As you probably know, 2023 saw the introduction of several “standardized” individual health plans designed by the Department of Health and Human Services (HHS). The 2023 Marketplace Rule from HHS required health insurers to offer “standardized QHP options designed by HHS at every product network type…, metal level, and throughout every service area that they offer non-standardized QHP options.” At the time, HHS “did not propose to limit the number of non-standardized plan options that issuers can offer but noted that” the Department would consider “whether it would be appropriate to do so in a future plan year.”

It didn’t take long. For 2024, the number of non-standardized plans health insurance companies can offer through the Marketplace will be limited. As the Kaiser Family Foundation (KFF) explains, for 2024, “CMS will limit insurers to offering no more than 4 non-standardized plan options for each SPD option they offer in a metal level for a given product/network type.” And for plan years 2025 and beyond, the “limit on the number of non-standardized plan offerings will be further reduced to 2.”

These limitations are being put in place in an effort to reduce consumer confusion. And it’s easy to see why they would be confused – in 2023, “the average enrollee faces more than 100 plan options.” This can be overwhelming. Studies cited by KFF “found that too many health plan choices – for example, more than 30 – confuses and overloads consumers and leads to poor enrollment decisions.”

Of course, it is part of our jobs as brokers to conduct a fact-finding interview with our clients so we can understand their needs and make a plan recommendation. But having so many plans to choose from makes it difficult even for brokers to sort through all of the options to select the most appropriate plan for their clients. Capping the number of plans, while it does limit consumer choice a bit, may actually help consumers make a decision.

For more information about the detrimental effects of having additional options to choose from, you may want to take a look at the book The Paradox of Choice: Why more is less by Barry Schwartz. As the author explains, in America, we equate choice with freedom. But this freedom is paradoxical because having too many choices, instead of creating even more freedom, actually limits it. Our job is to find the sweet spot on the curve where there are enough but not too many options.

The Wikipedia page about the book summarizes a key point this way: “Schwartz argues that eliminating consumer choices can greatly reduce anxiety for shoppers.” It seems the federal government is taking his advice.