OPINION: finally, plain English from health insurance companies

Introduction

You probably missed it because of the media’s focus on the fiscal cliff, but a provision of ObamaCare took effect on January 1 that can help you avoid making costly mistakes when you sign up for health insurance. At the very least you’ll be able to understand what you’re actually signing up for.

From now on, health insurers will have to provide us with information in plain English, and in no more than four pages, about what their policies cover and how much we’ll have to pay out of our own pockets when we get sick. And they’ll have to provide it in a standard format that will enable us to make apples-to-apples comparisons among health plans. Click here to see an example of what the plan descriptions must now look like.

As you can imagine, insurers fought hard to kill that part of the law. That’s because they’ve profited for years by using legalese and gobbledygook in describing their policies, and also by purposely withholding information we really need to make informed coverage decisions.

Now, at long last, thanks to ObamaCare, you can say goodbye and good riddance to “explanations” like this one:

“Benefits are payable for Covered Medical Expenses (see “Definitions”) less any Deductible incurred by or for a Covered Person for loss due to Injury or Sickness subject to: (a) the Maximum Benefit for all services; (b) the maximum amount for specific services; both as set forth in the Schedule of Benefits; and (c) any coinsurance amount set forth in the Schedule of Benefits or any endorsement hereto. The total payable for all Covered Medical Expenses shall never exceed the Maximum Benefit stated in the Schedule of Benefits. Read the “Definitions” section and the “Exclusions and Limitations” section carefully.”

Yes, that’s from an actual policy the folks at Consumers Union found during research they did a few years ago into the consequences to patients of indecipherable policy descriptions.

One of the reasons I decided to go public as a critic of the industry I used to work for was my disdain for how insurance firms padded their bottom lines through obfuscations like that paragraph above. I described to members of Congress in 2009 how they “confuse their customers and dump the sick—all so they can satisfy their Wall Street investors.”

Sharing the witness table with me during my first Senate testimony were Nancy Metcalf, senior editor at Consumer Reports, and Karen Pollitz, then research professor at Georgetown University’s Health Policy Institute. Metcalf pointed out in a policy brief she provided the senators that the average American adult reads at an 8^th grade level, yet the typical health plan document is written at a first-year college reading level. She also noted that because of the lack of standardization, terms like “deductible” and even “hospitalization” varied from plan to plan. An article she wrote for Consumer Reports described a health insurance policy that essentially hid in dense fine print the fact that hospital coverage excluded the first day of hospitalization—“usually the most expensive day when lab and surgical suite costs are incurred.” That meant, of course, that the patient would have to pay the full amount of that first day in the hospital, typically several thousand dollars.

Pollitz, now a senior fellow at the Kaiser Family Foundation, spent more than a decade trying to get legislation enacted to help consumers make sense of health insurance. She and consumer advocates in California who had been studying the issue began citing the now-common “Nutrition Facts” label as an example of what was needed.

It was so needed, she told Congress, that even studies conducted by the insurance industry showed that the majority of people asked said that they would prefer to work on their income taxes than try to read their insurance policy.

In addition to the standard format and plain English that must now be used, insurers must also provide an estimate of how much a given policy will pay for “having a baby (normal delivery)” and “managing type 2 diabetes” and also how much the policyholder will have to pay. In years to come, additional examples will have to provided, such as for a heart attack or breast cancer.

Pollitz cautions, however, that the cost information in the examples this year is not necessarily as reliable as it could and should be. With little fanfare, the government told insurers last summer they could use a simple formula during 2013 to estimate policyholders’ out-of-pocket expenses. Next year, however, they’ll have to start using their actual claim experience in the examples.

It’s not perfect by a long shot, but it’s a great start and a lot more than we’ve ever had before.