INSURANCE TRANSPARANCY NEEDED
May 10, 2009 -- "There is no question that 'meaningful health insurance' is at the heart of the effort to get affordable, quality coverage for all Americans," said CAP Senior Fellow Judy Feder at "Truth in Labeling: Transparency and Health Insurance," an event CAP hosted last Friday. A group of experts joined Feder for the discussion, including Georgetown University Research Professor Karen Pollitz, American Cancer Society Action Network's Senior Program Editor Steve Finan, and Senior Program Editor at Consumer Reports/Consumer Reports on Health Nancy Metcalf.
In order for health insurance to be meaningful it must "comply with the three A's," said Feder. "It must be adequate, available to all, and affordable." This is unfortunately not the case with most plans; they often have coverage gaps, deny people insurance, or are too expensive for most consumers.
Being underinsured is nearly as dangerous as being uninsured. Even with insurance, "you can lose everything if you have a heart attack," explained Pollitz. Millions of insured Americans accrue staggering medical bills each year due to inadequate coverage.
It can be difficult to tell what benefits a health insurance plan provides, and consumers are generally not even allowed to read a policy before purchasing it. These practices also make it difficult to avoid hidden costs. "For almost anything we buy these days people can get consumer information, except for health insurance," said Finan. Despite the wide variety of plans available, consumers have almost no tools to effectively compare them and make an informed decision.
Even after purchasing coverage, it is nearly impossible for the average consumer to understand their plan and judge whether it will cover costs. "The policy language is in legal and health jargon making it difficult for people to understand," said Pollitz. In one study three out of four people didn't understand their policy and 53 percent didn't know whether there was a limit on their out-of-pocket spending.
The fundamental lack of coverage transparency can lead to insurmountable debt. "We are trained as consumers [to] buy bargains," said Metcalf, but plans that seem cheap often have costly loopholes. Pollitz and her team compared three hypothetical patients with serious health conditions under 10 different insurance plans offered in Massachusetts and 10 others in California. The discrepancy in out-of-pocket payments for their breast cancer patient ranged from $4,039 to $55,250, as detailed in their report, "Coverage When It Counts."
Often patients don't know about the limits in their coverage until they receive their bill. Even if consumers know they have an out-of-pocket limit, and know what it is, sometimes this limit isn't comprehensive and it is difficult to determine what is covered and what isn't. "It is important to make the out-of-pocket limit real," said Pollitz. Otherwise patients can incur staggering debts, even under a seemingly comprehensive policy.
"We all agree that everyone should have basic coverage, but the question is what does this mean? What do you leave out?" asked Metcalf. This will be a central issue in the process of health care reform and creating a system that doesn't leave people without coverage.
Vital steps toward health insurance reform and transparency will be standardization, comparability, disclosure, and honesty of language. "The most important step is to make health insurance less variable," said Pollitz. "What we have now aren't choices. They're traps." Consumers should also have access to comparative information the same way they do for other products through services such as Consumer Reports. One way to do this would be through a Coverage Facts label, modeled after the FDA's Nutrition Facts labels.
Health insurance must undergo significant reform, and transparency needs to be at the heart of it. Patients should not have to face a lifetime of debt because of dense, complex legal language. As Feder said, "If health insurance doesn't work for sick people it doesn't work."
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