The discussion about setting minimum limits for health insurance coverage is not a new one, but it has become more important with the increasing possibility of mandatory health insurance. Anthony Wright, at Health Access Weblog does a nice job of discussing the issue. There’s another aspect to this that I think deserves some attention: marketing and consumer perception of health insurance policies. It’s one thing if a client knowingly purchases a policy with high out of pocket limits. Some people might look at my family’s $5000 deductible HSA qualified plan and say that it’s no good because it doesn’t cover anything until we pay the first $5000. But to us, it’s perfect. It keeps our premiums down, and we’ve made funding our HSA a priority over the years, so that we could afford to meet the deductible if necessary. The main point is that we were aware of the out of pocket exposure when we got the policy.
In Colorado, discount-style plans are required to state clearly on their marketing materials that “this is not insurance”. This is common on dental and vision discount plans, and on some of those too-good-to-be-true policies that promise to cover a family of six for $100/month. But there are other plans that technically qualify as insurance, but still leave members with precarious gaps in coverage.
Policies with low per-incident or annual limits are one example, as are plans that break down claims into specific sections (things like per day hospital expenses, for example) and cap each section with a set dollar amount. Some policies have extremely high coinsurance stop-loss limits, but are sometimes sold by agents who focus on the 80/20 aspect of the policy, rather than the actual out-of-pocket limit of the coinsurance. In all of these cases, if the consumer is completely aware of what is being purchased, what the coverage limitations are, and how much exposure they would have in a worst case scenario, I have no problem with the policies being sold as insurance. If the premiums are low enough and the consumer is educated about the coverage, even a catastrophic-only policy might have some takers (although I find it hard to believe that many people would knowingly purchase a policy that could leave them with hundreds of thousands of dollars in bills – one would assume that if plans like that were clearly marketed, they wouldn’t sell very well).
But the problem is that the consumers are often not well informed about their coverage limits. This might be because the agent is new to the business or just desperate to make a sale. Or it might be because the consumer is so anxious to get a low premium that the nitty gritty details of the coverage get ignored. Whatever the reasons, it’s all too often that people find themselves in a financial mess because the holes in their health insurance policies don’t become evident until they are in the midst of a large claim.
My own opinion on this is that we need to maintain a wide range of options for consumers, but enact more consistent marketing guidelines. If a consumer has a large bank account for emergencies and is happy with $25,000/year in out of pocket exposure, it’s not my place to tell that person that the policy is unacceptable. But if a consumer is unaware of the $25,000 out of pocket exposure and purchases the policy because of a slick sales presentation, that is most definitely a problem.
Currently, health insurance marketing is regulated on a state-by-state basis by insurance commissioners. In Colorado, we have the health plan description form that is standardized and makes comparing plans somewhat simple. But it tends to get buried in marketing materials, and is often overlooked by consumers. I would take this a step further and make sure that all plans – regardless of where they are sold – clearly state the important details up front. Things like deductible, coinsurance limits, annual or per-incident limits (if any), major exclusions (expenses like prescription drugs or physical therapy, for example) etc. should be stated clearly and concisely on all marketing materials.
At the same time, I think that we do need some more regulations to remove the worst of the worst policies from the market. There is a fine line to walk here though, because a plan that seems horrible to one person might be just what another is looking for. For my family, $5000 is an acceptable amount of risk, but $20,000 is not. Perhaps for another family, $20,000 is an acceptable amount of risk, but $50,000 is not. We need to be careful about balancing consumer protections without limiting plan designs too much.
I found Anthony’s article in the Health Wonk Review, hosted this week at Medicaid Firstaid.