Many American workers actually make adverse choices when given multiple health insurance options. When workers can choose between two or more health plans, there may be several reasons for switching from one plan to another. Experts at the Employee Benefits Research Institute are concerned about workers making adverse choices. According to their research, most people who switch plans are younger workers or those who do not have family coverage. These two factors increase the risk of adverse selection. EBRI conducted a study that included data from one large employer after the company went from offering four health plan options to 10 different choices.
The study showed that most people who switched plans kept the same type of health insurance but simply selected a different insurer. The employer offered financial incentives to help workers choose plans that would benefit them the most, and they were encouraged to avoid those that would be adverse for their needs. Workers were prompted to choose plans with more comprehensive coverage, lower premiums or health savings accounts when eligible.
While the beneficial incentives should have helped steer workers in the right direction, researchers found that older workers were not as likely to switch plans as younger workers. They were troubled by this since switching to a better plan meant improved access to emergency care, outpatient services and several other features that older workers are more likely to use frequently.
Researchers found that those who were enrolled in HSAs were more likely to switch plans than those who were enrolled in a regular health insurance plan. About 50 percent of those who were enrolled in HSAs actually switched. High-income workers were more likely to switch plans than low-income workers, and those who had been enrolled in a plan for a long time were less likely to switch regardless of age. Researchers found that most of those who did not switch plans had a higher rate of visiting their primary care physician frequently for various issues.
Since the 1960s, employers have placed a great deal of importance on offering workers more options for health coverage. While only about 20 percent of large employers offered several choices in the 1960s and 1970s, that number jumped to over 45 percent by 2015. There has been very little empirical evidence showing clear trends of adverse plan choices in the past, and EBRI researchers said that it should be an important issue moving forward after what they found from this study. These trends also emphasize the importance of having several beneficial choices for a healthy workforce, which translates into a productive workforce.
At UBF, we have also found that offering employees plans through a private exchange doesn’t necessarily reduce cost. The theory that employees will gravitate towards lower cost plans has not panned out the way many had originally thought. Low wage earners tend to enroll in more expensive plans even if they don’t see the doctor very often. The idea of having insurance that requires little in copayments is appealing and comforting. While those in higher income brackets have a tendency to make more frequent changes and also enroll in plans that offer more choice in providers.
Alan Wang is the President of UBF and serves as the lead consultant. He has delivered the UBF solution set throughout the world and is highly regarded for his areas of expertise. You can follow him on Twitter @UBFconsulting.