Most Americans struggle to figure out which health insurance plan will save them money.
A study of nearly 24,000 employees at a large Fortune 100 company found that 61% of them chose the wrong plan for their needs. The Carnegie Mellon University researchers who conducted the study estimated that the average employee could have saved $372 per year by choosing a different plan.
“The majority of employees chose plans that were more expensive regardless of how much health care they actually consumed the following year, and on average the cost of these choices was about 2% of the salary,” said Saurabh, an associate professor of economics at Carnegie Mellon. Bhargava, author of the study, told CNBC.
It is expensive for Americans. In 2018, more than 8% of total US household spending was on health care costs. This represents an increase of approximately 37% since 2004, compared to 5.9% of total household expenditure.
Forty-six percent of Americans say they find it difficult to pay for medical bills not covered by their insurance, according to an October 2021 survey from the Kaiser Family Foundation.
“It seems that people are unable to maximize their well-being because they have a hard time understanding the decision-making environment,” said Anya Samek, associate professor of economics at Rady School of Management. University of California San Diego.
A major problem with choosing a health care plan is that people don’t understand the jargon that insurance companies use to discuss each plan. According to Policygenius’ 2020 Health Insurance Knowledge Survey, only about 1 in 3 people are able to correctly identify three common health insurance terms: premiums, copayments, and deductibles.
“This fundamental lack of literacy, I think, contributes to a number of issues that people have exhibited when choosing a plan,” Bhargava said.
Watch the video above to learn why Americans struggle to choose the most financially beneficial insurance plan for them and how to avoid leaving money on the table.
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