Fuzzy Multiattribute Consumer Choice Among Health Insurance Options

Abstract

People buy insurance to protect themselves against possible financial loss in the future. Health insurance provides protection against the possibility of financial loss due to health care use. A selection among health insurance options is a multiattribute decision making problem including many conflicting criteria. This problem can be better solved using the fuzzy set theory since human decision making is generally based on vague and linguistic data. We propose an integrated methodology composed of fuzzy AHP and fuzzy TOPSIS to select the best health insurance option. The considered option types, Health Savings Account (HSA), Flexible Spending Accounts (FSA), and Health Reimbursement Arrangement (HRA) are evaluated using eight different criteria under fuzziness. A sensitivity analysis is also realized. With competition increasing among health care plans, employees of large firms typically are faced with more opportunities for choice and more complex options than in the past. Most people understand that an insurance choice may be important for them, but their decision making also appears very limited. The dominant model of choice assumes careful examination and weighing of alternatives, but as the number of choices grows, this becomes an increasingly complex and difficult task.The selection of health plans and providers is, in part, an iterative process in which individuals better learn to make informed choices responsive to their needs. The instability in initial choices, however, suggests considerable failure to understand important differences among plans in access, cost, and freedom to select providers or to be reimbursed for services outside the plan. This is particularly true as populations select plans with which they have had little prior experience. Some preferences seem much more central to people's decisions than others. The primary preferences are related to the character of established doctor/patient relationships, cost, and special needs (Mechanic 1989).There are numerous different health insurance plans available in any country today. Because every person has their own unique situation, determining "the best" health insurance plan will vary from person to person. Situations vary and health insurance plans that are right for one person's situation may not be right for someone else's. This is why we propose a methodology for the selection among health insurance options in this paper.Individual choice over health insurance policies may result in risk-based sorting across plans. People are generally unsuccessful in selecting an alternative with more than four criteria. In approaching choice situations, people immediately make efforts to narrow the number of operative choices to a psychologically manageable set. Typically, individuals consider very few alternatives and focus the comparison only on a subset of the many relevant dimensions. People are more likely to select familiar options. Familiarity may be assessed by prior experience with a particular type of health plan arrangement (Mechanic 1989).The...

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