Making sense of health care exchanges

After states decide whether to set up their own exchanges, or let the federal government do it, then comes the hard part.

For the second time in seven days, the federal government has pushed back a deadline for states to decide whether to build health exchanges or leave it to Washington.

The exchanges -- which are basically websites that allow people to buy health plans -- are essential to delivering health insurance to some 30 million Americans. Deciding yes…or no…over the next month is just the beginning.

For states that go forward, they must figure out how to make these exchanges useful. The challenge: how do you make shopping for health insurance easy and painless...well, relatively painless?

We love to shop -- for clothes, for cars, for our pets. But health insurance?

“Consumers would rather pay their taxes or go to the gym than go shopping for health insurance,” says Lynn Quincy with Consumers Union.

Quincy says it’s a combination of fear and ignorance. We know it’s a really big, important decision, but we don’t understand what it all means.

“You know this plan features a deductible, it features this co-insurance, but here’s the exceptions and here’s the out-of-pocket limit and here’s some benefit limits,” she says. “It’s as if the document were printed in Greek.”

I mean do you know the difference between ασφάλιστρο and εκπίπτουν?

Yes, that’s Greek for premium and deductible. Which is why MIT health economist Jon Gruber says to run successful online exchanges, states must strip away as much clutter as possible.   

“You know in a typical ECON 101 course, we teach more choice is better. In practice we know when individuals are faced with many choices and confusing choices, they often choose worse,” he says.

They also often choose too quickly. Researchers studying how people use health exchanges found the average shopper will spend six minutes picking out a plan.

“This isn’t going to work if we have to make every individual consumer an excellent chooser of health insurance plans,” says Tom Baker, a professor at the University of Pennsylvania.

Baker says what works best is when the website guides shoppers with a few key questions -- Family plan or individual? Old doctor or new one? --  then quickly winnows down the health insurance options.

“What we need to do is make them comfortable that the small number of choices they are facing are reasonable choices,” says Baker.

And something else needs to happen. Shoppers need to know the true costs of the policies they are looking at.

Christian Palino is with the design firm IDEO that has built a model exchange that includes a calculator to do that.

 “There are tradeoffs. If you want to pay less money, you are going to get less coverage,” says Palino. “And so making those tradeoffs as easy for people to understand and literally to see them visually, we feel like that’s empowering.”

Under the Affordable Care Act, or ACA, millions of people expected to use the exchanges. Many will be low-income and getting insurance for the first time. University of Pennsylvania economist Amanda Starc says there’s some real concern these shoppers will buy the wrong plan.

“Part of the social the social insurance component of the ACA is this idea that you shouldn’t go bankrupt because you got sick,” she says.

Starc says it’s easy to imagine people buying plans with low monthly premiums, but high deductibles.

If folks can’t afford the out-of-pocket costs, the health system picks them up, which leaves us with the same health care problems we have today.

About the author

Dan Gorenstein is the senior reporter for Marketplace’s Health Desk. You can follow him on Twitter @dmgorenstein.

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