How Do People Really Decide Which Health Care Plan to Choose?

Margot Sanger-Katz writes about the difficulty of choosing a health care plan:

The range of choice is generally heralded as a good thing….But it turns out in real life most people are terrible at picking the health plan that is right for them. Health insurance is a complicated financial product, and study after study has shown that people routinely pick bad plans, even choosing options that leave them worse off financially in every possible scenario.

Needless to say, this is a pretty good argument for universal health care. But let’s put that aside and move on:

But what is the alternative to choice? Amanda Starc, an associate professor of management at Kellogg School of Management at Northwestern University, said there was evidence that people really did want different things from health insurance. About a third of people 65 and older are currently enrolled in private Medicare Advantage plans, a share that is large enough to suggest that many would be less happy with only the choice of government Medicare.

That’s true. Enrollment in Medicare Advantage plans has grown substantially over the past couple of decades:

But why has this happened? Is it because people love choice?

Maybe. But there are other factors at work here. Up through 2010 or so, the federal government reimbursed MA plans at a substantially higher rate than traditional Medicare, which meant that MA plans could afford to be more generous. Obamacare attempted to rein this in, but when you add everything up (reimbursement rates, quality bonuses, lower bid rates, etc.) MA plans were still more generously funded than traditional Medicare even after Obamacare took effect. In other words, people increasingly chose MA plans not because they loved choice so much, but because they were genuinely able to offer better benefits.

They also offered something else that turned out to be highly prized by customers. Here’s the conclusion of a study from the Urban Institute:

Our multivariate analyses found that county-level MA penetration growth was related to access to $0 premium and four-or five-star plans, implying that beneficiaries choose MA more frequently where MA plans are more generous or higher quality. MA plans with a four-star rating or higher have higher benchmarks to bid against and a higher rebate percentage to pass on to beneficiaries through extra benefits, and five-star plans can offer year-round open enrollment. Research shows that $0 premiums and extra benefits feature prominently in MA plan advertising (Cai et al. 2008), suggesting that plans see generosity as a major selling point.

People might like choice, but they like $0 premiums even more! This is pretty popular among Obamacare plans too. This should not come as a great surprise to anyone.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with The Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with The Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate