There are many problems with health insurance exchanges using private insurers. It adds yet another middleman layer and set of costs, and hasn’t proven to control costs in the past. Moreover, they can’t do much for the real cost problem caused by certain providers’ monopolies.

To me, though, the most fundamental problem is that they depend on people being highly knowledgeable health insurance shoppers and that is never going to happen. Kaiser Health News has a good story shows just how bad health literacy is in this country:

It’s a big problem. About one in 10 people in the U.S. have a proficient level of health literacy, according to an assessment by the U.S. Department of Education – that is, they could understand and use health-related information in daily activities.

And researchers at the USC Schaeffer Center for Health Policy & Economics determined that just weeks before open enrollment began last year for state and federal insurance exchanges, more than 40 percent of Americans couldn’t explain a deductible – the amount patients owe for health services before insurance kicks in. The authors found that those likely to benefit most from the health law – uninsured and low-income Americans – had the least awareness. [...]

Insurance is often perplexing even to savvy consumers. Acronyms abound: HMOs, PPOs, ACOs. Letters arrive in the mail saying “this is not a bill” yet appear to be just that. Some detail exorbitant prices that have nothing to do with what is actually owed.

This is a remarkably number given that healthcare makes up 10.62 percent of total employment in this country according to the Altarum Institute.

Understanding how current insurance policies work is not something that can be fixed with an outreach campaign or a ten minute tutorial. It is so deeply complex that you are unlikely to find anyone with a decent grasp of how all the moving parts fit together who doesn’t work in the industry.

The idea that most people are going to be able to correctly compare the deductibles, co-pays, co-insurances and premiums of each plan while cross checking their local provider networks to decide the best financial move based on their individual probability of developing every known medical condition that year is pure fantasy.

The only way to really assure most people are making the best choice on an exchange is to highly standardize the plans so they are identical except for two or three clearly defined variables. Of course at that point there is very little reason to even have an exchange instead of just directly providing people a plan via the government.

Photo by Steve Rhodes under Creative Commons license