Health Insurance Confusion Likely to Result in Poor Policy Choices


A new study to be published in the September edition of the Journal of Health Economics has revealed the confusion that so many individuals feel when it comes to understanding health insurance. Unfortunately, this confusion could be problematic for millions who are expected to acquire new policies through health exchanges under the Affordable Care Act this fall.

Americans Plagued by Health Insurance Confusion

Behavioral economists from the University of Pennsylvania, Stanford, Harvard, Yale and the University of Chicago participated in research that revealed the confusion many Americans experience when attempting to understand their health insurance policies.

In one survey, the researchers attempted to uncover how well current policyholders, ages 25 to 64 with private health insurance, understood four basic traditional health insurance concepts — deductible, copay, co-insurance and out-of-pocket maximum. The survey also examined how well the policyholders believed they understood the concepts.

Analysis of the responses revealed that, while most participants felt confident about their own understanding of these concepts, only 14 percent of all respondents accurately understood them.

To make this determination, the survey explored how well respondents were able to incorporate all four concepts when computing the cost of a four-day hospital stay based on specific information granted to them.

The results revealed that only 11 percent of policyholders were successful in making the correction computation.

Consumers Must Be Informed to Benefit from the Affordable Care Act

In their analysis, the researchers came to the conclusion that it would be difficult for most Americans to make the right decisions when choosing plans under the Affordable Care Act this fall because they simply don’t understand health insurance policies.

They explained, if consumers don’t understand how to make informed decisions when selecting their plans, they may inadvertently overlook the reduced prices and improved quality they’ve been given access to.

In October, most states will open their health insurance exchanges to the public, which will allow consumers to purchase coverage at group rates that are expected to be more affordable under the Affordable Care Act than those found currently at private health insurance companies.

The best option for policyholders, the study argued, would be to have access to a simplified insurance plan that eliminated deductibles and copays, which were the least understood elements of the insurance plan design.

Image courtesy of David Castillo Dominici /