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You are here: Home / Anderson On Health Insurance / Decision supports need to avoid dominated choices

Decision supports need to avoid dominated choices

by David Anderson|  June 1, 201810:03 am| 7 Comments

This post is in: Anderson On Health Insurance

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UPDATE 13:50 Health Sherpa tweaked their recommendation engine. Originally the two plans were tied on total costs for the “low” cost scenario and there was no further criteria for this specific scenario of low CSR Silver options. They’ve added additional tie breakers if the first tie breaker is inconclusive for this odd, corner case.

Buying individual market health insurance is confusing.

I’m an insurance expert.  I don’t think that I could pick out the optimal choice for my family when we lived in Pittsburgh as there were too many choices.  I am very confident that I could pick out a not-bad plan but I am confident that I would be leaving a little bit of money on the table somewhere.

Decision supports are critical. Katherine Hempstead in Health Affairs argued this point in January 2017:

We may be entering a world where insurance products will be more loosely defined, and plan standardization less likely. In such an environment, the availability of high-quality consumer decision support will be more important than ever. While the future of insurance exchanges is currently unclear, individual market consumers in every state will continue to benefit from high-quality decision support.

 

And we need good decision supports. One of the criteria for “good” support has to be steering people away from dominated plans. A dominated plan is when on all relevant criteria, the alternative plan meets or beats the dominated plan. For health insurance, some of the relevant criteria will be network, premium, cost sharing, customer service and hassle. Evaluating hassle and customer service between firms by using only publicly available data is very difficult, but even on the simple issues of network, premium and cost sharing, domination can be assessed.

HealthSherpa shows dominated plans as the recommended plans. I looked at the plan recommendations for a single 40 year old making $25,000 in 2018 in Roane County, Tennessee, Zip Code 37763. This individual qualifies for weak CSR if they elect to buy a Silver plan.

Blue Cross and Blue Shield of Tennessee is the sole ACA insurer in the county. BCBS-TN engages in aggressive Silver Gapping by offering a high premium plan that is the benchmark Silver and a low premium Silver. For this individual, the low cost Silver plan is a $0 premium plan after subsidy.

And yet, Health Sherpa is recommending that the Bronze plan. It has the same premium ($0), the same insurer, the same network. The difference is the deductible for the low cost Silver plan is significantly less and the maximum out of pocket is also significantly less than the Bronze out of pocket.

The low cost Silver plan for this individual’s situation dominates the recommended Bronze plan.

This is a problem as people will anchor on the recommended options. Dominated choices are bad choices for consumers and good decision support should move people away from clearly bad choices.

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Reader Interactions

7Comments

  1. 1.

    p.a.

    June 1, 2018 at 10:08 am

    What is HealthSherpa’s paradigm/algorithms to lead to this? Are they available publically?

  2. 2.

    David Anderson

    June 1, 2018 at 10:11 am

    @p.a.: I don’t know what they are.

    I ran into this as I was offering comments to a colleague’s paper and I wanted to offer a real world example of dramatic relative price changes for subsidized folks due to changing market structures. I had used Roane County in 2017 for as a no-gap county and now in 2018 they are a big gap county. It was coincidental that the scenario I entered produced a dominated choice.

  3. 3.

    Betsy

    June 1, 2018 at 10:37 am

    I just left my job and have been offered expensive COBRA continuation coverage. I need to compare what I could get on the marketplace. Your posts here have educated me a lot, but I’m still unsure about how to choose. Do you have some tips?

  4. 4.

    David Anderson

    June 1, 2018 at 10:52 am

    @Betsy: Good luck, I have some recent thoughts on the decision matrix about what to do when you lose ESI

    https://balloon-juice.com/2018/05/18/insurance-options-after-a-lay-off/

    If you need anything else, hit me up.

  5. 5.

    Brachiator

    June 1, 2018 at 10:53 am

    I’m an insurance expert. I don’t think that I could pick out the optimal choice for my family when we lived in Pittsburgh as there were too many choices.

    I enjoy all your posts, and this one particularly hits home. It reminds me that libertarians not only worship the unregulated free market, but insist that they are Philosophical Supermen and Superwomen who always know how to make the best choice. I would love to see them reveal what health insurance choices they made, and have experts evaluate the results.

  6. 6.

    Betsy

    June 1, 2018 at 11:15 am

    @David Anderson: Thanks so much! I’ll take a look.

  7. 7.

    soapidsh

    June 1, 2018 at 11:47 am

    I try to read David’s posts every day and I’m a reasonably bright guy but still have absolutely *no idea* how *any* of these moving parts work together and praise FSM that my spouse and I have good insurance through our employers. I don’t understand how anyone can be expected to navigate this system.

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