Ellen Peters, a professor of psychology at Ohio State University, said choosing a health plan involves financial decisions that even people with health insurance don't have to make very often. For the uninsured, the choices "may be quite unfamiliar," she said.
Peters is the lead author of a July 2013 paper commissioned by the Institute of Medicine's Roundtable on Health Literacy that showed that only 8.6 percent of uninsured adults have proficient "numeracy skills." These are defined as the math skills needed to take full advantage of the online exchanges.
Most consumers can figure out the difference between two plans' monthly premiums. But people need a greater level of math proficiency to estimate total health-plan costs based on expected health-care needs, the report noted.
'They were practically throwing darts'
Studies demonstrate ways to simplify the task by presenting options to people in a way that will help them make better choices.
Eric Johnson, co-director of Columbia University Business School's Center for Decision Sciences, and Tom Baker, professor of law and health sciences at the University of Pennsylvania, realized some time ago that "choice architecture" would matter on the exchanges. To test their hypothesis, the two academics and colleagues in New York, Miami and Jerusalem set up several experiments mimicking the decisions consumers have to make when shopping on the exchanges.
When asked to choose the lowest-cost health plan from among four or eight options, the study participants failed miserably, the study found.
"In fact they practically couldn't do it at all. They were practically throwing darts," said Johnson, who expects their paper to be published shortly in a peer-reviewed journal.
On average, consumers could potentially lose $611 annually by failing to choose the most cost-effective option, the study found. "People seem to put more weight on the out-of-pocket costs and the deductible than they do the premium," he explained.
When business school students were given the same task, they got it right 73 percent of the time, often with the aid of spreadsheets, the study found.
Ordinary consumers either don't know how to do the math or don't bother to do it, Johnson reasoned. The problem could be cured "just doing the math for people," he said.
Because many of the health plans that consumers will purchase on the exchanges will qualify for federal subsidies, peoples' bad decisions could end up costing taxpayers more than $9 billion annually, Johnson said.
The study also found that adding a cost calculator improved the chances of choosing the right plan and reduced the margin for error by an average of $216 annually. And using a "smart default" to indicate a person's best health-plan choice based on his or her specifications can also help, Johnson said.