Health Exchanges

The Benefit Gap

Purchasing health insurance is kind of like purchasing a specialty light bulb. There are more bulb options than you can ever imagine. Standing in front of the wall of bulbs once you’re at the store, you’ve probably realized that it’s next to impossible to pick the right bulb without knowing the model and wattage needed.

If you’ve used an exchange or picked your insurance from a bunch of policy summarizes, you probably felt that same overwhelming feeling as standing in front of the wall of bulb options and likely thought there has to be a better way.

Exchange and Brokers:
Exchanges and brokers narrow the options so that you only have to look at part of the wall. The problem is that the criteria used to narrow the options basically tell you which policies you can afford but not necessarily which plans are best for you.

Income, age and location are the primary criteria being used to filter the options on the exchanges. Age is a risk adjustment to help insurers price the policies, income addresses your ability to pay for health insurance and location provides all of insurance policies offered in your city. In other words, it’s like seeing only the bulbs that you can afford to buy but they may or may not fit your light.

Healthcare Jargon:
Model numbers and wattage don’t help if you don’t the model and wattage needed. Similarly, the use of healthcare acronyms don’t help you pick a policy when you don’t understand what the acronyms mean.

Exchanges and policy summarizes are littered with healthcare acronyms such as HSA, PPO, HMO and EPA. Some of the acronyms have been around for a while but how they are being used is changing and evolving within the healthcare industry and those newly covered probably don’t have a clue what they mean. The problem is that all of the acronyms affect the cost of healthcare and impact the consumer experience.

Comparable Plans: 
How do you pick a bulb when you don’t know the model and wattage? Chances are you guess. You pick the new bulb from your memory of the old bulb and take it home to try it out. That’s kind of what people do when picking health insurance. They use past experience to find a policy like their old one or a better one if the last one didn’t meet their needs. 

However, the only thing comparable about the plans now are the names and the benefit terms included. Some benefit terms specify a copay or rate of coinsurance and others set a maximum benefit. Consequently, there is no mathematical way to know which term provides the better benefit.

Few people are able to figure out which benefit is better because it takes a lot of work just to get the information needed to do it. So most people guess and hope for the best. Needless to say, emotions flare when they figure out their guess was not so great because unlike a light bulb, they’re stuck with the policy for an entire year.

To provide the math at time of purchase, more information is needed about each insurer’s network. Most insurers have to contract with healthcare providers (physicians, hospitals and others) for services needed by their members. The contracted rates are negotiated and may be different from provider to provider.  For healthcare providers not included in the network, the provider’s charges are needed to calculate the benefit.

The Point:
Healthcare consumerism starts with the selection and purchase of the insurance policy not healthcare services. If consumers don’t purchase the right policy for them, there is friction every time they use their benefits.  

With healthcare costs becoming a bigger part of the consumer budget, we need to make it easy for healthcare consumers to understand what they are purchasing and make better recommendations of policies to serve their needs.

About the Author: Shannon Smith is a healthcare strategist with over fifteen years of experience helping companies achieve greater success.