Understanding Health Insurance – part II

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August 29, 2013 by Lisa Brammer

If you are a regular follower of this blog, you may have noticed that we talk a lot about the healthcare industry. Okay, so the fact that my background before coming to UCS was in health care might play a part in this, but seriously, the reason we talk about it so much is because of the complexity of healthcare reimbursement. If you are in the industry—or have dealt with it—you know what I’m talking about.

Remember last week when we talked about the four elements (copay, coinsurance, deductible, and out-of-pocket maximums) of health insurance and how we’ve come to realize that, as simple as they appear, these four elements are actually quite complex—and rarely understood? Only 11 percent of respondents in a survey were able to use provided information to accurately compute the cost of a four day hospital stay. (Please see Carnegie Mellon University, http://www.cmu.edu/news/stories/archives/2013/august/aug1_understandinghealthinsurance.html )

As dismal as these numbers are, I’m afraid they probably represent the most understood concepts of health insurance.

Last weekend when out with a bunch of friends, I asked them about their health insurance, wondering which type of insurance plans they had. At first, I couldn’t tell if their blank stares were in response to my question or how they felt about the topic. As it turns out, only one knew off the top of her head (she usually is that one in every crowd—thanks Jess). When given a list, some could recognize their plan type, but none could tell me the difference between a PPO and an HMO. Describing Point of Service (POS) plans only added to the confusion. I’ll give them credit because they all understood the concept behind catastrophic health insurance plans and knew of traditional indemnity plans (when described) and a couple not only knew about, but actually utilized a Health Savings Account (HSA).

A 2013 Mercer National Survey of Employer-Sponsored Health Plans reported that 65 percent of Americans are signed up for PPO/POS (PPO and POS plans were combined in ’08 in the survey due to declining offering/enrollment of POS plans), 18 percent with HMOs, 16 percent with consumer directed health plans, and 1 percent with traditional indemnity plans.

It’s kind of alarming to realize that Americans, for the most part, do not understand much about their health insurance at all. Granted, I questioned only a small group of people, but I am willing to bet my little sampling represents the masses.

The fact that all of the people I spoke to about insurance plans actually had an insurance plan is certainly worth mentioning. Let’s fast-forward a month or so and think about the difficulty the uninsured are going to face while shopping for insurance on the exchanges. The choices are going to be overwhelming.

I understand that the Affordable Care Act is requiring insurance companies to supply “simplified” versions of the plans to help applicants understand their choices. But as George Loewenstein from Carnegie Mellon University points out, this approach risks just smoothing over the complexities of the plans. Will this give people a false sense that it will be all a lot easier to navigate than it actually will be? Instead of increasing knowledge, will it lead to more of the, I think I know what I’m talking about, but really I don’t mentality? I’m afraid that’s exactly what will happen.

My understanding, from information gotten from PricewaterhouseCooper and the Kaiser Family Foundation, is that people participating in the exchanges on average will likely be less educated, older, and less likely to speak English at home than the average Joe.

This will certainly pose some challenges for people working in patient financial services. Let’s face it, a lot of the exchange participants will be price-sensitive shoppers. I know we all are to a certain extent, but without understanding the nuances between the plans; will the price of the premium be the only driving factor when choosing a plan?

If so, we all know the lower cost plans come with higher deductibles, copays, and coinsurance, which will lead to larger BAI (balance after insurance) for providers to collect.

Will the newly insured be able to navigate their way through the intricacies of their new plan or will they end up with a hospital bill larger than they could have imagined because, let’s say for example, they went to a provider that was out-of-network?

Having financial counselors that can not only collect all of the germane information but also explain your financial policy, verify health insurance benefits, and provide patients with an estimate of their out of pocket costs before a pricey procedure will educate both patient and provider and will offer a clear understanding of the patient’s financial responsibility and an opportunity to collect that balance pre-service—or at the very least set expectations for payment. Pre-service financial counseling will also help identify patients who are eligible for charity care and government assistance programs.

I read in an article in Health Affairs that as many as 28 million people are expected to bounce between Medicaid and the exchanges. Wouldn’t it be great to know who to actually bill?

To be honest with you, I’ve only touched on a few of the complexities of healthcare reimbursement. I didn’t even mention the price variances that exist between identical services or how the prices for services rendered are negotiated. I guess I’ll just have to save that for another post.

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