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April 08, 2008

Who’s Opposed to Informed Choices on Health Insurance by Californians?

I'm a good bargain shopper. (My prize: 10-piece set of top tier Calphalon pots once for $70) Here are my rules for assessing a good bargain:

1. Is it a known product (do I know it's a quality product -- like Calphalon)

2. If it's marked down, is it a good price compared to other similar products

3. Lastly, will I use it (because it does me no good to get a good deal on shoes if I'm not going to wear them...and I've done this way too much).

This mental checklist is meant to ensure that the product is of value to me.

Which brings me to the letters submitted by the health insurance industry SB 1522 (Steinberg), which create standards for health insurance that would enable any person to go through such a checklist when buying insurance on their own. (See our Fact Sheet on SB 1522.)

In short, SB1522 would:

1. Classify health plans into five "tiers'' so consumers would know what they were buying - i.e. a top tier plan means comprehensive, bottom tier means "catastrophic.'' (Known/quality product)

2. Insurers would have to have at least one plan in eacth tier, enabling apples-to-apples comparisons.

3. Establish minimum benefits, which would weed out junk insurance -- such as "hospital only'' plans that barely covers the hospital visit. (will I/can I use it?)

Let's step back a bit. Let's say you don't receive health insurance on the job now and have to go out and scavenge for a decent plan. Go to http://www.insuremyhealth.com/ and you'll get hit with 107 plans with all manner and range of co-pay, deductible, premium, office visit policies.

The "choice'' argument: Insurers argue that SB1522 will lead to a reduction in consumer choice. First off, their argument is bogus. Choice will still exist; it will just be more organized and limited. And limiting choice for consumers is actually a good thing, according to research on a parallel issue-401(k)s (the research on choice can also be applied to choosing ice cream, jams and insurance policies):

"...Findings from this study show that an extensive array of options can at first seem highly appealing to consumers, yet it can also reduce subsequent motivation to purchase this product...the very act of making a choice from an excessive number of options might result in "choice overload,'' in turn lessening both teh motivation to choose and the subsequent motivation to commit to a choice....''

That research correlates with private polling of uninsured and individual market participants, which also reveals that consumers do not have confidence in their understanding of what the insurance plans provide, nor do they trust the literature that is provided by the plans.

SB1522 would provide choice, but in an organized fashion so that consumers could go through their mental checklist and feel comfortable about a "known product'' and make comparisons against other plans.

Click here for your free California health insurance quote now!

Posted by healthinsurance at April 8, 2008 04:24 PM