More choices, less happiness

On a hot summer ice-cream-craving day, would you choose the shop that has ice_cream_choicesthree flavors of ice cream or the one with three dozen?  If you want to be satisfied with your choice, you go to – surprise – the one with three flavors.

Having too many choices leaves us with regrets. “Well, the one I took was okay but what about the other 35 that I didn’t?” (For a terrific book about choice architecture, see Nudge: Improving Decisions About Health, Wealth, and Happiness.)

It works for ice cream, and for more complex products – such as (wait for it!) health insurance.  People are as excited about comparing health insurance plans as they are about alphabetizing spices.  Even I – a person who basically understands health insurance – would rather wax my driveway.

Yet a trumpeted selling point for President Trump’s plan is flexibility in plan design.  True, people might want more insurance carriers competing, but no one, not even an actuary, would want to design his own plan.  The possibilities for plan design tweaks are virtually endless, and shoppers do not have a way to wisely choose.

How could a person know whether coverage for rehab is worthwhile?  Whether applying the deductible to laboratory tests is a good idea?  And how does a person know if he “got it right” – he doesn’t bump up against any of the limits he chose?  Or he does?

The Affordable Care Act gave some structure to the tedious task of comparing health insurance plans.  The four different levels – bronze, silver, gold, and platinum – equated to the percentage of medical costs (for the average person) that the plan paid.  A shopper could get a basic handle on a plan and how it differed from another by knowing one was silver and the other was gold.

The ACA is accused of creating a nanny state, dictating our health insurance plan design, forcing people into coverage that they do not need. The opposite — designing our own plans with little or no parameters — is surely a boondoggle, and will lead to less satisfaction rather than more.   Not to mention, it will lead to ever greater complexity in insurance rates and perhaps fewer people buying health insurance.

To say that we can have affordable health insurance with low deductibles and high benefits is fantasy.  To say that having unfettered choice of health insurance plans is desirable ignores the reality that benefit design is not a shopping trip.  It’s a science.

Meanwhile, medical costs zoom onward and upward.  The force underlying health insurance costs does not care whether you have a deductible, or even whether you have health insurance at all.  We would all be better served to focus on the core issues, rather than creating burdensome decisions for people who want health insurance.

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