The Complexity of Choosing a Health Plan

A confession: I am a health economist, and I cannot rationally select a health plan.

I buy health insurance through the Federal Employees Health Benefits Program, or F.E.H.B.P., which is very similar to the Affordable Care Act’s exchanges. Like the exchanges, the federal employee program runs an online marketplace with a choice of plans, which vary by region.

Most workers don’t have a lot of choice among plans offered by their employer. But the federal employee program offers me about 20 plans to choose from, and a similar number to almost all other federal employees. This puts me in a position akin to a consumer selecting among many plans in an Affordable Care Act exchange or a Medicare beneficiary selecting among many Medicare Advantage plans.

I have a lot of sympathy for consumers in these markets. Comparing health plans is hard, even for a health economist like me. (And it’s arguably harder on the Affordable Care Act exchanges, where consumers may also need to report income and apply for subsidies. Federal employees just need to choose a plan.) Each year when I shop for coverage through my employer, I feel like I’m buying myself at least as much grief as I am insurance.

In one sense, buying health insurance is not different from buying any other product, like a laptop computer or a refrigerator. There are two things to consider: how much you pay (the price) and what you get (the quality). Quality can mean a lot of things for a health plan, and your criteria may differ from mine. For me, the most important aspect is which doctors and hospitals are in its network and, hence, most generously covered. (Some plans cover out-of-network providers less generously; some not at all.)

A health plan’s price is more amenable to quantitative analysis, but still hard to assess.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary