To understand how consumers make decisions and the extent to which various factors can hinder decisionmaking, RAND researchers reviewed the literature on health insurance choice and on designing websites to support consumers' choices and, where possible, gleaned best practices from the literature. To understand the approaches health insurance websites have taken to convey information to consumers, they then reviewed 20 websites.
- How do consumers make choices in the context of health insurance enrollment to determine what plan characteristics matter most?
- What types of errors in decisionmaking are common?
- Are there best practices to help consumers make optimal, or at least improved, decisions?
- Could sites use default settings and other nudges to help enhance the consumer experience and improve the quality of plan choice?
- What types of information do websites present to consumers?
- How do sites present that information?
- What types of decision-support tools are available?
- How might these factors influence consumer choices?
The Patient Protection and Affordable Care Act introduced the health insurance marketplaces, new online clearinghouses for buying and selling insurance. One of the benefits of the marketplaces is that they enable consumers to compare a variety of health insurance plans, and, ideally, select the plan that best suits their needs. However, the task of selecting a health insurance plan can be complicated because of such factors as difficulty understanding health insurance jargon, poor numeracy, inadequate decision-support tools, and an excessive number of choices. For this report, RAND researchers reviewed the literature on health insurance choice to understand how consumers make decisions and the extent to which confusion, lack of information, and other factors can hinder decisionmaking. They also reviewed literature on how to design websites to support consumers' choices and, where possible, gleaned best practices from the literature. They then reviewed 20 health insurance websites to understand the approaches these websites have taken to convey information to consumers. They found that existing health insurance websites follow some recommended practices, such as allowing consumers to sort and filter plans based on key characteristics. However, websites were lacking in other dimensions, such as in the use of out-of-pocket cost calculators, presentation of information on provider networks, and presentation of information about plan quality. Although, ideally, websites would convey such information to consumers, that might not be possible or desirable without better data. Future analyses should consider how alternative web design strategies affect actual choices among consumers enrolling in marketplace plans.
Consumers Suffer from Bounded Rationality and Other Biases
- They might make suboptimal choices because they have difficulty processing complex information, fatigue, and other factors that limit critical thinking skills.
- Consumers are also prone to status quo bias: They stick with initial choices even if prices change or if new, potentially better choices become available.
- The order in which sites present choices significantly influences consumers' decisions.
- Consumers can be susceptible to framing biases, such that the manner in which sites describe choices can affect decisions.
Consumers Have Limited Health Literacy and Numeracy
- Many people lack familiarity with such terms as deductible, coinsurance rate, and provider network. Low-income and uninsured consumers have a more-limited understanding of these concepts than higher-income and insured consumers do.
- Consumers tend to put undue emphasis on premiums in selecting plans, suggesting that they do not fully take into account the impact of cost sharing.
- Conveying information on plan quality to consumers is difficult, an issue that is at least partly related to consumers' lack of familiarity with quality metrics.
- There are many dimensions of quality, not all of which are important for every consumer, but providing detailed information on multiple quality metrics can become overwhelming. Consumers might tend to view price as a proxy for quality.
Some Options Could Improve Plan Selections
- Simplifying the information presented as much as possible could improve consumer choice. People make better choices when price and quality differences are ranked using symbols instead of numbers, when information is presented graphically, and when key information can be compared side by side.
- Provide tools to help consumers sort and filter options.
- Provide out-of-pocket calculators that estimate several possible outcomes.
- Provide accurate information about provider networks.
- Display information about quality in a simple easy-to-understand format.
- If optimal choices are available, list them first.
- Base the default—what happens when consumers make no choice—on either the status quo or the optimal choice.
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