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Factors Associated With Health Insurance Literacy

Proficiency in Finding, Selecting, and Making Appropriate Decisions

Adepoju, Omolola; Mask, Andrew; McLeod, Alexander, PhD

Journal of Healthcare Management: March-April 2019 - Volume 64 - Issue 2 - p 79–89
doi: 10.1097/JHM-D-18-00021

EXECUTIVE SUMMARY This study set out to determine individuals’ proficiency in finding, selecting, and making appropriate health insurance decisions for a positive healthcare experience. Primary data were collected by means of a cross-sectional online survey of 1,469 adults in the United States. Using separate multivariate regression models, we examined the relationships between patient characteristics and an individual’s ability to choose, compare, manage, and use health insurance plan benefits. Across all four constructs, younger individuals exhibited significantly lower health insurance literacy. Compared to males, females reported lower levels of health insurance literacy. However, females were better able to compare health insurance benefits and efficiently use health plan benefits. Respondents who reported private insurance coverage or being uninsured had significantly lower health insurance literacy levels. We concluded that health insurance literacy is a salient issue that affects optimal healthcare use. Identifying characteristics associated with limited health insurance literacy is useful in guiding efforts to address health insurance literacy among healthcare consumers.

assistant professor, School of Health Administration, Texas State University, San Marcos, Texas

School of Health Administration, Texas State University

assistant professor, Department of Health Information Management, Texas State University

For more information about the concepts in this article, contact Dr. Adepoju at

Dr. Adepoju is now employed by Optum.

The authors declare no conflicts of interest.

Supplemental digital content is available for this article. Direct URL citations appear in the printed text and are provided in the HTML and PDF versions of this article on the journal’s website (

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The most visible national policy aimed at improving population health is the Affordable Care Act (ACA). This law was intended to address the determinants of poor insurance coverage and increase access to healthcare through expanded eligibility to Medicaid programs and subsidized health plans via health insurance exchanges. With these improvements come new responsibilities for consumers to make informed decisions on plan selection and healthcare use. Such decisions can only be made when there is a certain degree of familiarity with health insurance terminology and processes.

Health literacy is defined as “the degree to which individuals have the capacity to obtain, process, and understand basic health information and services needed to make appropriate health decisions” (Ratzan & Parker, 2000, p. 8). Health insurance literacy, a closely related concept, reflects “the degree to which individuals have the knowledge, ability, and confidence to find and evaluate information about health plans, select the best plan for their own (or their family’s) financial and health circumstances, and use the plan once enrolled” (Quincy, 2012, p. 7). Although these concepts are related, health insurance literacy provides a bird’s eye view to an often ignored and salient barrier to promoting a culture of health. The U.S. healthcare system is increasingly complex and requires consumers to understand the terms and processes used unless they choose to outsource the decision-making responsibility (McCormack, Bann, Uhrig, Berkman, & Rudd, 2009). Limited health insurance literacy may undermine healthcare reform efforts and slow the progress toward attaining the Triple Aim objectives in healthcare: improving population health and patient experience while reducing the per capita cost of care.

Others have suggested that consumers’ ability to understand, shop for, and use their health insurance plan varies and is extremely limited for some (Consumers Union, 2012; McCormack et al., 2009). Consumers Union (2012) also reported deep-seated confusion and lack of confidence with respect to health plan cost-sharing among both insured and uninsured individuals, resulting in the selection of suboptimal plans for respondents’ specific healthcare needs. Although the ACA addresses some of the plan selection challenges through “navigators” and in-person counselors, consumers are left to grapple with post plan-selection tasks that directly affect their healthcare consumption patterns (Centers for Medicare & Medicaid Services, 2015; Patel et al., 2013). Individuals with limited knowledge on how to use an insurance card or limited understanding of key cost-sharing requirements make uninformed decisions, which in turn can lead to care in more expensive settings or to advanced stages of poor health (Vernon, Trujillo, Rosenbaum, & DeBuono, 2007).

Policy-makers, practitioners, and healthcare administrators agree that successful healthcare reform hinges on significant local, state, and national efforts to improve low health literacy in diverse populations (Somers & Mahadevan, 2010). Health literacy is important to achieving better health outcomes, and health insurance literacy modifies access to healthcare by influencing whether individuals avoid or delay seeking needed healthcare (Dorn, 2011; Morgan et al., 2008; Paez et al., 2014). This study examined patients’ proficiency in finding, selecting, and making appropriate decisions for a positive healthcare experience. Findings from this study will prove useful in identifying characteristics associated with limited health insurance literacy, thereby guiding efforts to address insurance literacy among healthcare consumers.

