Choosing a Health Plan Is Hard, Even for a Health Economist

Greg Judd’s Insight:
Frakt is frequently an “I’m soooo smarter than you” kind of writer, but this is an almost charmingly modest first-person account of the difficulty with health coverage “markets”.

I have to admit that I’m a bit surprised he didn’t boil his process down to some version of “so I realized I needed to look at the total cost of coverage” at some point….

ARTICLE BELOW: [From www.nytimes.com – October 28, 9:00am] http://www.nytimes.com/2014/10/28/upshot/choosing-a-health-plan-is-hard-even-for-a-health-economist.html?abt=0002&abg=1&_r=0

A confession: I am a health economist, and I cannot rationally select a health plan.

I buy health insurance through the Federal Employees Health Benefits Program, or F.E.H.B.P., which is very similar to the Affordable Care Act’s exchanges. Like the exchanges, the federal employee program runs an online marketplace with a choice of plans, which vary by region.

Most workers don’t have a lot of choice among plans offered by their employer. But the federal employee program offers me about 20 plans to choose from, and a similar number to almost all other federal employees. This puts me in a position akin to a consumer selecting among many plansin an Affordable Care Act exchange or a Medicare beneficiary selecting among many Medicare Advantage plans.

I have a lot of sympathy for consumers in these markets. Comparing health plans is hard, even for a health economist like me. (And it’s arguably harder on the Affordable Care Act exchanges, where consumers may also need to report income and apply for subsidies. Federal employees just need to choose a plan.) Each year when I shop for coverage through my employer, I feel like I’m buying myself at least as much grief as I am insurance.

In one sense, buying health insurance is not different from buying any other product, like a laptop computer or a refrigerator. There are two things to consider: how much you pay (the price) and what you get (the quality). Quality can mean a lot of things for a health plan, and your criteria may differ from mine. For me, the most important aspect is which doctors and hospitals are in its network and, hence, most generously covered. (Some plans cover out-of-network providers less generously; some not at all.)

A health plan’s price is more amenable to quantitative analysis, but still hard to assess.

Each laptop has a sticker price, as does each refrigerator. Health insurance has not one but many price-like characteristics. The premium is the most salient price, perhaps. But there are lots of others like co-payments (fixed dollar amounts you pay each time you visit a doctor, get a lab test or pick up a prescription), co-insurance (a percentage of the cost you pay for each visit, test or prescription), and deductibles (how much you pay before your plan pays a single dollar). Complicating matters, deductibles do not apply to every service, and co-payments and co-insurance can vary by service — a different amount for a hospital stay vs. a primary care visit vs. a visit to a specialist, for a brand-name drug vs. a generic, and so forth.