Health Insurance Choices – Emotions Versus Reason

Amy Gillentine has written an article for the Colorado Springs Business Journal that points out many of the current concerns and confusion surrounding our health care system. When it comes to open enrollment for employer-sponsored plans, she sums it up clearly:

Choosing among options for health insurance is often an emotional — rather than practical — decision.

In 2001, I started working for a national corporation that paid for most of its employees’ health insurance. Until that point, I had been covered on my parents plan while attending CSU, and then by a US government plan while I was in the Peace Corps. My new job was the first time I had to sit down and choose a policy for myself. I remember the open enrollment meeting for new hires, we all sat around looking at the paperwork, most of us without a clue about what constituted a good choice. I heard some people saying things like “always choose a PPO – HMOs are terrible” just as much as I heard people saying the opposite. In reality, I don’t think any of us actually understood the difference, we were just repeating what we had heard other people say.

And now we spend our days helping our clients navigate the bewildering array of individual health insurance options available in Colorado. We find that people who are savvy, smart entrepreneurs often know little to nothing about health insurance. People don’t really understand terms like PPO, HMO, HSA, HDHP, deductible, coinsurance, etc. It’s interesting to note that Steve Berkshire, a human resources professor at Regis University in Denver, made the following observation regarding the thousands of dollars in out-of-pocket that an insured is responsible for before insurance benefits kick in on an high-deductible policy:

“That can be a big surprise. Particularly if people are used to a PPO plan, then opt for the HSAs or high-deductible plans. The most important thing is to just keep in mind how much you will be expected to pay out of pocket.”

PPO just means preferred provider organization. It has nothing to do with the deductible or how comprehensive the policy is. All this means is that you have a network of providers you can see without being referred by a primary care physician. You can have a PPO with no deductible, or a $10,000 deductible – and everything in between. In reality, almost all high-deductible, HSA qualified plans are indeed PPOs. But if a professor of human resources struggles with the semantics, how is the average consumer supposed to figure out the differences in the plans?

Ms. Gillentine’s article points out the relatively inconsequential things upon which people often base their health insurance choices on. Things like whether their current doctor is in the network, or how close the nearest hospital is. In reality, the only time you need to worry about getting to the nearest hospital is during a life or limb emergency, when any hospital can be used. For scheduled treatments, it might be better to have to drive a little further to the hospital and have better coverage once you get there, or lower premiums every month.

Jay and I help our clients do the math when they pick a policy. We look at total annual premium plus maximum annual out-of-pocket, illustrating worst-case financial scenarios. Often, people tell us they had never thought about it that way – they just thought that it would always be best to have the lowest deductible possible or the lowest premium possible, without regard for total cost. Consumers who would be much more savvy when buying say, a new vacuum cleaner or a plane ticket, tend to revert to emotional decision-making when it comes to health insurance. And for people who have never dealt with a serious health crisis, decisions tend to be based on past experiences with minor claims and doctor visits, rather than the major claims that are the real reason we have health insurance.

Ms. Gillentine’s article brings up another issue that merits discussion. Rob Rush, the director of business development at Memorial Health Systems points out that hospitals are seeing an increase in bad debt that correlates with high deductible health insurance policies. These policies were designed to save money on premiums, but in doing so, the insured shoulders a bigger chunk of initial claims, often several thousand dollars worth. If you get an HSA-qualified high deductible health plan (HDHP), your premiums will be lower than they would be if you opted for a more comprehensive policy with a lower deductible. But it only works if you open the HSA and actually put money into it so that you can cover the deductible if you end up having a claim. In theory, these plans are a great idea. Jay and I love our HDHP/HSA, and have lots of clients who agree. But if an insured can’t or won’t take responsibility for saving the money needed to pay the deductible on the policy, then the HDHP is not a good fit and was probably purchased for emotional reasons rather than practical ones.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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