Friday, April 06, 2007

John’s Health Insurance Ordeal

Last time I wrote about Jane’s exasperating treatment decision. This time I focus on John’s health insurance ordeal.

It was time for John to choose a new health plan for his family and he wanted to do it right. So he spent weeks visiting insurance web sites, using online calculation tools, and talking to numerous insurance professionals and other consumers. He gathered tons of data on dozens of health plans and put it all in a big spreadsheet. It listed the deductibles, premiums, co-insurance, co-pays, covered treatments and wellness programs, ceilings on coverage, estimated tax-savings and other details.

What’s the problem here?

Nearly everyone agrees that skyrocketing healthcare costs in the USA—much higher than any other country—are putting our nation in danger of financial ruin! Those in the know are also aware that there are very serious quality and efficiency problems with America’s healthcare. There are over 45 million uninsured. Many businesses can’t afford to cover their employees. Hundreds of thousands of patients are hurt or killed each year by medical errors and deadly drug effects. The quality of care delivered in our country is rated below many other industrialized nations. And the enormous Medicare debt we’re pushing onto our children is shameful!

To deal with these serious problems and others, our country has recently been trying to control costs and improve quality by having consumers put more “skin in the game.” That is, they must pay more for their healthcare. The logic of this “consumer-directed healthcare” strategy is that by paying more, consumers will take control and drive down costs. For example, consumers will be less likely to request unnecessary care. They will manage their own health better by making positive lifestyle changes. And they will seek out providers who deliver the most cost-effective treatments and get the best results.

While this strategy may seem sensible, many critical questions remain unanswered. How are consumers to be certain when care is required? How can they determine the most cost-effective treatments and find the providers who deliver the best care? And how can they select the most affordable health plans that meet their current and future needs? Jane and John—being bright, educated and motivated consumers—did a great deal of research, got tons of information, but ended up with no clear-cut answers.

Bottom line: The consumer-directed healthcare strategy is dangerous! This is because the most important ingredient is missing: Consumers need easy access to accurate, relevant and understandable information about the quality and cost of providers, treatments, eldercare and health plans. This information is essential for making prudent choices.

What health insurance policy is the right one?

Not surprisingly, John discovered that policies with lower premiums and higher deductibles, while costing less, carried greater financial risk. Such plans would save him money as long as he and his family remained healthy. This meant he would have to make very accurate judgments about likelihood of family members getting sick and the extent of care they would need in the coming year. A miscalculation, incorrect assumption, or just bad luck, could send John into financial ruin.

Unfortunately, research suggests that consumers consistently underestimate their risk of being seriously ill. This is especially true for individuals who have not used healthcare services often, because they don’t have the knowledge they need to fine-tune their judgments based on experience [1].

And consumers’ decisions don’t stop there. After you chose a health plan, you must determine what healthcare providers deliver the most cost-effective care and, if you’re not feeling well, you have to decide whether your symptoms require a doctor’s visit.

What’s the problem here?

As a consumer, you need information about health policies that enable you to compare different plans. You also need a clear-cut way to estimate your future healthcare needs and your out-of-pocket expenses in different scenarios. You then have to become a good diagnostician, so you don’t seek unnecessary care or allow unnecessary tests … Just don’t err and fail to go to the doctor for something serious!

Putting it all together: The role of the modern consumer

So, as a modern consumer, it’s your responsibility to know when you’re sick enough to make a doctor’s appointment. It’s your responsibility to choose the treatments that will do you the most good with the least risk when you are ill, as well as finding competent healthcare practitioners and hospitals that will deliver that care safely and cost-effectively. It’s also your responsibility to optimize your health and manage chronic illness through the right lifestyle changes and adherence to the right self-management plans. In addition, you may be responsible for assuring that elderly loved ones receive the right care and have a good quality of life. On top of all this, it’s your responsibility to choose the right health insurance policy for yourself and your family.

As a modern consumer, therefore, you have the daunting responsibility of researching all your health care and insurance options thoroughly, while avoiding information overload. Where essential information is lacking, you must somehow get the knowledge you need anyway. And then you must gain a clear understanding of confusing technical data and conflicting professional opinions. GOOD LUCK!!!

Click here for the next post in this series.

[1] Based on


JM2cts said...

I think suggesting that 'John' could find himself in 'financial ruin' is a little strong. I mean, based on what I understand of consumer-driven healthcare, you still have a high-deductible plan in place to cover you in case of an event that might move you from being a healthy consumer to a heavy user of healthcare services. John will be fine, even if he has a health event occur and ultimately, he will become a smarter shopper for healthcare services and if lucky, he'll have some tax-free savings for retirement along the way.

