Published September 21, 2012
Would you buy a car without knowing its features or gas mileage?
Then why do we purchase health insurance that way?
"Health insurance is one of the most expensive things we buy where you're essentially supposed to buy it without understanding what you've just purchased," says Lynn Quincy, senior policy analyst for Consumers Union, the publisher of Consumer Reports.
"It's unfair not to provide uniform, understandable information about a product that is this expensive and has enormous financial and health consequences for families," Quincy says.
To date, health insurers have been free to present information about their policies any way they choose, making it difficult for consumers to decipher plan descriptions buried deep in industry jargon and legalese. This makes it nearly impossible to compare health plans.
"Some plans are 100 pages long and were really written by lawyers to protect the insurance company rather than to inform the consumer," says Tim Jost, health law scholar and professor of law at Washington and Lee University. "They're basically useless to consumers."
But a new phase of the health care reform law attempts to correct the confusion by requiring health insurance companies to make available a uniform "Summary of Benefits and Coverage," or SBC, a reader-friendly disclosure of their individual or group policy details written in everyday language.
Insurers will be required to provide SBCs to: new applicants; current customers, whenever coverage is renewed or changed; and anyone seeking the information on demand. It will be available in English, Spanish, Chinese, Tagalog and Navajo.
Jost and Quincy were two of many experts who helped design what some have termed the "nutrition facts" or "yogurt label" for health insurance. The design team, led by the National Association of Insurance Commissioners, included the federal departments of Health and Human Services, Labor and Treasury, as well as health insurers, health care professionals, consumer and patient advocates, and linguists.
Their task: Create a short, easy-to-understand health benefits summary and an accompanying standard glossary of terms. The goal was to provide clear, consistent and comparable information that everyone can use to shop for health insurance.
The resulting glossary covers commonly used insurance lingo, from "allowed amount" (the maximum an insurer will pay for a covered health service) to "urgent care" (care that a reasonable person would seek right away, though not severe enough to require a trip to the emergency room).
The Summary of Benefits and Coverage, which can span no more than four double-sided pages, will contain most of the details every shopper wants to know about a health plan: its estimated deductibles; limit on your out-of-pocket costs; annual coverage limit; copayments; in-network versus out-of-network costs; and limitations and exceptions for routine office visits, ER visits, outpatient surgery, hospital stays, mental health/substance abuse counseling and prenatal/postnatal care.
Having all that information will give consumers "a new edge in deciding which plan will best suit their needs and those of their families or employees," says Health and Human Services Secretary Kathleen Sebelius.
But one key detail is missing from the summary: the plan's price tag. Earlier versions prominently featured an estimated premium, but the cost information was later removed on concerns raised by insurers, who noted that health plan prices can vary widely due to factors such as family size.
The government's final rule establishing the SBC and glossary notes that individuals who are shopping for coverage and want premium information can find it on the federal Healthcare.gov website.
Consumers Union's Quincy says that even though a price estimate was not specifically mandated by health care reform, its absence will make shopping more difficult.
"The goal is to allow consumers to compare their health plans. You undermine that goal by having them go someplace else to get the premium part of their comparison," she says.
One SBC innovation that appealed to consumer focus groups was its cost-of-coverage examples for three common medical situations: normal childbirth, managing Type 2 diabetes, and breast cancer. While the designers say they hope to eventually expand the number of case examples to six, they subsequently eliminated breast cancer from the initial three to keep things simpler.
Jost, of Washington and Lee, was disappointed by that decision. The breast cancer example had made test groups take notice because of its $98,000 price tag for treatment.
"In the consumer testing, most people had absolutely no idea how much a normal procedure costs. In fact, they asked people and their estimates were just wildly different," Jost says. "People were really surprised how much their insurance plan actually covers. That was kind of an 'aha!' moment."
As for the uniform glossary of terms, even though it's simplified it proved to be of limited appeal in focus groups. "Because the definitions often relied on other definitions, it just became cognitively very difficult for most consumers," Quincy admits.
Jost says the SBC has been timed to precede the opening of state health exchanges and other big changes that are on the health insurance horizon thanks to health care reform.
"An awful lot is going to happen in 2014, and if consumers can at least have one tool that they can begin to understand and get used to before then, that's going to be a huge advantage," he says.
Although health insurance companies balked at the added expense of generating the Summary of Benefits and Coverage, Jost predicts they, too, will one day become fans of the "yogurt label."
"I think ultimately they're going to be really glad they have the SBCs," he says.