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The Bad Design of Health Care Exchanges Will Cost People Billions

If you got insurance on an Affordable Care Act exchange last year, not going through the process again every year can be very costly to you.

According to a new report from HHS, ” More than 7 in 10 current Marketplace enrollees can find a lower premium plan in the same metal level—before tax credits—by returning to shop.  If all returning consumers switched from their current plan to the lowest-cost premium plan in the same metal level, the total savings in premiums would be over $2 billion.”

Of course we have long known from other health care systems that only a tiny percentage of people are likely to shop around each open enrollment period. This has a lot to do with the fact that most people lack the health insurance knowledge and math skills to needed to properly shop around.

Even if the government could convince most people on the exchanges to annually undergo this shopping process they find very unpleasant, it doesn’t actually mean people will save money. Experiments have shown that even when people are offered a fairly simplified choice they are very bad at picking the best insurance policy. In fact one experiment found that without significant help participants, “selected the correct option 21 percent of the time, a figure not different than chance.” The current exchanges might be as useful as a dart board for helping many people pick the best plan for them.

Democrats should have known about these significant short comings with insurance exchanges in 2009 but choose to go with this system anyway. The billions people are probably going to overpay next year is largely the fault of Democrats for choosing this bad design. Of course what is waste to regular people is profit for the insurance companies, so from their perspective the system is very well designed.

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Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is now living in the Washington DC area. He created a politics and policy blog, The Walker Report (http://jwalkerreport.blogspot.com/).

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