This document discusses challenges consumers face when shopping for health insurance and provides recommendations to address those challenges. It finds that consumers lack understanding of basic insurance concepts and terms, have difficulty calculating value, and don't trust insurers. To help, it recommends providing a framework to help consumers navigate options, using trusted sources to communicate clearly, standardizing some plan features to ease comparisons, and testing materials with consumers. The Affordable Care Act creates opportunities to better educate consumers in selecting plans.

1. Plain Talk about Health
Insurance: Getting the
Context Right
Lynn Quincy
September 7, 2012
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2. Yes, THAT Consumer Reports
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3. Confession
I am not a communicator…
…I am an economist
…who does policy analysis, primarily
focused on health insurance issues.
How did I get here?
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4. A Happy Alignment of Goals
 If health insurance markets are going
to work, consumers must be able to
play their role as informed, activated
shoppers.
 In turn, if consumers are going to
really understand health insurance,
policymakers must step in.
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5. Failure to Address Consumer
Confusion has Grave Consequences
 Consumers find themselves
underinsured, too often leading to
medical bankruptcy
 Under-insured consumers act like
uninsured consumers – they delay
getting care
 Inability to effectively compare plans
undermines the health plan marketplace
 Strains customer help lines
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6. How Can We Improve Consumers’
Ability to Function in the Health
Insurance Marketplace?
 Get better information about the
challenges consumers face
 Use this information to:
 improve the underlying products,
 improve the way products are
communicated and
 activate consumers.
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7. Overcoming mis-perceptions of
policymakers
We must abandon
the image of a
careful shopper
capable of
weighing the
myriad costs and
benefits of their
health insurance
options
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8. Three CU studies explored how
consumers shop for health
insurance
Study Examined: When: Locations:
Mid-sized cities in…
Pages 1-4 of new Sept-Oct 2010 IA, NH, CA, OH
health insurance
disclosure
“Coverage Facts May 2011 MO, NY
Label” (pages 5-6)
Actuarial Value May 2011 CO, MD
Concepts
Participants were evenly divided between men/women; uninsured/
insured (non-group). A variety of education levels, ages (26-64), and
race/ethnic background, and prior familiarity with health insurance.
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9. Consumers Dread Shopping for
Health Insurance
I think medical insurance is probably one
of the hardest things for me that I shop for.
And I think one of the hardest things is to
figure out what’s covered.
-quote from report: Early Consumer
Testing of New Health Insurance
Disclosure Forms
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10. Consumers Doubt the Value/
Purpose of Health Insurance
 Many view health insurance as pre-paid
health care, rather than insurance.
 If they don’t expect to use much health
care next year, doesn’t seem like a good
value.
Note: this is different from the notion that
“I’m young and invincible.” Rests on a
skewed notion of what insurance is.
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11. Consumers want a good “value”
but can’t calculate value
Consumers care about cost.
But they don’t want the lowest cost
plan, they want the best value plan
they can afford.
Notion of value is sophisticated:
•scope of services covered
•share of the cost paid by plan
•sometimes the quality of providers
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12. Consumers are confused by
cost-sharing terms
This is the greatest area of confusion.
They don’t know the vocabulary: deductible,
coinsurance, benefit maximum, allowed amount,
out-of-pocket maximum
The underlying concepts are complex and they must
be used together to estimate patient costs for
services (do copays count towards the deductible?
the out-of-pocket maximum?)
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13. Sophisticated computation
skills are required
Is this a
No pharmacy Yes
Have expense? Have
I met the I met the
medical pharmacy
deductible? Yes Yes deductible?
No
No Have
I met the Pay full
Pay full amount
amount annual
Out-of-pocket Max?
No Yes
Subject to any Pay nothing
annual benefit
limits?
No Yes
More calcs More calcs
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14. Implications
 We are effectively asking
consumers to shop blindfolded.
 It is like providing health plan
detail in a foreign language.
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15. Which would you choose?
Health Plan A or Health Plan B
Terms: Terms:
εκπεστέου είναι εκπεστέου είναι
$4.000· η $1,000 7
μητρότητα δεν μητρότητα έχει
είναι $5.000 όφελος
καλύπτονται όριο
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16. Some medical coverage terms
are also confusing
 What is the difference between
primary and preventive care?
 What are specialty drugs?
 How does a diagnostic test differ from
a screening?
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17. Consumers need a “mental
map” to navigate a complex
topic like insurance
 If this “map” or framework is missing,
decisions aids like glossaries or well-
designed disclosures can do little to help
consumers—there is nothing for them to
attach the information to.
 If they have prior experience with health
insurance, consumers view new information
through that lens. Example: Copays
counted towards the deductible in my old
plan so this plan probably works the same
way.
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18. If they don’t have prior experience
with health insurance…
… they’ll use other experiences – like car
insurance.
Moderator: So let’s say [you] had a really bad year
and you had two illnesses… you think each time
you're going to have to pay that deductible?
Participant: Yeah, because it’s just like an accident in a
car. If I crash my car 10 times I [would have to
keep paying the deductible] …it’ll be a loss for the
insurance company just having a one-time
deductible.
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19. Providing clarity is insufficient;
information must also be
trusted
 If consumers don’t trust the information,
they won’t use it
 Trust levels are very low for health
insurers*
 Even when consumers have a good grasp
of the information in front of them, they
often don’t trust their analysis. They
worry about the “fine print” because
health insurers are “tricky.”
*Harris Poll, 2010: http://www.harrisinteractive.com/NewsRoom/HarrisPolls/tabid/447/mid/1508/ 19
articleId/648/ctl/ReadCustom%20Default/Default.aspx

