Confidence is High Despite Gap in Health Insurance Literacy

October 24, 2014

A recent report published by the American Institutes for Research (AIR) revealed a wide gap in American’s basic knowledge about health insurance. Americans are overall moderately to very confident in their ability to select and use a health plan that best fits their family; however, when they were tested on their health insurance literacy, the results did not live up to the confidence they exhibited. Here is an overview of the AIR’s recent issue brief, A Little Knowledge Is a Risky Thing: Wide Gap in What People Think They Know About Health Insurance and What They Actually Know.

Background on the Report

The issue brief was based on results from the American Institutes for Research Health Insurance Literacy Survey. The survey sampled 828 people ages 22 through 64 who were uninsured, privately insured, or insured through Medicaid.

The survey was used to validate the American Institute for Research’s Health Insurance Literacy Measure (HILM), which consists of 21 questions assessing self-confidence and the behaviors associated with choosing and using health insurance. The HILM was validated with 18 objective, multiple choice questions designed to assess actual understanding of health insurance terms and concepts.

Confidence in Selecting and Using a Health Insurance Plan

More than half of the people surveyed were “moderately or very confident” in their ability to select and use a health insurance plan that is a good fit for their family. While the people surveyed were confident in their knowledge, the got an average of 60 percent of knowledge and skill items correct when their health insurance literacy was assessed.

Key Findings about Health Insurance Literacy

  • A majority of those surveyed were able to identify common insurance terms, such a premium (81 percent) and an appeal (80 percent)

  • Overall, consumers did not have a firm understanding of different plan types; only about half could identify general characteristics of an HMO, and only 23 percent could identify characteristics of a PPO

  • Three out of four individuals surveyed reported being “moderately or very confident” that they have the knowledge to use health insurance; however, only 20 percent could accurately identify the amount they would pay for a visit to an in-network doctor when presented with a cost-sharing scenario that included a copayment, deductible and coinsuranceout-of-pocket_costs-1

    Source: American Institutes for Research Health Insurance Literacy Survey

  • When comparing health insurance plans, 42 percent were “not at all” or “somewhat likely” to check what a plan will and won’t cover before obtaining healthcare services

Health Insurance Literacy Varies among Demographics

  • Younger individuals (ages 22 to 34) got an average of 55 percent of knowledge and skills items correctKnowledge_with_age

  • Older individuals (ages 55 to 64) got an average of 63 percent of knowledge and skills items correct

  • Individuals who had not visited a physician in the past year on average got 49 percent of knowledge and skills items correct

  • Individuals who has visited a physician several times a year scored an average of 64 percent on the knowledge and skills items

  • Individuals who annual incomes of less than $25,000 on average got 45 percent of knowledge and skill items correct

  • Individuals who earned annual incomes of greater than $75,000 on average got 67 percent of knowledge and skill items correct

Read the full issue brief from the American Research Institute here

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