Many of the people who are supposed to get health coverage through the Affordable Care Act next year don’t understand basic elements of insurance such as deductibles, premiums, and co-insurance, a new poll from the Urban Institute suggests. That means the newly insured may be blindsided by how much they actually have to pay for a doctor’s visit or trip to the hospital.
The survey asked more than 1,000 people who were either uninsured or had private health plans about how well they grasped nine terms that describe different attributes of health plans, including “co-payments,” “provider network,” and “covered services.” Researchers found that only 40 percent were “very or somewhat confident” that they knew what all the phrases meant.
Who could blame them? Health insurance is full of jargon. The language can be opaque, especially for people who have never purchased insurance before. Even if you understand labels like “out-of-pocket maximum” and “annual limits on services,” it can be hard to figure out what health plan best fits your own circumstances.
When you compare plans on healthcare.gov, three numbers appear in bold type: the premium (what you pay each month for the policy), the deductible (the amount you have to pay for medical care you use before the insurer starts paying), and the out-of-pocket maximum (the limit on how much you’ll have to pay for medical care during the year, capped at $6,350 for an individual or double that for families).
In smaller type on the right, you see details about co-pays (the flat dollar amount you pay per service) and co-insurance (the percentage of the total cost of a service that you’re on the hook for). Click into the details of a plan and you’ll get a more precise summary of these charges (if there are different rates for prescriptions, specialists, or emergency room visits). Going further gets you to a plan brochure with all the fine print and a list of drugs the plan covers.
The understanding of health insurance was lower among young adults and minorities. It was also lower among people who qualify for government help buying coverage, meaning they earn between $32,500 and $94,000 for a family of four and don’t have insurance through work or government programs. This is the group that the exchanges were built for.
Plans with lower premiums shift more risk onto the policyholder—that is, they cost more when you use services, through co-pays, co-insurance, or higher deductibles. If consumers don’t understand how their health plans work before they buy insurance, a lot of people may get an unwelcome lesson when their medical bills arrive.