Choice Dynamics of "Money Wasting" plan choices in ACA state marketplaces

The health insurance marketplaces established by the ACA aim to facilitate health plan choice by creating a market for qualified non-group health plans.  Ideally, consumers in these marketplaces will compare health plan prices and benefits and select the plan that best meets their needs and preferences.  However, choosing a health insurance plan can be daunting and confusing, especially for vulnerable populations.  Evidence from other health insurance markets finds that some consumers make “money wasting” decisions, where they fail to choose the health plan that minimizes their expected costs for a given level of risk protection.  Whether consumers in ACA marketplaces make similar “money-wasting” decisions is unknown. 

This paper analyzes whether enrollees in ACA marketplace plans make “money-wasting” choices, and the plan shopping strategies, choice architecture, and individual characteristics associated with these choices. The primary data are from an enrollee survey we fielded in May – July 2015 among a stratified sample of new enrollees who enrolled in Qualified Health Plans purchased through the Connecticut or Washington state marketplaces for 2015.  We collected data on factors of coverage most important to enrollees when they were choosing their plan, sources of information used for plan choice, modes of information gathering, whether enrollees had or wished for help in selecting their plan, and enrollee characteristics including race, health status, and education level. Survey data are weighted to adjust for post-stratification and non-response, so as to generalize to the larger Marketplace populations. Survey data are linked to administrative data from the marketplaces containing the enrollees’ plan choice, age, gender, household income, amount of premium subsidy (if any), and whether enrollee household income was <250% FPL, making them eligible for a cost-sharing reduction (CSR) plan in which cost-sharing obligations are significantly reduced.  

We define two types of money-wasting choices: (1) failing to enroll in a CSR plan, if eligible, and (2) failing to choose the cost-minimizing health plan.  To determine whether a respondent chose their cost-minimizing plan, we use predictive modeling software, developed by health insurance decision support firm Picwell, to estimate personalized projections of each respondent’s health insurance spending across plans in the Marketplace. We calculate the differential in expected out-of-pocket cost (premium + expected cost-sharing) between the enrollee’s chosen plan and (1) lowest cost plan in the marketplace overall, and (2) lowest cost plan with equivalent actuarial value.

Preliminary analyses find that 20% of eligible enrollees fail to enroll in a CSR plan. Our final paper will report on rates of each type of money-wasting choice.  We also estimate multivariate logistic regression models to report on the relative contribution of decision making strategies (e.g., prioritizing premium, overall affordability, or provider network), having help with plan selection, time spent choosing plans, demographic characteristics, and Marketplace choice architecture towards likelihood of making a money-wasting choice.  These findings will inform whether and when plan choices that appear “money-wasting” may be aligned with consumer preferences, and if not, which characteristics, decision-making strategies, and environments are associated with sub-optimal choices in ACA marketplaces.