I am a heavy user of healthcare services - Type 1 diabetic on an insulin pump - I think CDHC will help bring price transparency to healthcare. Look at it from a pure business standpoint - 8 years ago you could buy an HDTV for $10,000 - today you can buy one for $1,000 because HDTV's are exposed to an open market. However, 8 years ago I purchased an insulin pump for $6,000, then last year I had to replace it, and guess what, it was $6,000 - why? If it was truly exposed to a market driven economy, more people would have purchased them over the years and the price would have gone down... instead the price has been controlled by third parties.

Putting power in the hands of the consumer seems to make sense to me - the problem is that too many people think that the consumer isn't smart enough to be able to do it themselves and I think ultimately, that's underestimating the intelligence of the consumer.


Dr. Steve Beller said...

The dangers, and benefits, of consumer-directed health plans (CDHP) have been widely debated. Following are some references that help make my point that they can be dangerous to consumers.

At ehealthinsurance, a Summary of Benefits sheet of a major carrier shows the maximum out of pocket (OOP) expense for an individual can be as high as $10,000 and for a family it’s $18,000. Note that copayments and mental health coinsurance do not apply towards OOP max. In addition, any costs that a carrier considers beyond “usual, customary and reasonable” are also excluded from the plan’s deductible and its OOP max.

Now, you are certainly correct that 5, 10 or even 20 thousand dollars OOP expense will not bankrupt everyone. In fact, CHDPs are especially beneficial to healthy people and to financially well-off persons who, with an HSA or HRA, gain a tax savings benefit and can afford to risk a high level of OOP exposure. But, the working poor and other low income persons with a catastrophic illness or an expensive chronic condition face great financial risk from high OOP healthcare expenses because they can barely afford to pay their premiums.

For these lower income folks, CHDPs may actually encourage them to avoid paying the required copayments by not going to the doctor when ill. This may result in them becoming even sicker and having to pay more OOP in the long term.

Following are some other links that discuss problems with CHDPs:

In , PEDIATRICS (Vol. 119 No. 3 March 2007, pp. 622-626), a recent article titled “High-Deductible Health Plans and the New Risks of Consumer-Driven Health Insurance Products” discusses CDHP risks, especially for families with young children.

On our WellnessWiki , we discuss a myriad of problems with CDHP’s High Deductible Health Plans and Health Savings Accounts.

Here’s article in the reputable Commonwealth Fund, titled "Rising Out-of-Pocket Spending for Medical Care: A Growing Strain on Family Budgets” (Feb 2006).

And here’s a link to a report of the California Department of Insurance titled “Dangerous Prescription An Assessment of Health Savings Accounts and Their Impact on the Health Care System” by Commissioner John Garamendi (Jan 2006).

That said, I do agree that "putting power in the hands of the consumer" makes sense. My concern is not the intelligence of consumers. Rather, it is the failure of our healthcare system to give consumers the clearcut information they need to make responsible decisions.

I welcome any feedback.

Steve Beller

C. Steven Tucker, President SBIS said...

I have been a health insurance broker for over a decade and every day I read more and more “horror” stories that are posted on the internet regarding insurance companies not paying claims, refusing to cover specific illnesses and physician's not getting reimbursed. Unfortunately, the reality is that insurance companies are driven by profits, not people. If the insurance company can find a legal reason not to pay for something, chances are they will find it, and you, the CONSUMER will suffer. However, what many people fail to realize, is that there are very few “loopholes” in an insurance policy. The majority of the time, when health insurance is purchased, the prospective insured doesn’t even know what kind of coverage the policy is providing, so there is really no need for the insurance company to try to use a “loophole” to get out of paying for something. Any insurance agent will tell you, that the terms of coverage are right in your policy, along with a copy of the application that you signed agreeing to those terms. Most people, as soon as they get their policy, put their insurance cards in their wallet and throw their insurance policy in a drawer or filing cabinet. No one really takes the time to look through their 47-82 page policy. Therefore, since the insurance company is counting on you NOT to read your policy, no “loopholes” are actually needed for the insurance company to get out of paying a claim. Your insurance company will tell you that your policy is a legally binding contract and that you had 10 days to cancel (a 10 day free look period) when you received it, if you weren’t happy with the terms of your coverage.

So do most policy holders really know what is in their 47-82 page health insurance policy? Yes, lots of confusing insurance jargon. Sure, the average policy holder could probably tell you how much their monthly premiums are, but can they tell you what their insurance policy doesn’t cover? Usually the policy holder doesn’t even realize what their policy doesn’t cover until they file a claim and receive a “denial letter” from the insurance company.

