# Health Insurance Policies are Inherently Complex

Difference Engine: Main camstack by Marcin Wichary

The Affordable Care Act will eventually start requiring health insurance policies to be explained in a simpler to understand manner. While this a good thing there is still the huge problem that simpler is not the same thing as “simple.” Insurance policies in this country are just inherently complex, making it almost impossible for regular people who will be using the new exchanges to actually know what is the best policy for them. This article by Susan Jaffe about test audiences being asked to review sample plans outlines helps make the point.

The article linked to two sample plans (one, two) [PDF]. They are actually a fairly straight forward way of describing dozens of interconnect aspects and clauses of a typical health insurance, but that does change the fact that health insurance policies are complex.

The testing targeted the “coverage facts labels.” The labels say that the information can help consumers compare plans by showing how much they would pay for procedures based the national average costs. A beneficiary’s actual costs might be different, based on the doctor’s advice, what providers charge, how much the policy pays, among other factors. That didn’t go over well with some testers.

“The word ‘might’ ruins everything,” one young man says. “It’s kind of sketchy.”

[…]

Premiums, deductibles and other numbers intimidate another participant, a man in his 20s, wearing shorts and flip-flops. He had to turn his baseball cap around so it wouldn’t hide his face from the video camera recording the sessions. “I’d have to have a calculator or ask someone from NASA to do the math,” he says. ( emphasis added)

This young man is correct. The math involved in making the best financial choice between just these two sample plans is extremely difficult. The formula for determine your total health care cost under plan 2 would be something like:

Total cost = X + \$40(A) + \$75(B) + (total cost(C) unless deductible has been reach than 50% of unknown cost(C)) + \$200(D) + (Y unless Y > \$1,500 than \$1,500) + (I unless I > \$5,000 than \$5,000) + J*

Y = \$10(E) + \$60(F) + \$100(G) + 50% cost of (H)

A = number primary care visits
B = number specialist visits
C = number other practitioner office visit
D = number of imaging
E = number of generic drugs refills
F = number of preferred brand drugs refills
G = number of non-peferred brand drugs refills
H = Specialty drugs refills
I = cost of other medical procedures hospital stays/surgery/etc..
J = cost of care not covered

*Assuming you only use in network providers. Using some out of network providers makes the formula much more complex.
(continued….)
Even if you master the formula and math needed to selected the best value, you are still required to also accurately predict the future. You need to guess your likely medical problems over the next year and know how many and what kinda of tests/visits/drugs/surgeries/etc… are required to treat those problems. If you don’t know the correct probability of developing medical conditions, understanding the above formula will not result in making the best insurance choice.

This is one of the many reasons I have little optimism about the value of the private insurance exchanges created by the ACA. Even with an effort to make the descriptions of the plans simpler to understand, the insurance policy will remain complex. To actually make the “smart” consumer choice requires both an amazing amount of knowledge about health care and the powers of fortune teller.

# Health Insurance Policies are Inherently Complex

Difference Engine: Main camstack by Marcin Wichary

The Affordable Care Act will eventually start requiring health insurance policies to be explained in a simpler to understand manner. While this a good thing there is still the huge problem that simpler is not the same thing as “simple.” Insurance policies in this country are just inherently complex, making it almost impossible for regular people who will be using the new exchanges to actually know what is the best policy for them. This article by Susan Jaffe about test audiences being asked to review sample plans outlines helps make the point.

The article linked to two sample plans (one, two) [PDF]. They are actually a fairly straight forward way of describing dozens of interconnect aspects and clauses of a typical health insurance, but that does change the fact that health insurance policies are complex.

The testing targeted the “coverage facts labels.” The labels say that the information can help consumers compare plans by showing how much they would pay for procedures based the national average costs. A beneficiary’s actual costs might be different, based on the doctor’s advice, what providers charge, how much the policy pays, among other factors. That didn’t go over well with some testers.

“The word ‘might’ ruins everything,” one young man says. “It’s kind of sketchy.”

[…]

Premiums, deductibles and other numbers intimidate another participant, a man in his 20s, wearing shorts and flip-flops. He had to turn his baseball cap around so it wouldn’t hide his face from the video camera recording the sessions. “I’d have to have a calculator or ask someone from NASA to do the math,” he says. ( emphasis added)

This young man is correct. The math involved in making the best financial choice between just these two sample plans is extremely difficult. The formula for determine your total health care cost under plan 2 would be something like:

Total cost = X + \$40(A) + \$75(B) + (total cost(C) unless deductible has been reach than 50% of unknown cost(C)) + \$200(D) + (Y unless Y > \$1,500 than \$1,500) + (I unless I > \$5,000 than \$5,000) + J*

Y = \$10(E) + \$60(F) + \$100(G) + 50% cost of (H)

A = number primary care visits
B = number specialist visits
C = number other practitioner office visit
D = number of imaging
E = number of generic drugs refills
F = number of preferred brand drugs refills
G = number of non-peferred brand drugs refills
H = Specialty drugs refills
I = cost of other medical procedures hospital stays/surgery/etc..
J = cost of care not covered

*Assuming you only use in network providers. Using some out of network providers makes the formula much more complex.

Even if you master the formula and math needed to selected the best value, you are still required to also accurately predict the future. You need to guess your likely medical problems over the next year and know how many and what kinda of tests/visits/drugs/surgeries/etc… are required to treat those problems. If you don’t know the correct probability of developing medical conditions, understanding the above formula will not result in making the best insurance choice.

This is one of the many reasons I have little optimism about the value of the private insurance exchanges created by the ACA. Even with an effort to make the descriptions of the plans simpler to understand, the insurance policy will remain complex. To actually make the “smart” consumer choice requires both an amazing amount of knowledge about health care and the powers of fortune teller.