Consumer Behavior In Rhode Island Shows Shopping For A New Health Plan Can Pay Off

It might feel sometimes like you’re shopping in a vacuum, where you are the single entity in the world that matters — “Do I buy this shirt? Do I want to shop around for a new health plan?” — but the truth is, the choices we make as consumers can have an effect on everybody else. For example, if you didn’t shop around and change your health plan from last year, you might find that the price of that plan has gone up for everyone.

However, because not everyone feels the urge to shop more than once for insurance, which is why the federal government ultimately decided to have those who signed up for coverage in 2014 automatically renew under those same programs in 2015, reports the New York Times.

This, rather than try to push people to shop around and sign up again every year. That way, people who weren’t paying attention wouldn’t lose coverage. Better expensive coverage than none at all, it seems.

But it’s different in Rhode Island, where the state runs its own marketplace and requires customers to go back online every year to find a health plan. The numbers show that doing it that way has more people switching things up to find the best plan for them, which often means the least expensive one.

This makes a difference. According to the NYT:

The divergence has led to an interesting experiment in consumer behavior. In the federal marketplace, so far, 35 to 40 percent of 2014 customers came back to and picked a plan for this year, according to the Department of Health and Human Services, while the remainder were automatically renewed. In Rhode Island, 78 percent of people have gone back to the marketplace to shop, according to state officials.

Of those who came back to the Rhode Island market, 60% chose a different plan than the one they’d had in 2014, which is a really high number for a health insurance market. To that point, only around 13% of seniors enrolled in Medicare prescription drug plans switch plans in a given year, the Times reports.

It isn’t just a state vs. federal thing either perhaps, as Massachusetts only saw a 7% switch rate for its customers back in the pre-Affordable Healthcare Act days. The numbers for the states aren’t in yet.

Christine Ferguson, the former director of HealthSource RI who made the decision to require customers to come back, says the state wanted it that way to make sure that consumer choices were shaping the state’s health insurance market, instead of the other way around, which could only make for fewer choices and pricier plans.

With consumers thusly engaged, companies would feel more inclined to offer the most popular products at competitive prices, Ferguson says.

“Consumers can put pressure on carriers and providers to do a better job of providing what they as consumers want,” she said.

And switching from the most popular 2014 plan often led to a much better deal in most markets, the Times reports, when going to a new one in the same category: A federal study found that 70% of consumers would save money if they switched their plans.

It shows in Rhode Island, where Times notes that the cost of the least expensive plan in the “silver” category sunk more than 10% while the most popular silver plan in 2014 went up in price. People who would’ve been automatically renewed for that plan would’ve ended up paying more.

And when consumers get out there and root around in the dirt, it could change how insurance carriers act. The Times notes a study that argues that the low switching rate in the Medicare market has produced sharp upticks in the prices of popular plans. If no one’s gonna move around anyway, why not charge them more?

On the other hand, there are those lazy people who are missing out on coverage because they didn’t return to the healthcare market, despite promos and a big campaign from the state. About 22% of the state’s customers from December don’t have health insurance. That number likely includes, however, people who found jobs with healthcare benefits, got married or something else changed to allow them to get coverage elsewhere.

Which would you prefer, if you had a choice?

A Rhode Island Rule on Health Enrollment Offers a Consumer Experiment [The New York Times]

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