Stacie Dusetzina is an associate professor of health policy at Vanderbilt University School of Medicine and a member of the 2021 Tradeoffs Research Council. Her research focuses on measuring and evaluating the costs of prescription drugs.

The long-delayed and still controversial Tokyo Summer Olympics open in Tokyo today, which means much of the world will be fixated on gold, silver and bronze for the next few weeks. But when it comes to buying health insurance through the Affordable Care Act (ACA) marketplaces, those metals are always relevant — “bronze” health plans generally have low premiums and high cost-sharing, “gold” plans have higher premiums and lower cost-sharing, and “silver” plans are in between. 

This can be a useful shorthand that makes the very difficult task of selecting a plan a little easier. One consumer may be happier paying a higher monthly premium in exchange for a lower deductible, while another might prefer to pay less in premiums and pay more out-of-pocket when they need care. But a new Milbank Quarterly paper shows that this shorthand doesn’t always work and can lead people to pay more for worse coverage.

Researchers Petra Rasmussen of RAND and David Anderson of the Duke Margolis Center for Health Policy looked at what happened when California’s ACA insurance exchange — Covered California — included two silver plans that were “dominated,” meaning the plans had nearly identical benefits to gold plans offered by the same insurer, but the silver plans had higher cost-sharing and higher premiums. On average, they found the dominated plan cost nearly $500 more per year in premiums, and, if the beneficiary actually needed medical care, they would pay more for that too. In other words, this was a “pay more, get less” scenario. 

Unfortunately, a lot of people picked these dominated plans — 4% of all enrollees in Covered California and 20% of people enrolled in plans sold by the two insurers offering these dominated plans. The researchers found the biggest predictor of picking a dominated plan was being in the same plan the year before. They suggest this could be due to enrollees’ “status quo bias,” or instead of picking a new plan, the enrollee might have skipped the difficult and stressful experience and let their plan auto renew. Auto-renewal has been shown to increase coverage by making it easier for people to stay enrolled, but this study shows it can also lead to enrollment in objectively worse coverage because picking the “right” plan once doesn’t mean the same plan will work the best for you next year. Another surprising finding was that people who had help from an enrollment assister were more likely to pick a dominated plan than those who went it alone. The authors speculate that enrollment assisters may not have been aware of the new plan coverage and costs.

The authors acknowledge these California results may not be generalizable to the rest of the country, but they do emphasize how study after study shows how hard it is to pick the right plan, whether it be employer-sponsored plans, the ACA exchanges or Medicare. The authors point to some helpful policy fixes for this particular situation, including changing how ACA exchanges present information about plans, notifying enrollees if they have selected a dominated plan or simply removing dominated plans from the menu of options. Anything that can make picking a plan a little easier and make it less likely for people to pay more for worse coverage seems like a very good idea.