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The validity of the Health Insurance Literacy Measure (HILM) has been reported by Paez et al. (2014). Building on earlier studies, we designed an online survey that included the HILM questions related to choosing, comparing, managing, and using health insurance benefits. Comparing health insurance examines the ability to determine benefit differences among policies, deductible requirements, and covered providers. Choosing health insurance analyzes an individual’s ability to decide payment options for coverage, estimate costs, ask personalized questions about plan features, and obtain plan information. Managing health insurance encompasses an individual’s ability to handle coverage claims rejections, predict out-of-pocket costs, and know how to investigate coverage benefits before receiving healthcare service (Paez et al., 2014). Using health insurance considers the likelihood that individuals would use a plan’s member services to tell them what medical services their health plan covers; use a system to look into what their health plan will and will not cover before they get healthcare services; use a system to review the statements they receive from their health plan, including explanation of benefits; and the ability to find out if a doctor is in-network before they see him or her (McLeod & Adepoju, 2018; Paez et al., 2014). The survey is provided as Appendix A to this article, published online as Supplemental Digital Content at

This project was approved by the university institutional review board in March 2016. The survey consisted of two sections: section one collected respondent demographics; section two included questions about health insurance knowledge related to comparing, choosing, managing, and using health insurance.

The survey was designed in Qualtrics and administered through the Amazon Mechanical Turk crowdsourcing Internet marketplace in October 2016. Amazon Mechanical Turk administers online surveys to individuals across the United States for a fee. In this study, researchers paid Amazon a small stipend that covered administrative and respondents’ fees. This distribution technique enabled an increased research scope of the adult population. Researchers received survey responses within a month. A total of 1,510 respondents answered the survey, of which 1,469 contained complete responses.

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In accordance with participant responses to questions in each of the four health insurance literacy constructs, we created composite scores of self-reported ability to choose, compare, manage, and use health insurance. Four separate multivariate regression models examined the relationships between patient characteristics and each composite score. All analyses were conducted in Stata 12.2.

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The characteristics of the surveyed population appear in Table 1. Most respondents were male (54%), white (70%), and non-Hispanic (89%). Income was distributed across four ranges, with the largest number of respondents in the less than $25,000 category (33%). Most respondents were insured (86%), chose their own insurance (53%), and were covered under private insurance plans (46%). About three-quarters of the sample reported at least one primary care visit in the past year. Only 14% of individuals in this study identified as college students. The mean age was 35.1 years.

Table 1

Table 1

On a scale of 1 to 7, respondents reported an average score of 4.39 for the ability to choose, 5.34 for the ability to compare, 4.35 for the ability to manage, and 5.29 for their ability to efficiently use.

Table 2 displays the results from the regression models for the ability to choose, manage, compare, and use health insurance. Overall, four variables—age, gender, income, and type of insurance and whether the respondent selected his or her insurance plan—displayed the strongest association with health insurance literacy. Individuals identified as college students reported lower health insurance literacy across all four constructs examined. However, none of the lower health insurance literacy scores attained statistical significance.

Table 2

Table 2

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Ability to Choose

A unit increase in age was significantly associated with a 0.02-unit increase in the ability to choose health insurance plans. Compared to males, females reported lower health insurance choice literacy levels (P = 0.002). Respondents with higher incomes reported better health insurance choice literacy (P < 0.01). Individuals with private health insurance coverage reported lower health insurance choice literacy (P < 0.01), compared to respondents on government-sponsored insurance plans. Respondents who indicated they chose their health insurance plans reported higher literacy choice levels (P < 0.01) compared to respondents who did not select their current plans.

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Ability to Compare

An individual’s ability to compare health insurance plans was significantly associated with age, gender, income, insurance status, and whether an individual chose his or her own health plan. A unit increase in age was significantly associated with a 0.02-unit increase in comparing health insurance literacy; females reported higher literacy levels (P < 0.01), as did those in the $75,000+ income bracket (P = 0.02). Compared to respondents on government-sponsored insurance plans, uninsured individuals and those who were unsure about their insurance type had remarkably lower comparing literacy levels (P < 0.01). Those who selected their current health insurance plans were better able to compare plans (P = 0.04) compared to those who did not choose their own insurance plans.

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Ability to Manage

As income increases, an individual’s ability to manage health insurance increases as well (all P values were < 0.01). Respondents who chose their own health plans reported higher managing health insurance literacy levels (P < 0.01). However, compared to respondents on government-sponsored insurance plans, uninsured respondents and individuals with private health insurance plans reported lower ability to manage health insurance benefits (P < 0.01). Increasing age was significantly associated with a 0.02-unit increase in the ability to manage health insurance plans.

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Ability to Use

Respondents’ ability to use health benefits efficiently was strongly related to age, gender, and insurance status. Women were more likely to correctly use health benefits (P < 0.01), and uninsured individuals were significantly less likely to be able to correctly use health insurance. A unit increase in age was significantly associated with a 0.02-unit increase in using health insurance literacy. None of the other covariates in the ability to use model attained significance at the 0.05 level.

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This study examined the relationships between respondents’ characteristics and an individual’s ability to choose, compare, manage, and use health insurance plan benefits. We found distinct patterns across the four health insurance literacy constructs. Across all four constructs, younger individuals exhibited significantly lower health insurance literacy. This is particularly important because younger individuals often represent a population purchasing health insurance benefits for the first time. Their ability to choose, compare, manage, and use health insurance is key to balancing insurance risk pools. Although the ACA includes provisions that allow individuals to remain on their parents’ health insurance policies until they reach 26 years of age (U.S. Department of Health and Human Services, n.d.), it is important for this population to be exposed to appropriate health insurance literacy terms before they reach the age of consumer independence.

