Inability to Understand Health Insurance Costs Consumers Hundreds of Dollars

Most people have a difficult time fully understanding their health insurance coverage, resulting in financial loss. The inability to accurately evaluate the various cost-sharing mechanisms leads many people to select a financially-dominated insurance plan—a plan which, given the premium and cost-sharing amounts, is economically suboptimal. For instance, spending $625 more in annual premium costs for a $500 lower deductible is economically irrational; yet, as shown below, the majority of people make that kind of mistake. A recent report analyzes the costs which result from these suboptimal choices. While people consider many factors besides cost when selecting health insurance, most of these preference differences were eliminated in this study and the problem persisted: 55 percent chose a financially-dominated plan.  The average savings which could be achieved by switching from various dominated plans are shown.

Obamacare Exchange Subsidies Were Over Generous

Because the subsidies are estimated and paid in advance based on income data from two years prior, many individuals received incorrect amounts and had to reconcile those errors when they filed their taxes this year. For the roughly two-thirds of subsidy recipients who had to pay money back, the average repayment was $729, according to a recent H&R Block report. Given the average premium and subsidy amount before these errors were reconciled, this repayment equates to an increased premium cost of 75 percent for these individuals, leaving only 58 percent of their plan premiums covered by the subsidy.

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