20. That’s a Lot Of Challenges
But
There’s Also Some
Good News

21. The 2010 Affordable Care Act
provides a
UNIQUE opportunity
to educate consumers
so they can navigate
health insurance
and health care

22. Opportunity Arises from…
 Consumers will be actively looking for
information – especially Fall of 2013 (just
before major reforms take place)
 Federal funding exists for ACA outreach
 The ACA standardizes some health
insurance features, making comparisons
easier
 New insurer reporting can help consumer
decision-making
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23. Selected ACA Reforms
Type of Reform By Sept 23, 2012 Jan 1, 2014
Standardization of  No lifetime limits  Upper-limit on Patient’s Maximum OOP
health  Some preventive services w/o  No $ annual limits
insurance cost-sharing  Individual and small group plans conform to
products* actuarial value tiers and cover essential
health benefits; priced using a limited set of
rating factors
 Plans sold in exchanges are “qualified”
New Transparency Summary of Benefits and  Claims payment policies and practices
Coverage form, including  Periodic financial disclosures
“Coverage Examples”  Data on enrollment
 Data on disenrollment
 Data on the number of claims that are
denied
 Information on cost-sharing and payments
with respect to out-of-network coverage
 Plans sold on the exchange must have
“calculators” or other method of
determining OOP cost for a service.
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*Some exceptions for Grandfathered Plans

24. How We Can Help Consumers
 Provide a mental map. When people can
see the “bigger picture” of how insurance
works, they have a “map” on which to tack
the details.
 Explain health insurance from the point of
view of what it means to them.
 Short glossary definitions and other
decision aids should be provided but need
to be accompanied by that “map” to be
effective.
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25. Example
 Showing what a plan would pay for a
serious illness altered consumers’
views – it conveyed the value and
purpose of insurance in a compelling
way.
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27. Communicate Using Trusted
Messengers
 Partner with trusted entities
 Manage consumer expectations – don’t oversell
 Merit consumer trust:
 vet health plans well,
 strive for stability in offerings,
 invest in good communications,
 test communications with consumers, and
 engage in these activities over the long run
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28. Provide “Short Cuts”
 Assume consumers will use cognitive
short-cuts to “get through” the task of
shopping for coverage.
 Consider developing short-cuts to help
consumers to make an informed
choice:
 Actuarial Value Tiers
 Measures of network adequacy
 Coverage Examples
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29. Provide Consumer-Friendly
Comparative Information About Plans
Choice Architecture is
“organizing the context
in which people make
decisions”
and it profoundly
influences consumers’
selections.
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30. Carefully Consider the Structure of
Initial Search Results
Why? Because consumers often look no
further and use these initial results to make
their decision.
 PBGH/CalPERS: 93% of the time the default
display of information is accepted by users.
 Checkbook: More than 60% of users make their
decisions without viewing any other information
beyond the initial summary screen.
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33. A Good Understanding of Context
Leads to Impactful Communications
 The clearest communication will not be
impactful unless we do everything else
right:
 Consumer has the underlying “mental map”
needed to understand the message
 Message comes from a trusted source
 Message is delivered at the right time, in the
right way
 The larger environment for the message has
been considered
 Message has been tested with consumers
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34. Thank you!
Please email
Lynn Quincy with
any questions:
lquincy “at” consumer.org
Reports can be downloaded
from:
www.consumersunion.org/health
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