From NY Times:

A confession: I am a health economist, and I cannot rationally select a health plan.

Let’s go through the challenges he lists one by one:

• Too many choices: “But the federal employee program offers me about 20 plans to choose from, and a similar number to almost all other federal employees.”

• Many price-like characteristics (not just one that you would get if you were buying a laptop): “Each laptop has a sticker price, as does each refrigerator. Health insurance has not one but many price-like characteristics. The premium is the most salient price, perhaps. But there are lots of others like co-payments (fixed dollar amounts you pay each time you visit a doctor, get a lab test or pick up a prescription), co-insurance (a percentage of the cost you pay for each visit, test or prescription), and deductibles (how much you pay before your plan pays a single dollar). Complicating matters, deductibles do not apply to every service, and co-payments and co-insurance can vary by service — a different amount for a hospital stay vs. a primary care visit vs. a visit to a specialist, for a brand-name drug vs. a generic, and so forth.”

• Inability to predict the future (i.e., how much healthcare you will need in next year): “One problem is that I don’t know how much or what kind of health care services my family will use next year.”‘

• Time required to collect information required to compare various health networks: “But a crucial feature of health plans is not as easily or widely accessible: the extent to which each covers services provided by one’s favorite doctors and hospitals. Except on a handful of Affordable Care Act exchanges and for federal-employee participants in the Washington area, such network information is typically available only on plans’ websites, making gathering and comparing plan networks prohibitively difficult.

What tools would be helpful?

• Readily available, historical information about health care usage: “We have the technology to track health care use electronically and to create online tools that could tell every health insurance consumer exactly how much each plan would have cost them based on prior-year utilization (as well as for a range of other utilization levels) and to what extent services provided by the doctors they saw and hospitals they visited would be covered next year. This is an effort that some policy experts have called for.”

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Looking for an activity where your students will grapple with all of these uncertainties?  Check out NGPF’s Select A Health Insurance Plan

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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