Many Consumers Will Pay Too Much for An Exchange Plan


More than 80% of consumers may not be able to make a clear estimate of their health insurance needs, and many will choose a higher cost plan than what they need, according to an analysis by Columbia Business School. For the analysis, Columbia looked at simulated exchanges modeled on the design of the actual exchanges.

Researchers asked people of varying education levels to choose the most cost-effective policy using websites modeled on the exchanges. The following results lead to some startling conclusions:
· The average consumer stands to lose an average of $611 by failing to choose the most cost-effective option.
· Because the federal government will subsidize many policies, American taxpayers could pay an additional $9 billion for consumer’s mistakes in choosing more costly plans.
· Providing monetary incentives did not improve outcomes. Participants were offered $1 for every correct answer and entrance into a lottery that pays one winner $200, yet 79% of participants still chose the wrong plan, adding $419 to the cost of their health insurance.

Columbia’s Professor Eric Johnson said, “If consumers can’t identify the most cost-efficient plan for their needs, the exchanges will fail to produce competitive pressures on healthcare providers and [fail to] bring down costs across the board, [which is] one of the main advantages of relying upon choice and markets.”
However, he cautioned against misusing the research. “Amid the political heat around the healthcare law, there’s going to be a great propensity for some politicians to jump on this study and misinterpret these results. This research presents no…argument for or against the Affordable Care Act. Instead, this is research about the difficulties and complexities in creating the actual delivery systems, which is being done in blue and red states.”

Researchers say that consumers should estimate their medical services before choosing a plan. Having access to tutorial links and pop-ups that explain basic terms like “deductibles” increases the chances of choosing the best plan. Adding a calculator to the process also improves the consumer’s chances of choosing the right plan and reduces the size of errors by over $216. In addition, using a tool that defaults to the most cost-effective plan drastically improves a participant’s chances at selecting the most appropriate plan by 20%. Together, calculators and defaults reduce the average mistake saving consumers and the government $453.

Exchanges that limit the number of health plan choices will reduce confusion among consumers (Utah offers 99 healthcare options for participants). Exchanges can significantly improve consumer performance by implementing tools, such as just-in-time education, smart defaults, and cost calculators. To download the full report, visit

Last Updated 08/10/2022

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