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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.

Dropping Coverage Due to Affordable Care Act? Not Yet

2013-Employer-Benefits-StudThe recent results on the Affordable Care Act (ACA) within our 2013 Study were quite revealing – Iowa employers do not have the appetite to drop their health coverage anytime soon.

One prime example relates to the employer mandate, which requires employers with at least 50 employees to offer either qualified health coverage to employees (working a minimum of 30 hours per week) or pay a $2,000 penalty per employee annually. Without hesitation, Iowa employers with 50+ employees indicated they would retain the coverage they offer and not pay the penalty. It is also important to note the employer mandate has been delayed from 2014 to 2015. During the survey process, however, the delay was not yet public knowledge, so employers were responding as if the mandate would begin in 2014.

 

Employer Mandate - Iowa Numbers

When asked how likely they are prepared to respond to the 2014 ACA provisions, smaller employers were considerably less prepared compared to larger employers. This question was asked using a 10-point scale, where 1 is “not at all prepared” and 10 is “fully prepared.”

Iowa Employers Prepared for ACA

Finally, based on the 2014 employer requirements through the ACA, less than 3 percent of Iowa employers have plans to discontinue health insurance coverage within the next three years.

Likely to Discontinue in Next 3 Years

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Obamacare: From Motorcycle to Unicycle

About 30 years ago, a good friend of mine told me that his brother-in-law rode his Harley Davidson from Kansas to Colorado. At that time, the American Machine and Foundry Company (AMF) owned Harley Davidson and the quality of Harley’s was less than stellar. In fact, during that era (1969 – 1981), Harley Davidson motorcycles were known as ‘Hardly-Ableson.’

My friend’s brother-in-law experienced a great deal of engine vibration during his relatively long trip to Colorado, causing some parts to loosen or worse, fall off! The motorcycle was so poorly engineered and manufactured that, by the time it reached Colorado, enough parts were missing from the original machine prompting the brother-in-law to quip that his motorcycle was downgraded to a unicycle!

I share this brief story because I sense something happening with the provisions found in the Affordable Care Act (ACA). For example, just last week, the Obama Administration’s decision to delay the ACA’s employer mandate for one year indicates that key provisions within ‘Obamacare’ are vibrating out of control. Instead of ‘fixing’ the Obamacare motorcycle (or trading it for a better-engineered vehicle), quick fixes are being made to move the motorcycle closer to the 2014 destination and beyond.

In addition to the employer mandate delay, the Health and Human Services Department (HHS) will no longer attempt to verify individual eligibility for insurance subsidies. Instead, they will rely on self-reporting by individuals regarding their employment status, income, and eligibility for health coverage through employment, etc. The federal government simply does not have enough time to meet the October 1, 2013 deadline imposed through the ACA. The relaxation of verification measures is temporary for the time being. This is a BIG change from this massive law’s original blueprint!

Under the ACA in 2014, people are to receive federal subsidies to help cover the cost of health insurance only if their employer does not provide federally-approved health coverage. According to the Wall Street Journal, the HHS is calling this a “slight technical correction.” Newly developed insurance exchanges will now be allowed to have “temporarily expanded discretion to accept an attestation of projected annual household income without further verification.” This provides more fuel to the arguments made by Obamacare opponents, who reason that this massive law was too expensive from the beginning – and now, it has few procedures in place to provide carefully-provided subsidies to only those who legitimately need the assistance. This seems to be an open invitation for fraud…

Reaching our destination in health ‘reform’ has become a long and arduous journey. Perhaps our focus should NOT only be the destination, but rather, having a well-thought-out plan that requires a reliable vehicle to deliver us safely on time and on budget.

The vibration continues…

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