High Insurance Costs Linked to Abundance of Complex Choices

The other strategy is the high-margin strategy where you set prices high, and you know you'll lose business from the more well-informed, but you will pick up enough of the less informed. Your volumes will be lower, but you're receiving higher margins."

In some other countries, the authors argue, the government takes a role in the private insurance market to alleviate the shopping problem, "because they have prescriptions on what the basic plan must look like," says Cebul. "The downside is that if you think there are benefits to letting lots of plans proliferate, you're limiting innovation of new health coverage products."

They permit the sales of auxiliary plans, mostly bought by individuals, but the group plans are prescribed. The authors predict that state health insurance exchanges may begin to alleviate the problem.

"If exchanges work well, the difference in premiums should start to go down, so then it becomes a little less attractive to send workers to individual market," says Votruba.

If they don't work well, employers will begin to offload their insurance responsibilities to the exchanges, paying the penalty and forcing their employees to obtain their own insurance in the individual market, and right now, individuals get very bad value in the market," says Cebul. "Anything that fosters churn has got to be an impediment to long-term investments in health."

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