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Understanding Health Insurance 101

Health benefit claim formI’ll always remember my first day on the job at Blue Cross and Blue Shield of Iowa (now Wellmark BC/BS) in 1984. A relatively newly-minted college graduate, I was asked a fundamental question about health insurance – “What is a deductible?”

I’m somewhat ashamed to share with you that I was clueless. Until my employment at an insurance company, why would I even care what a deductible was? That day in 1984, I quickly learned about deductibles and other cost-sharing tools commonly found in health plans.

According to a 2013 article in the Journal of Health Economics, almost nine out of 10 Americans (86 percent), could not define all of the following terms on a multiple choice questionnaire:

  • Deductible
  • Copayment
  • Coinsurance
  • Out-of-pocket maximum

This is both important, and frankly, troubling. Here’s why…

In 2006, approximately one in 10 American employees had a health insurance deductible of $1,000 or more for single coverage. Today, almost half do. During this same year in Iowa, the average single deductible for an employer-sponsored health plan was $776. According to our 2015 Iowa Employer Benefits Study©, this average mushroomed by 114 percent to $1,662. The increase is quite simple: as health costs continue northward, so, too, will the premiums that employers and employees pay. To keep the premiums ‘reasonable,’ employers continue to shift cost-sharing arrangements – deductibles, copayments, coinsurance & out-of-pocket maximums – to employees and their family members.

Making informed decisions about purchasing healthcare is paramount in the post-Affordable Care Act (ACA) era. Teaching employees (and their family members) the A,B,C’s of their health plans is critical when choosing high-value care at affordable prices. This so-called ‘healthcare consumerism’ is supposed to push the mainstream delivery system into a more efficient, patient-centric ‘system’ of care. The building blocks to get there require Americans to fully understand what they must pay for the care they seek – and understand the terms in which they are asked to pay (e.g. deductibles, etc).

One key premise of the ACA was to have more Americans covered by some form of health insurance, whether it be through employers, Medicare, Medicaid or through individual plans, subsidized through marketplaces, such as a state or federally-qualified exchange. By doing so, Americans would seek care prudently and not access care through more expensive hospital emergency rooms.

Yet, a new report from the U.S. Centers for Disease Control and Prevention (CDC) shows that the number of emergency room visits continue to increase, with one in five Americans taking at least one annual trip to the hospital ER for urgent care purposes. In 2015 alone, about 131 million Americans visited emergency rooms, with 29 percent having private insurance, 25 percent with Medicaid or Children’s Health Insurance Program policies, 18 percent had Medicare and 14 percent had no insurance.

Employers – Consider a Simple Health Terminology Pretest

Test QuizEmployers can do their part by educating their employees on terms and provisions offered through their health coverage policies. To begin, learn whether employees understand the four key payment concepts of health coverage (deductibles, copayments, coinsurance and out-of-pocket maximums). This can be done by simply surveying the workforce with a simple pretest.*

  1. Do you know what a Deductible is? (Yes or No)
  2. Which of the following best describes a Deductible?
    a. An amount deducted from your paycheck to pay for your insurance premium.
    b. The amount deducted (covered) out of your total yearly-medical expenses.
    c. The amount you pay before your insurance company pays benefits.
    d. The amount you pay before your health expenses are covered in full.
    e. I’m not sure.

Curious about additional questions to ask employees? I highly recommend reviewing the Journal of Health Economics article, “Consumers’ misunderstanding of health insurance.” By surveying your employees, perhaps you can follow-up with them via email or handouts and define each healthcare term, providing examples of how they are used within your particular health plan. Later, you may wish to perform a post test to determine improvement in comprehension of these particular terms. Something to consider…

Much like Orwell’s ‘1984,’ my education about deductibles came and went. How about you? It’s never too late to bring others up to speed on health insurance concepts.

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*Loewenstein, G., et al. Consumers’ misunderstanding of health insurance. Journal of Health Economics 32 (2013) 850-862.

From Blindfold to Billfold

Blindfold to billfold

Have you ever shopped for groceries using a blindfold? Maybe closed your eyes and ignored the prices of the items you purchased at a big-box store or at your favorite restaurant? I didn’t think so. To the best of my recollection, I haven’t either.

But when it comes to purchasing medical services or pharmaceutical drugs, we all seem to be wearing blindfolds.

A recent HealthMine survey of 750 consumers enrolled in wellness programs found that nearly 30 percent compare prices before shopping for healthcare. Despite the fact that most Americans continue to pay growing healthcare costs through rising premiums and out-of-pocket expenses, only 30 percent of employers include a price comparison tool for employees to use. But let’s face it, most price comparison tools available today do little to reflect the true costs that any particular provider accepts as final payment – largely because most tools use dated claims metrics and merely ‘estimate’ the costs.

