Research Report Consumer Decisionmaking in the Health Care Marketplace Erin Audrey Taylor, Katherine Grace Carman, Andrea Lopez, Ashley N. Muchow, Parisa Roshan, Christine Eibner C O R P O R A T I O N For more information on this publication, visit www.rand.org/t/rr1567 Library of Congress Cataloging-in-Publication Data is available for this publication. ISBN: 978-0-8330-9505-3 Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2016 RAND Corporation R® is a registered trademark. Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions.html. The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Preface For this report, researchers conducted a literature review to better understand how consumers make choices about health insurance enrollment and to assess how website design can influence choice when consumers select plans online. The team also considered how such factors as imperfect information and bounded rationality can influence consumers’ health plan choices and whether errors in decisionmaking caused by information failures or bounded rationality can be reduced with better website design. In addition to conducting the literature review, the team reviewed 20 health insurance websites, including 14 websites operated by state-based marketplaces, four private health insurance websites, and two public health insurance websites (the Medicare Plan Finder [Centers for Medicare & Medicaid Services, undated (b)] and the California Public Employees’ Retirement System website [California Public Employees’ Retirement System, 2016]). In reviewing these websites, the team attempted to understand how the design of the sites might influence choices. After a review of the team’s findings, the report concludes with a discussion about how websites could be improved to better support consumers’ enrollment decisions. We conducted the literature review and the review of the websites in the spring of 2015. This report will be of interest to policymakers and industry experts involved in designing health insurance websites and researchers who are interested in consumer choice. The work was sponsored by the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. However, the views, opinions, and findings presented here are ours and should not be construed as official government positions unless so designated by other documents. Questions concerning this report can be addressed to Christine Eibner ([email protected]) or Erin Taylor ([email protected]). This research was conducted within RAND Health. A profile of RAND Health, abstracts of its publications, and ordering information can be found at www.rand.org/health. iii Contents Preface ............................................................................................................................................ iii Figures........................................................................................................................................... vii Tables ............................................................................................................................................. ix Summary ........................................................................................................................................ xi Acknowledgments ....................................................................................................................... xvii Abbreviations ............................................................................................................................... xix Chapter One. Introduction .............................................................................................................. 1 Chapter Two. Literature Review ..................................................................................................... 5 Background ............................................................................................................................................... 5 Methods .................................................................................................................................................... 5 Consumer Choice in the Context of Health Care ..................................................................................... 6 How Do Consumers Make Decisions? ................................................................................................. 7 What Is the Appropriate Choice Architecture? Challenges to Effective Decisionmaking ................ 14 Previous Research on Health Insurance Website Design ....................................................................... 22 Marketplace Regulations Affect Website Design and Choices .......................................................... 22 Consumer Research Informed Website Design .................................................................................. 23 Health Insurance Choice Websites Sometimes Reflect Consumer Research Results ........................ 24 Summary ............................................................................................................................................ 26 Approaches to Future Website Development from the Literature ......................................................... 26 Consumers Might Incorrectly Calculate Cost or Put Undue Emphasis on Premiums ....................... 26 Choice Overload Might Lead to Suboptimal Decisions ..................................................................... 27 Consumers Might Have Difficulty Understanding Complex Health Insurance Information ............. 28 Consumers Might be Subject to Inertia or Status Quo Bias ............................................................... 29 Limited Numeracy, Literacy, and Knowledge of Health Insurance Adversely Affect Individual Decisions ...................................................................................................................................... 29 Standardization of Products Might Promote Competition ................................................................. 30 Is Nudging the Solution? .................................................................................................................... 31 Summary ................................................................................................................................................. 31 Chapter Three. Website Reviews .................................................................................................. 33 Introduction ............................................................................................................................................ 33 Methods .................................................................................................................................................. 34 Framework Design ............................................................................................................................. 34 Website Selection ............................................................................................................................... 35 Website Review Process ..................................................................................................................... 37 Limitations .......................................................................................................................................... 37 Findings .................................................................................................................................................. 38 Many Pathways Exist to Navigate Sites ............................................................................................. 38 v Websites’ Requirements for Personal Information Varied ................................................................ 41 Plan Display ....................................................................................................................................... 43 Coverage Exemptions and Penalty Information ................................................................................. 56 Summary ............................................................................................................................................ 57 Chapter Four. Conclusion ............................................................................................................. 59 Appendix ....................................................................................................................................... 63 Bibliography ................................................................................................................................