Although the trends did not attain statistical significance, respondents who identified as college students displayed lower health insurance literacy abilities across all four constructs. This new finding corroborates earlier research that reported college students as having lower abilities to choose (McLeod & Adepoju, 2018)—and is particularly important because college students represent a group typically considered literate in other metrics. These trends suggest that higher education does not necessarily align with improved health insurance literacy.

Another key finding was that privately insured individuals were significantly less able to choose, compare, and manage plans when compared to individuals with government-sponsored health insurance. This did not come as a surprise, especially because of the plethora of private insurance options compared to either enrolling in Medicare or Medicaid. (Recently, consumer choices on the private health insurance marketplace have become more limited.) Individuals on government-sponsored insurance rarely must deal with navigating high-cost deductibles, sometimes with values greater than $3,000, before receiving care. Although the ACA included protective measures such as essential benefits and annual dollar limits on insurance companies’ charges for those benefits, new consumers enrolled in private insurance plans still experience confusion and remain at risk for the consequences of poor insurance selection (Paez et al., 2014).

Our results also suggest that females had a higher competency in comparing and using health insurance benefits, but not in choosing or managing health insurance benefits. In fact, females reported significantly lower competencies in choosing. This finding aligns with numerous studies that report higher healthcare consumption patterns among females (Bertakis, Azari, Helms, Callahan, & Robbins, 2000; Hunt, Adamson, Hewitt, & Nazareth, 2011; Kaiser Family Foundation [KFF], 2016a; Redondo-Sendino, Guallar-Castillón, Banegas, & Rodríguez-Artalejo, 2006), which may provide additional health insurance educational experiences through greater exposure to healthcare services. The inverse choosing relationship can be attributed to the proportion of women serving as primary policy holders. A KFF study (2016b) notes that women are less likely than men to be insured through their own job and more likely to be covered as a dependent. Coverage as a dependent could mean limited opportunities to select and administer their insurance policies.

Despite efforts such as Medicaid expansion and subsidies in the ACA, income remains a significant determinant of health insurance (KFF, 2016a), and as this research shows, a determinant of health insurance literacy. It is well established that lower income, as a socioeconomic determinant, predicts poorer health outcomes. When income is limited, individuals focus their resources on immediate necessities such as food and forgo other needs such as health insurance.

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Implication for Practice

For health insurance enrollees, some form of health insurance benefit education is provided at the point of plan selection. However, these efforts are insufficient to impart health insurance literacy. To bridge literacy gaps, we suggest that educational opportunities occur more frequently through the course of the plan coverage. These opportunities should target populations with lower health insurance literacy levels: younger individuals and persons enrolled in private health insurance plans. Educational opportunities could take the form of short videos on health insurance websites and social media that younger individuals routinely use. These videos should cover topics such as choosing, comparing, and managing health insurance benefits. Also, they should simulate real cases a hypothetical member would have when navigating the health insurance benefit system. For example, a short video clip on “what to do if your health plan refuses to pay for a service you think should be covered” will be beneficial to young members who are struggling with how to use health insurance benefits. The videos should end with dedicated phone numbers that members can call if they have questions or concerns.

It is also important for payers to partner with providers in improving insurance literacy competencies. Most provider offices have monitors that display interesting information for patients and their families as they wait to be called in for treatment. These monitors often display upcoming healthcare events, new treatment modalities, and new prescription medication. Information on health insurance literacy with specific examples on comparing, managing, and using benefits can also be shared on these platforms. For example, a short video on understanding “what you would have to pay for a specialist visit” would be of interest to patients waiting to see a specialist. For physician practices, this is a potential win-win scenario where providers have patients receiving care in the right settings and payers can accrue better member satisfaction.

Health insurance literacy education can also be promoted via healthcare literature. Most waiting rooms have magazines and printed healthcare materials. Insurance-specific benefit materials can be provided, too. Payers may also send educational health insurance literature to members via mail. Materials can include aids to help patients in the health insurance decision-making process. These aids can provide information about options and outcomes and can help curtail confusion around the use of health insurance.

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Study Limitations

This study is not without limitations. We focused on a relatively small sample whose respondents may have been at risk of survey fatigue. All responses were received within the same month, which might affect the external validity of survey responses. In addition, individuals might have felt pressured to respond hurriedly without giving much thought to each question. Because of the nature of survey administration, we were unable to compute a survey response rate (because we were unable to assess the total Amazon clientele that the survey was sent to). Most important, the findings from this study show positive or negative associations and do not speak to causal relationships between the examined variables and outcomes.

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Identifying opportunities to improve health insurance literacy becomes paramount considering the industry shift toward consumer-directed plans, including high-deductible health plans with a health savings account or health reimbursement arrangement. With these trends, consumers will be responsible for making informed health insurance choices. Targeted education for specific populations may yield benefits in improving overall health insurance literacy levels and consequently healthcare use. Future efforts to eliminate health insurance waste should target improving inverse indicators of the ability to compare, choose, and manage health insurance.

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