Confusion, another way health insurance is costly

Young adults often misunderstand how out-of-pocket health care costs add up according to an article published in the Journal of Adolescent Health. Despite the fact that young adults identify financial strain as the biggest deterrent to paying for coverage, the study found that the vast majority of young adults simply don’t understand what it is that they are paying for. As a result, young adults may be choosing plans without an adequate understanding of what certain plan characteristics mean.

Method

The study observed 33 young adults, ranging in age from 19 to 30 years, from January to March 2014 while they shopped for health insurance on the HealthCare.gov website. Following the shopping experience, researchers interviewed them to determine their perceptions regarding certain advantages or disadvantages of insurance. The study aimed to determine which factors young adults found important when choosing a plan. The study also included a one-month follow-up to ascertain how participants felt about their enrollment decisions.

Literacy

Of the 33 young adults enrolled, 27 completed the follow-up interview. Those individuals said that the most important advantage of health insurance was the access to health care services and resulting peace of mind. They also expressed the opinion that the primary disadvantage of health insurance was the financial strain it produced. With respect to the health insurance literacy of the young adult participants, the study found that young adults were fraught with misunderstanding. Specifically, 48 percent of young adults could not correctly define deductible as the portion of a plan holder’s cost that is paid prior to the insurance paying its portion. Additionally, a much higher rate, 78 percent, of the participants incorrectly defined co-insurance, misunderstanding that it is the portion of the cost paid by plan holders after the deductible has been met. Participants also expressed that deductibles and premiums were the primary factors influencing plan selection.

The Participants

On average, the participants in the study were 26 years old. The majority of the participants were white and, although nearly half had completed graduate or professional school, the average participant income was less than $40,000 a year. Despite the fact that 60 percent of the participants were uninsured when the study began, most of the participants were in good health and indicated that they visited a health care provider at least once in a year. During the observations of the participants shopping, the majority of participants referred to Silver plans as a middle-of-the-road option. At the follow up interviews, eight of the 33 participants had enrolled in plans through HealthCare.gov.  Six of those participants chose silver plans, one chose a catastrophic plan, and another chose a bronze plan.  The study found that the participants were satisfied with their selections. Five of the participants remained uninsured at the time of the follow up interviews. Those five participants cited unaffordability of insurance coverage as their reason for remaining uninsured.

Impact

Dr. Charlene Wong of the Children’s Hospital of Philadelphia and the University of Pennsylvania said that “Their confusion over these basic terms can have real consequences on their cost exposure down the road.” The researchers acknowledged some drawbacks of the study, including the fact that the participants were highly educated and not necessarily representative of young adults nationwide. However, the researchers concluded that young adults’ perspectives on health insurance and enrollment should be taken into consideration when developing health insurance plans and communicating about those plans to consumers. For example, the communications could illustrate how the deductible and coinsurance affect the cost of an emergency room visit. Researchers urged that if young adults are going to obtain plans that are appropriate for their financial and health needs, steps need to be taken to improve young adults’ health insurance literacy.