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Another Healthcare Choice

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July 07, 2009 – Comments (7)

 Supporters of our private health insurance plans suggest that having the choice of 17,000 plans is of great benefit to you.

 I choose to call my Congressman and ask him to support H.R.676, instead. 202 244 3121

Unless you have read and understand your health insurance policy cover to cover, including footnotes, perhaps you might too.

Testimony of Nancy Metcalf

Senior Program Editor

Consumer Reports

before the

Committee on Commerce, Science, and Transportation

U.S. Senate

June 24, 2009

on

Obstacles to obtaining clear, useful consumer information when buying individual

health insurance

Mr. Chairman and Members of the Committee:

Thank you for inviting me to testify on the obstacles confronting consumers who attempt to buy insurance on the individual market. I have talked to many such consumers as a health writer for Consumer Reports,1 and I can tell you that I have yet to encounter to a single one who yearns for a broad choice of “individualized” plans in a highly competitive marketplace. They all want the same, pretty simple thing: a health plan they can afford that won’t leave them destitute if they get really sick.

They say things like:

“I knew it was not a great plan but I thought, it’s better than nothing.”

“I just wanted something to cover me if something catastrophic happened.”

“We knew the deductible was going to be high, but I thought that it was a pretty good

deal.”

“I thought, at least I’ll be covered if I have, God forbid, a catastrophic illness.”

These are quotes from real people who did their best to buy decent insurance. Then they did get seriously ill and found out their policies did not protect them the way they thought they would…because they were no match for insurance companies who know exactly how to design and market plans whose gaping holes don’t become apparent until it’s much, much too late.

2

Some of the reform proposals on the table include subsidies that will open this market to many millions of new customers through health insurance exchanges. These must include strong consumer protection and transparency provisions, because consumers really don’t understand this market at all. I’ll explain why.

1. Consumers don’t know the component parts of insurance.

If people bought cars the way they buy health insurance, they wouldn’t be aware that a car has to have brakes, or a steering wheel, or an engine. A couple of years ago, we ran some focus groups of people who had bought their own health insurance. We asked if their policies had an annual out of pocket limit, and they had no idea what we were talking about. Though perhaps it wouldn’t have mattered, because there’s absolutely no standardization about what expenses apply to the out of pocket limit. One of the most common exclusions is prescription drug copays, which can add up to thousands of dollars a year for some people.

2. They don’t understand that low premiums are low for a reason.

As consumers, we are trained to look for a bargain. Buying a car or a flat-screen tv, we’re proud if we can get it for less than our friend paid. People think insurance works the same way. They never consider that if they are 55 years old, and have diabetes and heart disease, that no insurer could possibly stay in business selling them a comprehensive policy for $150 a month. That’s why so many of the junk policies we’ve looked at are marketed as “affordable.”

3. They don’t read the small print.

Many of the people stuck with bad health plans blame themselves for not reading the small print. I always tell them it’s not their fault, particularly since in most states, you can’t even see the small print – that is, the real policy -- until you’ve applied, paid a couple of months premium up front, and been accepted. At that point, you have a brief period to inspect the policy and send it back if you don’t like it, but I doubt that many people do. For one thing, they’d be uninsured if they did.

4. Even if they did read the small print, they wouldn’t understand it.

It is routine for policies to say they’ll cover a certain benefit, such as outpatient doctor visits, up to the policy’s limit – but that limit is, of course, on a different page and they don’t tell you which one, and it’s only four visits a year. Another common dodge:

sections on “what is not covered” that leave out vital information, like the United American policy sold in Florida that somehow fails to mention in that section that it only pays for $250 of outpatient doctor bills a year.

5. They have no idea how catastrophic a health catastrophe can be.

Many so-called affordable plans marketed to young adults don’t have prescription drug coverage, which seems like no big deal if you’re 26 and never need anything except an occasional antibiotic for strep throat. But what happens if, the next year, you’re diagnosed with rheumatoid arthritis and suddenly need a bioengineered drug that costs $25,000 a year? One of the most poignant cases I ever covered was a middle-aged couple who bought a United Healthcare policy with a $50,000-a-year maximum payout, which seemed like plenty to them. Then the husband got colon cancer, and his treatment cost more than $200,000.

WHAT CONSUMERS NEED

Consumers Union believes that what consumers really need is access to affordable insurance that will cover all their medical needs. We don’t think policies that exclude or limit major categories of care, such as outpatient treatments or prescription drugs, should be sold at all.

But absent those reforms, at least insurers should be forced to be honest about what they’re selling. In clear, user-tested formats, they should disclose what a policy covers -– and more important, what it doesn’t. If the policy has low dollar limits on hospital or doctor or drug coverage, it needs to say so, clearly and understandably, and not on a different page, or in a footnote.

Consumers need to be told, in big letters, what their policy’s out-of-pocket limit is, and right next to it, in equally big letters, if there are any expenses that don’t count towards that.

They need to know approximately what their out-of-pocket costs will be for expensive treatments such as cancer chemotherapy, or heart surgery, or infusions of patented biologic drugs.

They need, in other words, a fighting chance not to be ripped off by junk insurance.

Thank you again for opportunity to testify.