Unlike car buying, where the buyer knows that the engine and transmission are standard, and that power windows and cruise control are optional, health insurance is a maze of confusion. Unfortunately, many health plans are purposefully designed to offer “limited” standard benefits. Often, coverage for other medical expenses, like “maternity” and “organ transplant” coverage are optional. Usually a policy holder doesn’t even realize that their policy doesn’t cover something “important” until they undergo medical treatment and then receive a huge bill from the hospital stating that “benefits were denied.”

Yes, we all complain about insurance companies, but we all know that they serve a “necessary evil.” Very few of us could afford to pay for open heart surgery, if we needed it, without insurance. This being the case, how can YOU, the consumer, protect yourself against the big, bad, greedy insurance companies? And, how will you know if you are truly getting the best plan for the lowest price? Simple…buy the type of health insurance plan that you really “NEED.”

Sure, everyone wants to have affordable, quality health insurance coverage, but in my experience, particularly dealing with the small business and self-employed market, very few people individuals can distinguish between the benefits they “want” and the benefits they really “NEED.’

I have read many comments on various blogs about plans that cover 100% (no deductible and no-coinsurance) and I agree that those types of plans have a great “curb appeal.” However, I would not recommend to anyone that they work overtime and give up time with your family just so they could afford a plan with 100% coverage. Do those types of plans offer the policy holder greater peace of mind? Absolutely! But is 100% coverage something that the policy holder really needs? Probably not!

Just like you would do, if you were purchasing options for a new car, you would have to weigh your “wants” vs. your “needs.” For example, although heated seats are a nice optional feature, “Do you really need heated seats if you live in Arizona?” Not unless you are planning to frequently drive to Alaska! So if you are healthy, take no medications and rarely go to the doctor, do you really need a plan with 100% coverage, and a $5 co-payment for prescription drugs? Is it really worth paying for this “option” if it costs you an additional $300 a month in insurance premiums to have this type of coverage?

Or, is it worth $200 more a month to have a $250 deductible and a full drug card vs. an 80/20 plan with a $1,000 deductible and a discount drug card. Wouldn’t the 80/20 plan still offer you adequate coverage? Don’t you think it would be better to put that extra $200 ($2,400 per year) that you would be giving to the insurance company in premiums in your own bank account, just in case, something happens in the future and you have to pay your $1,000 deductible or buy a $12 Amoxicillin prescription? Don’t you think it is wiser to keep your hard-earned money rather than handing it over to the insurance company? Remember, the insurance company offers you NO REFUNDS on insurance premiums if you stay healthy.

In my experience, this is one of the primary reasons that most people I speak to feel like they have been defrauded or "ripped-off" by their insurance company and/or insurance agent. In fact, time and time again I hear almost identical comments from every business owner that I speak to. Comments such as, “I have to run my business; I don’t have to be sick!” “I think I have gone to the doctor two times in the last five years.” “My insurance company keeps raising my rates and I don’t even use my insurance?”

As a business owner myself, I can understand their frustration. Many business owners complain that it is not easy to determine what type of health insurance coverage they really need. So, is there a simple, secret formula that everyone can follow to make health insurance buying easier? Yes! Become an INFORMED Consumer. Every time I contact a prospective client or call one of my client referrals, I ask a handful of specific questions that directly relate to the policy that particular individual currently has in their filing cabinet. You know….the policy that they are relying on to protect them from having to file bankruptcy due to medical debt. The one they bought to cover that $400,000 life-saving organ transplant that they may need someday or those 40 chemotherapy treatments that they may have to undergo on an outpatient basis should they develop lung cancer.

So what happens almost 100% of the time when I ask these individuals “BASIC” questions about their health insurance policy? They have difficulty answer them! The following are 10 questions that I frequently ask a prospective health insurance client. Let’s see how many YOU can answer without looking at your policy.

