A recent article in BenefitsPro discusses how the current administration may reverse course on a popular provision in the Affordable Care Act. The requirement forces healthplans to simplify plan language and give examples of coverage options by this fall. I imagine this will resemble credit card offers that have a table highlighting key components (e.g., APR) and put everything into plain English.
However, insurance companies are pushing back, saying that this would be expensive – a trade group puts the cost at $382 million over the first two years. The author contends the White House may buckle under this pressure, hoping to appear business friendly heading into the November elections.
Overall, I disagree with the insurance trade group assessment. There will definitely be an upfront cost, but they don’t talk about the potential benefits from this transparency. For example, this education may allow the customer to choose a more efficient plan that puts limits on coverage or helps them understand those limits better, both of which help healthcare dollars be spent more efficiently and lower costs.
While I think transparency benefits the system by helping consumers make better decisions, my faith was shaken by a Freakonomics podcast that discussed financial literacy education. One of the guests argued against this (there’s a great debate in the middle of the podcast), saying that a little education…
1) …can give consumers overconfidence that leads to more reckless behavior – a healthcare analogy is a patient who visits a doctor armed with online research that complicates the diagnosis and treatment options
2) …shows no evidence of positive behavior change. She says that studies show people like learning about finance, but didn’t necessarily change their habits
3) …isn’t sufficient to address the complex financial products available - healthcare insurance definitely has a similar complexity
This isn’t a perfect comparison and educating people on their plan options, not how to use the plan, are two different processes. Nevertheless, while I support greater transparency and providing greater consumer choice, the outcome of this regulation, if it survives, could be a little more uncertain.
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