If you are into horseshoes and hand grenades, then maybe this level of ‘transparency’ is good enough. It’s not for me, and I suspect, it wouldn’t fly for most Americans.

Price variations for common medical services can be substantially different for those who are commercially insured. These differences can be two- to three-fold within certain states and metropolitan areas.

The survey also revealed that:

  • 42 percent said it was ‘very important’ to use a price comparison tool.
  • An additional 48 percent responded that such a tool would be ‘nice to have.’
  • 41 percent feel that price shopping for medical services is not that necessary because the “Cost is covered by my health plan.”
  • Another 34 percent indicated that “I don’t select medical services based on price.”

This type of information may serve as wonderful news to those who provide medical services to the public. Think about it – it’s truly a great gig: provide services to people who appear somewhat indifferent about cost…primarily because a detached third party is blindly paying for it with no clue on whether the services have met consumer expectations! This payment disconnect is part of a larger problem that employers and policymakers face when trying to coax this Titanic in a different direction to avoid the iceberg of devastating consequences.

What’s in your wallet? To find out, we must take off our blindfolds and find a better way to learn what (and how) we are paying for quality care.

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A Suitcase of Memories

67 Year Old SuitcaseCAUTION:  This week’s blog post does not pertain to anything remotely related to employee benefits.

It began with a simple inquiry from my sister, Ann. She wanted to borrow an old family suitcase.

At first, I didn’t think I had the navy blue with white trim family relic, but when my search deepened into the bowels of our basement, I found it hidden behind forgotten Christmas decorations. From my loud reaction, you would’ve thought I had won the lottery! You see, by locating the suitcase, I also regained my sanity. I actually did possess this ‘heirloom’ and had not lost my mind.


Clare Ann Lorsung
High School Graduation

The 67-year-old suitcase elicits memories from two generations. While growing up on a farm in west-central Minnesota during the Depression and WWII years, Mom graduated from high school in 1949. Four days after graduation, Mom began working at Northwestern Bell Telephone Company in Detroit Lakes, where she rented a room. Periodically, Mom was able to take off two days in a row allowing her to visit her parents in Ogema – 21 miles away. She would take the Greyhound Bus carrying a cardboard box of clothes and assorted items. From there, she would walk yet another mile to her farm home.

After so many trips, Mom grew tired of carrying the cardboard box. She skimped on food and eventually exhausted two paychecks to purchase a matching set of suitcases – a large and small – for $29, from J.C. Penney. She was so proud to finally have her own luggage when traversing between work and home.

The odyssey of the wandering suitcase

Over the years, the two suitcases made countless trips with its owner and many others who were granted the privilege to borrow them – a honeymoon trip, traveling to Alabama where Dad was called back into service, weekend excursions for me and my siblings to visit our grandparents on the family farm near Ogema, and assorted trips around the country – always finding its way back to its rightful owner, Mom.

Before moving to Iowa from North Dakota in 1972, the suitcases were eventually replaced by modern-era luggage – making Mom’s past treasures a distant relic from simpler times. Evidently, Mom gave the two suitcases to my oldest sister, Margaret, most likely before we moved from Fargo.

Marg would later migrate to Arizona along with the suitcases. Thirteen years ago, while I visited Marg in preparation for her eventual death due to cancer, I was given the larger suitcase as a keepsake (the smaller suitcase apparently no longer survived). It was during that particular time with my sister that I learned just how important it was to live and die with dignity. The suitcase served as yet another poignant reminder of Marg’s message to her family and friends.

Inside suitcaseFast forward to Ann’s request about the old souvenir. Once I found the suitcase in the basement, I opened it and found two old airline tags, one from Braniff and the other from Ozark Airlines – both no longer operating under those names. Since the suitcase had no key for its lock, it had been wrapped with brown masking tape to hold it shut. The inside blue lining, however, was in excellent condition. Also included was Marg’s Fargo address before she moved to Arizona in the early ‘80s.

The latent memories we hold of the past may necessitate a periodic jolt to help clarify a better understanding of who we are today. After finding the ‘hidden’ suitcase, it was only then that my memory resurrected how it came to be in my possession. Reunited with her suitcase recently, Mom recalled the numerous memories she had, and the significance this suitcase had on a young lady beginning her life’s journey.

small-suitcase---7The suitcase will continue to serve a purpose, but not as it was originally intended for one 18-year-old. Along with nearly seven decades of memories, it will now house Mom’s wedding dress, a hand-sewn baptismal gown worn by 18 children and grandchildren, various writings, family photos, Mom’s Bible and other life trinkets. My sister, Ann, will be its caretaker with the knowledge that it belongs to all of us and to the many generations that follow.

Thanks Mom for providing yet another message for all of your children and grandchildren. Work hard and take care of your possessions as they may elicit memories that prove to be priceless.

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