1. What Insurance Company are you with and what is the name of your plan?
2. What is your deductible?
3. Do you know what your coinsurance percentage is and what dollar amount (stop loss) it is based on? (e.g. 80/20 coverage means you pay 20% of some dollar amount, what is it?)
4. What is your maximum out of pocket expense per year? (e.g. deductibles + coinsurance + other fees)
5. What is the Lifetime maximum benefit the insurance company will pay out if you become seriously ill and does your plan have any “per illness” maximums or caps? (e.g. the plan has a $5 million lifetime maximum, but only pays out $1 million per illness. This means that you would have to develop FIVE separate and unrelated life-threatening illnesses costing $1 million or less to qualify for $5 million of lifetime coverage)
6. Is your plan a schedule plan, in that it only pays a certain amount for a specific list of procedures? (e.g., Mega Life & Health & Midwest National Life, a.k.a. National Association of the Self-Employed NASE)
7. Does your plan have doctor copays and are you limited to a certain number of doctor copay visits per year? (e.g. Can only go to the doctor 2 times a year for a $20 copay?)
9. Does your plan offer outpatient prescription drug coverage and if it does, do you pay a copay for your prescriptions or do you have to meet a separate drug deductible before you receive any benefits?
10. Does your plan have any reduction in benefits for organ transplants and if so, what is maximum the plan will pay if you need an organ transplant? (e.g. Some plans only pay a $100,000 maximum benefit for organ transplants, but the procedure actually costs $250-$400K)
9. Do you have to pay a separate deductible for each hospital admission or for each emergency room visit? (e.g. Some plans have a separate $750 hospital admission fee for each hospital admission which is separate from your deductible. Others have a separate $100 E.R. deductible that may be waived if you are admitted to the hospital.)
10. Are there any restrictions, benefit “caps” or “access fees” on out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc.? (e.g. Some plans pay a $500 maximum for each out-patient treatment and others require you to pay a $250 “access fee” per treatment. This is usually separate from your plan deductible. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000)

So how many questions could you answer? If you couldn’t answer all ten questions either, that doesn’t necessarily mean that you are not a smart consumer? It may just mean that you just dealt with a "bad" agent, because a “great” agent would have really taken the time to help you understand your insurance benefits. A “great” agent asks questions to try to understand your insurance needs and recommends plans based those needs. A “great” agent takes the time to explain the difference to you regarding “needs” and “wants” and gives you enough information to weigh all of your options so you can make an informed purchasing decision. A “great” agent looks out for YOUR best interest and NOT the interest of the insurance company.

So how do you know if you have a "great" agent? If you can answer all of the above questions without looking at your health insurance policy, you have a "great" agent. If you can answer the majority, you may have a “good” agent. If you can only answer a few, you, most likely, have a “bad” agent. Just like any other profession, there are insurance agents that really care about the clients they work with, and there are others that avoid your questions and duck your calls when you leave messages about your unpaid claims or your skyrocketing health insurance rates.

Remember, purchasing health insurance is just as important as purchasing a house or a car, if not more important. Ask your agent a lot of questions and make sure that the answers that s/he provides are thoroughly explained to you. If you don’t feel comfortable with the coverage, price, etc. ask your agent if you can see another plan so you can make a side by side comparison before you buy. Additionally, read the “fine print” in your health plan brochure and policy and ask your agent what every asterisk (*) next to the benefit description really means.

Furthermore, do your own due diligence. For example, if you research MEGA Life and Health, a.k.a. Midwest National Life a.k.a. National Association for the Self Employed (N.A.S.E), you will find that there have been 14 class action lawsuits brought against them since 1995. So ask yourself, “Is this a company I would trust to pay my insurance claims?

Furthermore, ask your agent if s/he is a “captive” agent or an insurance “broker.”
“Captive” agents can only offer ONE insurance company’s products.” Independent” agents or insurance “brokers” can offer you a variety of different insurance plans from many different companies. These plans can often be customize to meet your specific insurance needs and budget.

Health insurance is probably one of the only things that I would not recommend buying off of the internet. In my opinion, there are too many variables to consider. A health insurance purchase requires the level of personal attention that only an insurance professional can provide. So use Ebay and Amazon for your less important purchases and use a knowledgeable, ethical and reputable insurance agent or broker for the most important purchase you will ever make….your health insurance policy.

Lastly, if you have concerns about an insurance company or agent, contact your state's Department of Insurance BEFORE you buy your policy. Your state’s Department of Insurance can tell you if there have been any complaints filed by policy holders against that insurance company and the reason for the complaints. If you suspect that your agent is trying to sell you a fraudulent insurance policy, (e.g. you have to join an association to qualify for health insurance, you have to become a member of a union, you have to become part of a group or a professional association) you should contact your state’s Department of Insurance to check to see if you agent is licensed and to verify that the insurance policy and insurance company are registered in your state.

In closing, I hope I have given you enough information so you can become an INFORMED consumer. However, I remain convinced that the following words of wisdom still go along way:

1. “If it sounds too good to be true, it probably is!"
2. “If you only buy on price, you get what you pay for.”

C. Steven Tucker, President
Licensed Multi-State Insurance Agent
Small Business Insurance Services, Inc.
"The Best Policy Is A Great Agent"

Dr. Steve Beller said...

