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Health insurance exchange strategy: Look to Amazon, Netflix

Brookings Institute paper calls for personalization, better default plan options

While recent policy changes such as the introduction of the Affordable Care Act's marketplaces are intended to promote healthy competition among health insurers, they are hamstrung by the fact that many consumers still struggle to make informed coverage choices.

In fact, previous research has indicated that nearly half of uninsured Americans lack confidence when it comes to selecting the right health plan. This can end up costing consumers and the government, a new policy paper from the Brookings Institute's Hamilton Project argues, as diminished competition results in insurers providing less-efficient plan offerings.

While policymakers have taken steps to improve consumer guidance on the ACA exchanges, the paper suggests two additional policy changes to reform how these markets function:

Provide personalized recommendations and decision support. The paper's suggestions for this policy change includes four key elements:

  • An individualized plan cost calculator that uses algorithms similar to those employed by Amazon or Netflix to assess consumers' preferences and needs.
  • A personalized risk protection assessment that uses data to help consumers understand how each plan provides coverage in various potential health scenarios.
  • A tool that provides information about hospital and physician networks so consumers can either sort plans by which providers they cover or weigh the cost and benefits of all plans, including those that don't cover their provider preferences.
  • The integration of data about individuals' preferences and expected utilization to simplify the demands placed on consumers.

Create better "smart default" policies. Inertia can often lead consumers to stick with their current plan rather than switch to one with better value, so marketplaces should be designed to default customers into the best high-quality, low-cost plan available rather than their current plan, the paper argues. This proposal includes three main components:

  • A new default plan option should offer greater expected financial benefit than a consumer's current plan by "some given amount" to be determined by the exchange regulator.
  • The exchange regulator will have to come up with a model to determine the maximum allowable financial loss associated with switching.
  • A new default plan option would have to contain all of the providers from which a consumer regularly receives care, or he or she would not be defaulted into that option.

Ultimately, "these changes will improve consumer welfare by matching them with the high-quality, low-cost plan that best fits their needs," the paper concludes.

To learn more:
- access the paper

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3 ways to improve consumer experience on health insurance exchanges
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