by WEX Health
Decision fatigue is real. It’s what happens to most of us at the end of a long day of decision-making, when our ability to make good decisions begins to deteriorate. And it’s often got everything to do with why Americans don’t always make the best or most affordable selection when it comes time to pick out a health insurance plan.
Many people opt for health plans with higher coverage (and ordinarily, lower deductibles), even when those plans are financially dominated by other options. (When a plan with a certain deductible is guaranteed to result in higher total spending than an otherwise equivalent plan, economists call it a financially dominated plan.) A study conducted by the National Bureau of Economic Research (NBER) looked at the health-insurance decisions of employees at a large U.S. firm where a new health insurance plan menu included a large share of financially dominated options and found that older workers, low earners and women in particular chose the low-deductible plans, resulting in excess spending.
Here are a couple of ideas on how to ease the healthcare decision-making process for consumers.
Timing is everything when it comes to healthcare decision-making
Experts recommend that the most important decisions be made early in the day. Amazon’s Jeff Bezos, for instance, says he blocks off a time each day to make his most important decisions, taking his “high-IQ meetings before lunch.” Consider this when selecting a time to present benefits options to employees—mornings are ideal.
It’s also a good idea to identify ways to reduce the stress around the healthcare selection process—taking as much pressure as possible off the employee. Stress affects how people learn and makes them more likely to make risky decisions. And choices involving money and health have been shown to be especially stressful for people, so it’s no surprise that 49 percent of employees say making health insurance decisions is always “very stressful.”
Defusing this stress can be as simple as setting aside more time each year to educate employees about their options, in a way gives them some skin in the game and is engaging.
Combat consumer inertia by building health insurance literacy
Several studies in recent years have presented evidence that consumer misunderstanding of their health insurance plans is widespread. One found that fewer than one-third of consumers are able to correctly answer questions about their health insurance plan. And the aforementioned study by the NBER concluded that Americans’ health insurance choices “reflect a severe deficit in health insurance literacy and naïve considerations of health risk and price, rather than a sensible comparison of plan value.”
As an employer or a health benefits administrator, you should feel a duty to educate consumers so that they are more empowered to make the best decisions for both their financial and physical health. Experts advise simplifying communications—speaking to consumers as you would to a friend—and tailoring decision aids to different audiences.
It can also be helpful to identify consumers’ most common misconceptions and be strategic about correcting them. For example, the specifics around flexible spending accounts (FSAs) and health savings accounts (HSAs), which provide tax breaks and are only offered in combination with high-deductible plans, are too often mixed up. As such, people sometimes mistakenly believe that HSAs operate like FSAs, which have a use-it-or-lose-it clause. Of course, with an HSA, any unspent money remains in the account indefinitely, and can be used to cover future medical expenses (including in retirement) or even invested. Plus, many employers contribute to their employees’ HSA accounts. But too few employees know about these and other benefits.
Employers may also want to consider additional ways to mitigate some of the risk employees initially feel when opening an HAS. In a New York Times article on why so many people choose the wrong health plans, Richard H. Thaler wrote, “If employers really want to encourage the use of [HSAs], they could improve them. An approach that I like is to raise premiums just enough so that the extra money, if put in an H.S.A., would cover all of a deductible (or, even better, an employee’s entire maximum out-of-pocket costs). When the high-deductible plan dominates the low-deductible one, this could still save employers money.”