November 5, 2017

LESS CHOICE IS BETTER:

Why So Many People Choose the Wrong Health Plans (RICHARD H. THALER NOV. 4, 2017, The New York Times)

If you get health insurance from your employer, you have to make decision every year about which coverage to choose.

So here is a warning: If you are simply sticking with an old plan with a low deductible, that may well be a wrong and costly choice.

You might wonder how anyone could say that choosing one plan over another is "wrong." Surely such a choice depends on personal preferences about doctors, premiums, deductibles and other factors. And that's all true.

But the mistake I am referring to is different. Because of human quirks, lack of understanding and overly complicated plans, many people are paying more without getting anything extra in return.

Economists have a term for a situation like this, where one option is better than another under any circumstances, dominance. And that is what we see in many workplaces: The cheaper health care plan, at every level of medical spending, often has a higher deductible -- a higher spending hurdle that must be reached before reimbursements begin.

Because people tend to keep the older, low-deductible plans they already have -- and because they are often frightened by high deductibles -- large numbers of workers and their families are spending more than they need to on health care.

Employers--until the government does so--should just default everyone into the catastrophic/HSA plan.

Posted by at November 5, 2017 5:29 PM

  

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