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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.

Walter and Max – Moments of Truth

The Truth and ACAOn April 17, one of the architects of the Affordable Care Act (ACA), Democratic Senator Max Baucus of Montana, lectured Health and Human Services Secretary Kathleen Sebelius over the implementation snafus of the ACA and that he sees a “train wreck” coming if the administration does not do a better job implementing and communicating its features.
Almost immediately after learning this, I thought of Walter Cronkite and the mythical “Cronkite Moment.”
On February 27, 1968, CBS News Anchor Walter Cronkite offered on-air that the U.S. war effort in Vietnam was going nowhere and suggested negotiations to get us out of the war. Keep in mind, Walter Cronkite was the most trusted person in America during that period. President Lyndon B. Johnson (LBJ) supposedly shut off his television and muttered something similar to “If I’ve lost Cronkite, I’ve lost middle America.” (Perhaps a few other colorful words were included along with this quote!)

Now, 45 years later, our current president might be losing support from a key ally in his own party. Baucus, chair of the Finance Committee, who was instrumental in helping author the ACA, drilled Sebelius on whether federal exchanges will be ready this Fall and provided umbrage about “The administration’s public information campaign on the benefits of the ACA deserves a failing grade…you need to fix this.” 

Baucus continued his honest assessment by saying, “People generally dislike what they don’t understand. I hear from the people on the ground in Montana that they are confused about the new health care law. People are worried about the impacts…I don’t see any results.”
Much like LBJ, President Obama might have had a similar feeling when Baucus made his blunt sentiments known to the public. The clock is ticking on the many key reform measures that will affect most all Americans in the months and years ahead. Each generation has its own defining moments – both good and not-so-good. How will the “Baucus Moment” impact this and future generations?

One more thing. Baucus, a senator since 1978, just announced yesterday (April 23) that he will not seek reelection in 2014.

And, that’s the way it is…
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