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CCH® BENEFITS — 02/17/11

Health Insurance Summary Of Benefits Should Be Clearer

from Spencer’s Benefits Reports: Health insurance disclosures required under health reform likely will create confusion and anxiety in employees, according to a new report from Consumers Union.

The Patient Protection and Affordable Care Act (ACA) requires a new health insurance coverage uniform disclosure form, called the Summary of Benefits and Coverage, which uses a fixed layout and standard terms and definitions to allow consumers to compare health insurance plans and understand terms of coverage. All insurance plans—group and nongroup, grandfathered and non-grandfathered—must use this form, beginning in 2012. As directed by the ACA, the National Association of Insurance Commissioners (NAIC) in December 2010 adopted such a form and sent it to the Departments of Health and Human Services and of Labor to develop regulations.

Consumers Union, with funding from the Commonwealth Fund and the California HealthCare Foundation, tested an early prototype of a Summary of Benefits and Coverage that the NAIC developed. Although initially survey respondents found the form clearer to follow and understand, they became confused and sometimes frustrated when it came time to determine their potential out-of-pocket costs under common scenarios the survey reported. They found the common insurance terms confusing, including how the different insurance provisions interacted and when they applied. The results of the study were published in an Issue Brief from the Commonwealth Fund, "Making Health Insurance Cost-Sharing Clear to Consumers: Challenges in Implementing Health Reform's Insurance Disclosure Requirements."

According to ACA requirements, the disclosure form is limited to four pages and must include the following elements:

• Uniform definitions of common insurance and medical terms;
• A coverage description, including cost-sharing for major benefits such as mental health visits;
• Overall cost-sharing provisions (such as deductibles); and
• Coverage exceptions, reductions, and limitations.

"Testing revealed that consumers were able to use the forms to make hypothetical choices among health plans," the report explained. "However, the study also found deep-seated confusion and lack of confidence with respect to health plan cost-sharing. These findings have significant implications for any venue providing comparative displays of health insurance information, like the future state exchanges, and for policies that rely on the ability of consumers to make informed health insurance purchasing decisions, such as "consumer-driven health care" policies."

The test subjects indicated that their ability to prudently consider health insurance offerings was helped by answering the following questions:

• How much does the plan cost, as determined by the premium, deductible, and copay?
• What is the cost of the prescription drug coverage?
• Is my doctor in the in the network?
• Is my preferred hospital in the in the network?
• Is there out-of-network coverage? What are out-of-network costs?
• Is it necessary to get a referral to specialists?
• How will preexisting conditions be treated?
• What are the reputation, financial stability, and longevity of the health insurance company?
• What is the most I will have to pay? What is the least I will have to pay?

"For many of the respondents, shopping for health insurance was an anxiety-filled task," the report narrated. "Although there were a few respondents who felt capable of choosing a plan, no one enjoyed shopping for health insurance. Anxiety about shopping for health insurance was especially prevalent in those of midlevel to low-level health insurance literacy and occurred in both the uninsured and individually insured groups…Many found health insurance cost-sharing so challenging, and the financial stakes so large, that they preferred if someone else checked their analysis."

Respondents also mistrusted health insurance documents, citing previous experience and feeling that such documents were written in "legalese" and were meant to protect the insurer and mislead applicants.

"The vast majority of respondents had difficulty with these exercises [to determine potential out-of-pocket costs]," the report concluded. "When they began to work with the forms, the concepts they needed to estimate cost-sharing became much more confusing—terms like coinsurance, allowed amount, and annual limits, for example. Difficulty estimating cost-sharing not only frustrated respondents but could lead them to select a plan that was not actually in their best interest."

Recommendations

Based on this study, the report suggested to the NAIC measures to improve the usability of the form, and the NAIC adopted many of the recommendations. Further recommendations include the following:

• Provide additional consumer decision aids: summary measures, benefit calculators, greater standardization;
• Provide consistency and other measures to instill greater trust in health plan materials; and
• Increase emphasis on consumer testing.

"These findings suggest that form revisions and other strategies are needed to mitigate confusion and help consumers become informed, activated purchasers of coverage," the study report concluded.

For more information, visit http://www.commonwealthfund.org.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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