Thank you for that well thought-out response, Steven.

The questions you recommend a consumer answer when evaluating health plans makes good sense to me. And finding a broker or some other insurance expert a consumer can trust to help compare plans can be equally important.

Unfortunately, even with those answers, consumers still face daunting challenges. They include (a) estimating the probable number of visits to primary care physicians and specialists and hospitals; (b) figuring out the amount of medications family members will need to take in the coming year; and then (c) selecting health plans that cover these needs. And to keep out of pocket costs down, consumers must determine what healthcare providers deliver the care they may need in a safe and cost-effective manner; and they must know when to make a doctor’s appoint, and when to wait for an illness to “run its course.” Finding answers to help make these decisions can be extremely difficult as well.

Steve Beller

Anonymous said...

Hi, Steve! I'm trying to start my own blog on healthcare, too! I focus on results by risk-adjusted medical condition. You may have heard this theory already. Michael Porter & Elizabeth Teisberg wrote the book -- Redefining Healthcare -- Creating Value-Based Competition on Results.

I was so impressed by the simple logic, that I've decided to try & get my fellow Massachusetts residents together to start a referendum to require the medical profession to post their results for each patient. With a massive pool of data, we'd at least have half a chance of making an informed decision.

You may already know that we in Massachusetts will have mandatory health insurance starting this July. The legislature is still trying to work out the quirks (i.e. -- how are people going to afford this??)

But no matter how we ultimately pay for healthcare, without information, we can't make make sound decisions.

As an example, I was trying to figure out if surgery or pain management made the most sense for my mom who suffered a compression fracture. As I'm sure you know, there are no posted results -- only websites touting their authors' approach (So surgeon A touted surgery A; surgeon B, surgery B; etc.).

Only by repeated questioning did I find out that, with one form of the surgery, multiple discs would likely be affected (They use a cement-like substance to fill the fracture; typically, they fill the discs above and below the affected disc -- Yikes!) With severe osteperosis, it could have been more discs! Well, gee, why not just cememnt her whole back!

Sorry, but I found this to be very upsetting. So to you're responder who said leave healthcare decisions to us consumers, I say: we don't have the information -- yet. But if I have my way, we'll get it started in Massachusetts.

Any advice you can offer me would be greatly appreciated. Thanks -- Linda Bistany, The Public Interest: (website); (blog).

Dr. Steve Beller said...

Thanks for you input, Linda.

I, too, found the Porter & Tiesberg book full of innovative ideas for transforming our healthcare system. A page on our Wellness Wiki discusses and compares their approach with other options for redirecting the way healthcare providers compete.

I consider Value to be a measure of:

Quality, i.e., effectiveness, which takes into account safety, diagnostic accuracy, treatment appropriateness, symptom reduction, quality of life improvement, etc.

…divided by …

Cost, i.e., efficiency, which take into account avoidance of excessive tests, use of the least expensive medications and procedures, minimizing relapse, etc.

So, V=Q/C.

In a sane healthcare system, a rational consumer would seek providers (clinicians, hospitals, etc.) and treatments with the highest value. And providers would compete by demonstrating high value for particular conditions.

The same goes for evaluating and selecting health insurance policies.

Unfortunately, for many reasons, we are very far from having such a sane system!

Concerning the kind of grassroots movement you’re creating, this blog post discusses the benefits of and challenges to mobilizing consumer movements. Please keep me informed as to your progress.

In a future post, I’ll be presenting a vision of innovative ways to empower consumers.

Anonymous said...

Thank you for the nice post.

Anonymous said...

I think its simplistic to compare healthcare decisions with other business decisions. Healthcare is a emotional decision, where your focus is getting the best care for your love one. While many of us will buy a cheap used car., we would never choose to have our child treated with outdated equipment and incompentent medical staff. This is more so with life and death situations. Patients and families (not consumers) are not emotionally able to make the financial decisions, being asked of them.

Anonymous said...

The healthcare insurance decisions are getting harder. Many employers are using self insured plans with limited coverages, restricted conditions and increased out of pocket costs. Same is true of many insurers (bc/bs) plans, with increased costs, an increasing deductions and copays. I agree, John easily find himself in financial ruin due to a major illness.

Dr. Steve Beller said...

Thanks for you comment.

Sadly, I see no improvement happening without major changes in many aspects of our healthcare system. Bottom line is that value to the consumer/patient ought to be our #1 priority, which would result in better results and lower costs. High value plus universal coverage everyone can affort is, imo, the holy grail and our society should settle for nothing less.