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Can Smart Consumers Save Money on Health Insurance?

Strange but true: the government doesn’t want you to understand how much your health care costs or make intelligent buying decisions about health insurance.

Suppose you want to know how much insurance to buy and want to research the cost of health care. Too bad. According to the LA Times, a new national report card on health care price transparency found that 36 states deserve either a D or an F for their efforts in helping citizens get access to information on the cost of care. The report looked at factors ranging from the availability of price data on public websites to the ability of consumers to get an estimate on treatment before going to the hospital. Only two states got an A (Massachusetts and New Hampshire).

People are justifiably worried:

“It should be concerning to every lawmaker in the country that 18% of the U.S. economy is shrouded in mystery,” said Francois de Brantes, executive director of Health Care Incentives Improvement Institute in Newtown, Conn.

“Without price transparency, consumers will continue to pay widely ranging amounts for the same exact services with no difference in quality,” said Suzanne Delbanco, executive director of Catalyst for Payment Reform, an employer-backed group in San Francisco.

As Delbanco suggests, the lack of price transparency is a major force driving health care costs upward today. Health care is practically the only industry that operates in almost complete contempt of the consumer. Consumers are kept ignorant of prices, constantly overcharged, denied bargaining power, and sent out the hospital door without so much as a goodbye. Regulations are just as obscure as prices, and in many respects Obamacare will only make this worse. A tracking poll just released by the Kaiser Foundation found that two-thirds of uninsured Americans (and a majority of all Americans) don’t understand how the Affordable Care Act will affect them or their insurance.

But hidden prices and impenetrable regulatory codes aren’t the only things keeping costs high. Especially for younger Americans, health care costs so much largely because people are forced into plans that have more coverage and benefits than they need. Obamacare’s “essential benefits” provisions, for example, require all small group plans to offer benefits in ten categories, including “maternity and newborn care” and “mental health and substance use disorder services.” Some Gen Yers might need or want these services; others would rather get cheaper plans that didn’t cover things they don’t need. Why should a young person who doesn’t drink be forced to buy coverage for rehabs he or she will never visit?

Fortunately, some companies are already finding ways around this. The NYT reports that some companies are trying a new way of covering their employees’ health care costs. Instead of enrolling them in insurance plans, these employers are giving workers a lump sum of money that they can then use to purchase a plan in an online marketplace. Many workers are using this new freedom to choose cheaper plans with higher out-of-pocket expenses:

“When people are spending their own money, they tend to be more consumeristic,” said Ken Sperling, Aon Hewitt’s national health exchange strategy leader…. Overall, 42% of employees picked plans that were less rich than they’d had the previous year, while 26% picked pricier coverage.

This is a rational choice for younger workers, and we hope to see more companies following suit. (It’s an especially rational choice because, under Obamacare, if you later develop an expensive medical condition that your current plan doesn’t fully cover, you can always upgrade your insurance — and you can’t be turned down.)

Give people access to good information, give them incentives to make smart decisions, and the health care system will start to reform itself. That isn’t the total answer, but it’s a start. Unfortunately, that doesn’t seem to be where we are headed.


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