Order & Partition Custom Health Plan Options

The notion of choice architecture is that the format in which we present alternatives to the consumer significantly influences the consumer’s choices. A set of studies at Erasmus University Rotterdam, Columbia University, and University of Pennsylvania provides an example of choice architecture with findings about selecting a healthcare insurer. The researchers note that such decisions are complex because of the differences among plans in conditions covered, deductible amounts, and required copays; are important because of the effects of healthcare coverage on a subscriber’s lifespan and financial stability; and are of societal interest because of evidence that consumers often overpay for coverage.
     A primary reason consumers have difficulty making the best decisions involving future risk, such as healthcare insurance, is that people focus excessively on the worst possibilities and pay insufficient attention to the probabilities of the various future situations. Artificial intelligence which uses information about the individual plan shopper and the range of plan characteristics allows for optimizing choice.
     Consumers are likely to rebel against being given only one plan to select from. What’s needed is a set of recommendations and a nudge toward the best one rather than a directive. In my email exchange about the studies with Prof. Benedict Dellaert, the lead researcher, he wrote, “Besides the fact that consumers may not like receiving only one plan as a recommendation, another important reason to offer them a small set is that models/algorithms will often not have a perfect prediction for each consumer. Offering choice can improve the consumer-product fit.”
     The choice architecture tested in the studies combined ordering with partitioning. In one version of the presentations, healthcare coverage options were listed roughly in order from best to least good in likelihood of minimizing cost for the consumer. The options were then partitioned by initially limiting the display of choices to the top candidates, with the consumer able to view all the remaining alternatives by clicking on a button.
     Study participants were more likely to select an optimal plan with this type of choice architecture than with an unranked list or with only ordering or partitioning.
     Regarding you using such a choice architecture, Prof. Dellaert cautions, “The model/algorithm must be of sufficiently high quality, including in terms of reflecting the consumer’s best interest, for the ordering with partitioning to help. If the ordering is antagonistic to the consumer preference, the partitioning may instead harm the consumer decision outcome.”

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