For the record, I am submitting a recent article from Consumer Reports on this subject entitled “Hazardous Health Plans,” as well as a Consumers Union Health Policy Brief explaining our recommendations in greater detail.

I disagree with the hope that Congress is up to regulating health insurance in any meaningful way. I believe Congress will let health insurers write the regulations. The health insurers are obligated to try to protect their cut of your dollar.

I also disagree with the "free market" solution, unless you have a model country that outperforms the Government run/funded systems of France, England, Canada, Sweden, Qatar, Netherlands, Denmark, Germany...

I support H.R.676 (but you know that) as do the physicians of PNHP.

Thank you.

We now return you to your previous coverage of declining 401k's, and related disasters while reminding you that your likely to be inadequate policy is guaranteed by your tax dollar, should your insurer manage to err like AIG.

 

7 Comments – Post Your Own

#1) On July 07, 2009 at 1:04 PM, ladyflower (68.22) wrote:

Great post.  I believe insurance companies are a big rip off because they can get away with it.  They promise the world and give nothing in return for the money they are paid.  But then I have chatted with people who live in Canada and they come to the States for medical treatment because they can not get treatment in Canada when they need it.  There is not enough Healthcare providers because there is not enough money paid to them by the goverment for their services.

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#2) On July 07, 2009 at 1:06 PM, davejh23 (< 20) wrote:

What makes you believe that a government "option" would not be designed with gaping holes in it?  Kennedy and Dodd are proposing that employers that don't provide health insurance to their employees should pay a $750 annual fee.  Why wouldn't Walmart opt to pay this fee instead of spending thousands on full-time employee's plans?  Why would my employer keep paying $10K for my family's plan instead of the $750 option?  This isn't another option.  It's a design to lead us directly to socialized medicine.  I'm not okay with a decrease in the quality of care for all so that the uninsured can have some insurance.  As it is, the uninsured are responsible for the huge increases in healthcare costs.  Is a $750 fee going to cover their healthcare costs?  No, it will just be another massive burden on government.  This will most certainly lead to socialized medicine, poor care, and probably a huge tax hike in the future.

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#3) On July 07, 2009 at 1:13 PM, davejh23 (< 20) wrote:

Maybe this plan is designed to kill off the boomers, so the government can get out from under their massive unfunded obligations for Social Security and Medicare.

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#4) On July 07, 2009 at 2:37 PM, devoish (98.62) wrote:

davejh23,

H.R. 676 is not the plan presently being promoted by President Obama. H.R 676's supporters have fought just to be formally heard and formally ignored by our President. At the present time if you/me/we do not call our Reps, and ask for H.R.676 we will get status quo at greater expense.

ladyflower,

Fortunately for the Canadians there is no law making it illegal to come here for care, and their taxes pay for any covered treatment whether it was delivered here or there.

It is however illegal for you to buy drugs there. You will not be covered here if you go to an "in-network" provider at an "out of network" hospital. Even within the USA. Does your plan cover you in Canada?

Did you read and understand your plan before you bought it?

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#5) On July 08, 2009 at 11:33 PM, FleaBagger (29.53) wrote:

devoish

Do you ever ponder where wealth comes from? Does it spontaneously appear in places? Do cell phones, cars, and medical devices appear out of thin air? Are doctors grown-ups who were born with the knowledge of how to perform surgery and treat illness, and have since grown into large enough people to be able to do it properly?

Canada has to take wealth from some productive sector of their economy to pay its citizens to avail themselves of the services of productive people in the United States because certain kinds of productivity (kinds that save lives) have been economically eliminated in Canada. 

You seem to think that a little tweaking is all that is needed when socialist medicine catastrophically fails in a country. The reason there are so many problems in the U.S. is because the government here has been tweaking away for forty years. Government-sponsored HMO's and insurance companies are not the free market, and they distort and drive up costs. People who value liberty have been saying this all along, yet you dismiss our calls for freedom as support for insurance companies. That is intellectually dishonest.

So our costs our higher, but our care is better. (We have a culture, such as it is, that produces obese, sedentary people, and yet we have essentially the same life expectancy as leaner, healthier European countries. That is simply because our medical care is more available.)

You will never be able to figure out how to anticipate all the medical needs of 300 million people, let alone efficiently allocate medical resources or plan innovation from your government headquarters. And the attempt to pay for healthcare from government coffers will inevitably lead to greater and greater control as the bureaucrats try to eliminate fraud (other than their own) and cut costs (except themselves).

I have another article for you about Krugman. 

http://mises.org/story/3539

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#6) On July 09, 2009 at 6:44 PM, devoish (98.62) wrote:

Fleabagger. The Mises institute is a load of crap. Krugman did fine.

The problem with American healthcare is not Gov't. It is corporate.

Free Markets have failed everywhere in the world.

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#7) On July 10, 2009 at 8:24 PM, SuperCharge (89.10) wrote:

If you didn't, take a peek at whereaminow's interesting post on this topic from 7-9. It claims that of the 40M un-insured, "13.2 Million American's are eligible for Medicaid but can't figure out how to sign up for it". I don't know the answers here, but it's safe to say many, many more don't understand their own policy.

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