“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” – Steve Jobs
Health plans don’t have to be complicated. In fact, complexity is often counterproductive. Complex plans often fail to meet their goals in deterring unnecessary use, and can raise costs by delaying essential care.
Complexity is standard
Unfortunately, complex health plans are the norm. Most people don’t understand their current health plan. People don’t know how much they will have to pay for care, or if it will be covered under their plans. In a 2013 study in the Journal of Health Economics, only 14% of respondents could correctly answer four multiple choice questions about the four components of health insurance design: deductibles, co-pays, co-insurance and maximum out-of-pocket costs. This mass confusion exists across income and educational levels. Similarly low rates of health plan comprehension are widely documented: in Wisconsin, 84% of people on a fee-for-service plan incorrectly believed they were in managed care. Other studies have shown that people tend to dramatically under-estimate their health plans’ coverage of services, from outpatient specialists and mental health providers, to emergency rooms and prescription drugs.
84% of people on a fee-for-service plan incorrectly believed they were in managed care.
In a 2013 study, the introduction of a simple health plan (with co-pays as the only variable; no co-insurance, no deductibles) was shown to be much better at getting users to act rationally and select more cost-effective care options, like going to urgent care rather than the ER for an earache. Not surprisingly, people need to understand their health plan in order to make rational decisions. And, removing the confusion about coverage makes people happier and more rational in their healthcare use.
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The Affordable Care Act takes a superficial approach that simplifies the presentation of information on health plans without changing their actual design. As critics write, “…presenting simplified information about something that is inherently complex introduces a risk of ‘smoothing over’ real complexities, in effect burying them in the now not-so-fine print.”
A better approach is not to just present health plans simply, but to create a health plan that is truly simple.