We tend to be creatures of habit. That’s a common rationale given for why most people have a hard time moving from typical PPO insurance to high deductible health plans (HDHPs). In academic terms, it’s called the “status quo bias”: especially when outcomes are unknown, we tend to prefer that which we have now – what we know. And as HDHPs are promoted as better value options for consumers, it’s incumbent on all of us to understand why it’s difficult for people to move from their previous plans and address these challenges in decision support, especially in private exchanges.
Status quo bias is just part of the reason why it’s hard to move to a HDHP. I think there’s an additional – perhaps even stronger – reason we prefer our traditional copay plans. When we look at a plan in which a doctor visit costs a fixed $25 vs. a plan where we pay the full (although technically discounted!) cost until/unless we’ve met our deductible, that copay plan really looks like the far better deal. “What a great discount,” we may think. We might even imagine how much easier it will be to hand over that $25 at the doctor’s office, rather than wonder what the cost will be when the bill finally arrives, usually weeks or months after the visit.
Here’s the problem with that line of thinking: we’re falling prey to a mental accounting bias and neglecting the bigger financial picture. Mental accounting, in this example, refers to the idea that we tend to think of premium and costs for care as being in two separate and unrelated expense accounts, when really we should think of them as one overall healthcare expense account. What if we pay $500 more in premium per year to have the plan with the $25 copay? Under that scenario, if there’s a discount to be had, we’ve just paid an additional $500 to get it – does it still feel like a discount or a “good deal”? That’s why it’s so important to do the numbers and compare plans under a likely utilization scenario or two. If we can eliminate the effect of mental accounting by understanding the total costs of premium plus costs for care over the course of the year, by plan, we can potentially make a wiser, more cost-effective choice.
And then there’s the challenge of getting people to believe the numbers and actually choose something new. An acquaintance recently shared a story about how she had purchased coverage on the individual market for her family. A smart cookie, she had run the numbers herself, and everything pointed toward a high deductible health plan being the best deal for her situation. Since this was something relatively new and unfamiliar to her, she double-checked with her insurance agent, basically asking “the choice seems obvious, so what am I missing?” His response? “You’re not missing anything…but most people still like their copays.”
In other words, it’s not always enough to simply show people the numbers. This is what we do with our Health Plan Recommendation Engine, but it is interesting to observe that people are often still focused on the old “familiars” like copay. We still have a ways to go in getting people to “think different” about their health coverage and healthcare costs. In addition to showing them the numbers in a new way, it’s about educating and guiding them and helping them connect the dots to their own situation. We have an opportunity (and even obligation) to educate and guide employees prior to and during the open enrollment process. We must help them think in a realistic way about their insurance choices before they are actually in the process of making a decision and maybe, in the process, overcome old biases.