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What Consumers Don't Know About Their Health Insurance


On a chilly New York day, a sales agent for UnitedHealthcare stood on a noisy street corner in Spanish Harlem pushing Medicare Advantage (MA) plans. He was engaging in 'table marketing a way to snag new customers, converts from other MA plans, he hoped. The table was stacked with sales brochures and booklets explaining United's community plan for seniors eligible for both Medicare and Medicaid.  It was hard to say what explaining he could do to illuminate the details inside his 105-page enrollment booklet.  I asked him if people understood what they were buying. First, he said, they have to know it's an HMO.

People often don't understand that with an HMO they must stay in the health plan's network for care. One consumer advocate, who helps seniors when they run into such problems, told me it was common for seniors to sign up for a Medicare Advantage plan not realizing they must use network physicians. Once they learned that he, he said, he would have to disenroll them and put them back in traditional Medicare with a Medigap policy.  When another sales person came along and sold them another MA plan, he would have to disenroll them again and return them to Medicare while they missed doctor's appointments in the meantime.

None of this is surprising. Most people don't understand their health insurance, a point underscored in a recent report issued by Consumers Union. The report, which describes the challenges consumers face in selecting health plans, foreshadows what is likely to happen when health reform takes full effect.

The CU report should be required reading for anyone who thinks that simply piling more choices on consumers and providing plan descriptions via some website will make consumers smarter purchasers and as a result, the insurance market will offer better products. CU concluded that the difficulties of understanding how health insurance works are so profound that the vast majority of consumers are essentially being asked to buy a very expensive product critical to their health while blindfolded.

Focus group testing revealed that consumers dread shopping for insurance. No kidding! So what do they do? They take short-cuts to get through the task. And guess what?  They often come to rely on insurance agents'good and bad ' to recommend a policy that may work better for the agent's commission than for a specific consumer's situation. Consumers may miss altogether or by-pass the glossaries of common insurance terms and plan disclosures when they realize these decision tools are not as fun or user friendly as say Orbitz or e-Bay shopping. Law makers promised that more transparency and information would help consumers make better choices, leading to more competition and lower prices. Consumers Union's research concluded that this policy objective 'may not be realized.

Furthermore, participants in CU focus groups indicated that they didn't necessarily want the cheapest plan. They wanted one that represented the best value they could afford. But finding the best value was downright difficult. Cost-sharing concepts, particularly co-insurance, are hard to grasp, the report noted. Consumers are not sure who pays the 20 percent (or 30 or 40 percent) co-insurance. They didn't know if it was the health plan or the patient. And they weren't sure whether out-of-pocket maximums or benefit limits were good for the patient or the insurance company. On a more basic level, some focus group participants could not calculate simple percentages like 20 percent of $1000. These findings cast a dark cloud over the notion that consumers will make the health insurance marketplace work better.

CU recommended that one way to make shopping easier may be to standardize health plan choices, reducing the variation but keeping some that might be manageable. Indeed that would help, and it's worth recalling that after a long period of deceptive marketing practices from sellers of Medigap plans, Congress finally standardized the policies in 1991. That not only simplified the buying decision by reducing the number of choices, it also ended deceptive sales tactics. That was the high water mark for consumer protection for health insurance policies.

The Medicare prescription drug law, which encouraged the growth of MA plans, undid all that. It's the Wild West once again.  With so many choices now available for seniors in New York City and elsewhere, it's easy to see why a passerby might sign up for insurance from a friendly salesperson hawking on the street.


More Blog Posts by Trudy Lieberman

author bio

Trudy Lieberman, a journalist for more than 40 years, is an adjunct associate professor of public health at Hunter College in New York City. She had a long career at Consumer Reports specializing in insurance, health care, health care financing and long-term care. She is a longtime contributor to the Columbia Journalism Review and blogs for its website,, about media coverage of health care, Social Security and retirement. As a William Ziff Fellow at the Center for Advancing Health, she contributes regularly to the Prepared Patient Blog. Follow her on twitter @Trudy_Lieberman.

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