.

Researchers conducted six experiments to determine how consumers performed when asked to select the most cost-effective health insurance policy for their needs.

The study found that, when "left to their own devices," consumers often made mistakes when choosing health coverage. However, the cost of errors by study participants fell from $533 to $77 when they were offered a "smart" default option that preselected the most cost-effective health coverage and a cost calculator.

The authors suggested several website design elements that could help consumers choose the most cost-effective plan, such as ability to sort by cost, the inclusion of quality cues and limiting the number of options to those meeting cost-effectiveness criteria.

Can such changes really clarify a process that so many found confusing long before the emergence of Obamacare?

According to Wright, people only need to understand the basics of health plans when looking for their ideal coverage and price.

"I like to describe it like an iPhone," he said. "You should understand the outside. That's what matters. You don't need to know what goes on in the microchip."

Weekly Roundup

Here's a look at more health care reform-related news:

Get a Blog: Bill Gardner on The Incidental Economist blog provides a few comments in defense of health policy blogging that explore what effect bloggers can have on public opinion.

Patching Up Hospital Care: At the Health Affairs blog, Debra Ness and William Kramer write that too much of the hospital readmission conversation has focused on whether penalties for excessive readmissions treat hospitals fairly.

Getting an Oscar: Nicole Fisher and Scott Liebman in Forbes' "The Apothecary" uncover Oscar, a start-up health insurer that will offer innovative policies through New York's health insurance exchange this fall.


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