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Did you pick the right health insurance plan?

Selecting a health insurance plan can cause considerable angst for a consumer and his/her family. Insurance plans are complex and there is a wide variety available on the market. Let’s try to simplify the decision making process. There are basically four areas that the consumer needs to assess for each plan offering;

1. The deductible.

2. The co-payment.

3. The co-insurance.

4. Out-of-pocket spending limits.

The complexity of plan choice arises in part from wide variation among plans across these four features that determine how health costs are shared between the insurer and consumer. And so consumers are faced with a dizzying number of permutations when trying to balance these four areas.

Lack of health literacy also plays a part in the process. A study done in 2013 found that only 14% of consumers could answer four simple multiple choice questions regarding the definition of these four cost sharing features. Also when presented with a simplified plan, most respondents were unable to accurately estimate the cost of their medical services. To confuse things further employees need to know if the plan covers their medications (formulary status) and whether their physicians are in or out of network.

The Affordable Care Act (ACA) organized plans were segregated into four ‘metal’ tiers – platinum, gold, silver and bronze. One investigation of hypothetical plan choices with plan menus designed to mimic those of the exchanges found that metal labels, rather than facilitating better decisions, worsened choices compared with generic labels (eg, plan A, plan B, plan C). This study also found that alternative plan labels that encouraged consumers to forecast how much care they anticipated needing did have a modestly beneficial effect, suggesting that participants may have misinterpreted metal labels as signals of quality, or the breadth of services covered, rather than the degree of cost sharing.

To make a financially efficient choice, employees, most of whom lack extensive prior experience with insurance, have to carefully consider the complicated relationship between plan cost, cost sharing, and their expected health risk. So what can be done to help employees navigate through these complex scenarios? I would like to suggest some possible solutions;

1. Provide decision aids. These may be scenario based examples or so called “people like me” illustrations.

2. The utilization of consumer historical data (claims, pharmacy etc) to help predict future costs should be encouraged. Prescriptive analytics tools can now help perform this task.

3. A more aggressive approach may be the use of plan “defaults” or restricted menus tailored to each consumer.

4. A more long term solution would be to simplify health insurance – period. Insurance products free of the complex features that consumers are least able to understand, such as deductibles and co-insurance,would more likely help consumers make informed decisions regarding plan choice and utilization.

Offering multiple plans seems like a good idea – the typical ACA enrollee is offered an average of 47 plans. One would hope that this large number of choices would help the consumer find an appropriate plan and may stimulate competition among insurers, leading to improvements in plan price and quality. However, these benefits are unlikely to emerge if consumers are not given the right tools and education.

To sign up for a free demo of the tools on offer at Obeo Health please click here.

Impact of Healthcare Underestimated by Many Advisors

There are some very good points raised in this article by Emily Brower Auchard. We agree that employees should approach healthcare with the same financial awareness they bring to buying a car or a home. The article is reproduced below….

The high cost of healthcare in the U.S. takes up an increasingly large portion of consumers’ financial resources, with health spending in the U.S. reaching $3.1 trillion—or nearly $10,000 per person per year, according to the Centers for Medicaid and Medicare Services. Even with long-term disability and health insurance, consumers who get sick can be hit with unexpectedly large out-of-pocket expenses.

Advisors say the unpredictable nature of healthcare costs requires creative planning and careful attention to the small print of health-related insurance. Over the course of his career, Anthony Domino, an advisor with Associated Benefit Consultants in Rye Brook, N.Y., with $2 billion under management, has seen big changes in how healthcare costs impact his clients.

“Today my clients can spend more on co-pays for drugs than they used to for their entire health insurance premium,” he says. While healthcare reform has changed the funding for health insurance it hasn’t impacted healthcare costs, he notes. With that in mind he encourages clients to shop carefully for their healthcare insurance. He also recommends they repeat the process for every annual enrollment period to be sure they are getting the best coverage possible. In addition to premium increases, other plan benefits and costs, such as drug benefits or coverage of out-of-network provider care, can change significantly from one year to the next. This can lead to what the healthcare industry now calls “surprise medical bills.”

Neal Slafsky, managing director of United Capital in Newport Beach, Calif., encourages clients to approach healthcare with the same financial awareness they bring to buying a car or a home.

Slafsky, whose firm has $15.4 billion under management, works with his clients to ensure they get the benefits they are due from their health insurance providers — which can mean taking a more active role in reviewing medical bills after a client’s hospital stay.

“Sometimes clients have to appeal their claim and go back more than once to get the benefits they are due,” he explains. If the process is too much for a client, he recommends they hire a medical claims processor.

“The fees are very reasonable and I’ve seen them get terrific results,” he says. The best way advisors can serve clients, he says, is to do a “deep dive” into the world of healthcare insurance.

Providers can be very opaque in their explanations of benefits and advisors can play a crucial role in translating that information for clients. “Where else is a client going to go to get that information?” he notes.

Long-term disability insurance is another element where clients typically need advisor guidance. “Clients need to plan well in advance to prepare for the possibility of being disabled,” explains Venita Zavidny, an advisor with Houston, Texas-based Kanaly Trust, which has $2 billion under management. Zavidny, who considers incurring a long-term disability to be one of her clients’ biggest risks, is well versed in the financial needs of long-term care. Zavidny works with clients to look closely and carefully at their long-term disability plans and to make sure they know exactly what coverage they are buying.

For instance, a plan that says it will provide 60 percent of a client’s income may look appealing on paper — but clients often neglect to factor in other costs. “Taxes will make that income considerably less,” notes Zavidny. Many plans include Social Security benefits in their formulas and will subtract any amount of long-term disability provided by Social Security from their payments. One piece of advice Zavidny offers her clients: avoid paying taxes on future long-term disability income by taking the benefit as imputed income. “This small decision on insurance choices can have big consequences for the future,” she notes.

Choosing the right health plan is a challenge

I have reproduced below an excellent article from NPR. It highlights the difficulties around picking a health plan. I have also included the healthcare terms that are explained as part of the article. Here you go……

Solicit opinions about health insurance and you’re almost guaranteed to find consensus: It’s mystifying and irritating.

“It just seems like a lot of the buzzwords are intended to just complicate the whole thing and make it more expensive,” says David Turgeon, 46, who’s sitting in a Minneapolis mall eating lunch.

Enrollment season rolls on, and people shopping on HealthCare.gov and the other marketplaces have until Jan. 31 to decide on a plan.

But even people trying to pick from their employers’ options can find the process complicated and difficult to understand. The jargon can be overwhelming, and it can lead people to make costly mistakes or to avoid care altogether.

Ronen Ben-Simon, 28, also eating lunch in Minneapolis, says some basic health insurance terms are lost on him — even though he’s a nurse. “I don’t even know what coinsurance is, to be honest,” he says.

Coinsurance, if your plan has it, kicks in after you’ve met your deductible and requires you to pay a set percentage of medical bills.

Over in St. Paul, Minn., Seanne Thomas, a 50-year-old real estate broker, says she has gotten good at figuring out how health insurance policies work. She’s had to, because her family members are covered under three different plans. “So I had to compare copays, I had to compare out-of-pocket, you know, deductible and maximum coverage.”

With all that grappling with insurance plans she’s done, Thomas is game for a quiz. Here’s a scenario, one of several, developed by American Institutes for Research:

A guy goes to the doctor to get a wart removed. The bill is $530. He has a copay of $30, a deductible of $100 and coinsurance of 20 percent. How much is he on the hook for?

Thomas nails the copay and deductible, but then runs aground.

“I don’t know what you mean by the term coinsurance,” she says. And without knowing that term, she’s out of luck.

Most people would be in the same position. A couple of years ago, American Institutes for Research, which is a social science research firm, asked hundreds of people and found that only 1 in 5 got the right answer, which is $210.

“People really struggle with understanding health insurance for a variety of reasons,” says Kathryn Paez, who researches health insurance literacy for the organization. “One is just the volume of information. There’s a lot to know. The other is because the language is unfamiliar to them, and they don’t really understand health insurance terms and concepts.”

And that unfamiliarity, Paez says, is greater among African-Americans, Hispanics and people with low incomes and low levels of education. Highly educated people struggle, too.

“We’ve created a monster, and it’s not surprising to me that there’s literacy issues,” says Kathleen Call, a professor in the University of Minnesota School of Public Health. “I’ve studied this stuff, and sometimes I make mistakes.”

Call has grown increasingly concerned that the complexity of insurance could compromise public health by keeping people away from the doctor.

“People are treating it more like car insurance: You don’t use it until something happens,” she says. “You have an accident, then you use it. Otherwise you’re trying not to use it. And that’s not the way we want health insurance to be used.”

And, Call says, not understanding what’s covered and what’s not can leave people on the hook for big medical bills. “That mistake can mean the difference between paying that medical bill or paying rent,” she says.

Surveys confirm that growing numbers of Americans avoid care because of the cost.

Remember that quiz? We ran it by the industry group that represents health insurance companies, American’s Health Insurance Plans.

Clare Krusing, a spokesperson for AHIP, accepts the challenge and then wishes she had a calculator in front of her.

“I totally understand why this is confusing and can be challenging,” she says. But the low $100 deductible was the biggest stumbling block for her. “I just don’t know of anyone that would have a $100 deductible to be totally honest with you.”

So who’s to blame for all the confusion? Krusing says the industry is using increasingly complicated cost-sharing schemes to hold down the cost of monthly premiums.

She also says plans are trying harder than ever to help consumers understand their policies: “Whether it’s on mobile apps, whether it’s on email reminders, whether it’s easy-to-understand videos, health plans are doing all of that.”

The industry and consumer advocates agree, if something’s unclear, demand clarification from the insurance company.

Health care glossary

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