Most Workers Make Bad Health Insurance Decisions

Even though the majority of workers receive health insurance coverage on the job, a new survey has found that many of them understand surprisingly little about their health plans and are leaving money on the table. The “Health Insurance Literacy Survey” by Healthcare.com found widespread misunderstanding about how copays and deductibles work, and what premiums and benefits are. Experts say that when people don’t understand their health insurance they may make poor coverage decisions, such as choosing plans that provide more benefits than they need, or too few. Those poor choices can be costly in terms of the premiums they pay or what they pay in copays, coinsurance and deductibles out of pocket. Some of the key findings:

• 26% of Americans surveyed say lack of health insurance understanding caused them to receive a higher-than-expected medical bill.
• 41% were unable to correctly answer what “in-network” means. Understanding the meaning of in-network is crucial when choosing where to receive treatment and avoiding paying excessive fees for medical services when going out of network. Most health plans do not cover out-of-network care.
• 59% don’t understand that low-deductible health insurance plans start paying out sooner than high-deductible health plans (HDHPs).
• 22% incorrectly believe that if they think their medical expenses will be low in the coming year, they should choose a low-deductible plan.
• 43% of those surveyed could correctly identify what a health savings account is, and 20% could not describe a single feature of these tax-advantage accounts.

What it costs them

The costs of choosing the wrong plan can be in the thousands of dollars per year, according to a 2021 analysis conducted by Trevor Collier and Marlon L. Williams, both associate professors of economics at the University of Dayton in Ohio. Collier and Williams found that 97% of 2,300 employees studied would have been better off choosing a plan that had lower premiums, but higher cost-sharing for medical services. Despite that, 23% chose the higher premium plan anyway. They calculated that the average cost per year of choosing the wrong plan was more than $2,000. The study shows just how little many people know about their health insurance coverage. As their employer, you can help your employees make good choices about their health coverage.

What you can do

During your open enrollment meetings, you should go over some of the basics of coverage and explain that people who are not frequent health care users may be better off in high-deductible health plans, that have a lower premium in exchange for more out-of-pocket expenses. Conversely, people who have chronic conditions are not good candidates for HDHPs. Make sure to schedule a series of meetings in the run-up to open enrollment where you can go over the basics of how health insurance works. Get your human resources team to urge staff to schedule time with them if they have any questions.