Health-Insurance Forms Also Need Reform

Insurance jargon confuses an already stressful process. Companies are trying to switch to simpler language, where "formulary" becomes "drug list"

The current public clamor over health-care reform is drowning out a basic problem that many Americans have: understanding their insurance policies.

In an August editorial for The New York Times (NYT), John Aloysius Cogan Jr., the executive counsel for the Rhode Island Office of the Health Insurance Commissioner, discussed the need for clearly written health-care policies. "It is hard to believe that very many of the 200 million Americans who have private health insurance understand their own coverage," Cogan wrote. Rhode Island, he continued, soon will require that all insurance policies are written at the average reading level of Rhode Islanders—eighth grade. (The average American reads at a seventh-grade level.)

"I don't know what the insurance companies are thinking when they write these policies," Cogan says in an interview with BusinessWeek. "My suspicion is that most of them are not [being confusing] intentionally. I would like to think that they're not doing this purposefully."

New Mandates and Options

Susan McKay, a spokeswoman for the advocacy group Tennessee Health Care Campaign, says clearer language is needed—both from insurers and in the health-care reform bills currently being debated in Congress. That legislation, if it passes, is likely to result in reams of new mandates and options that insurance suppliers, employers, and regulators will have to boil down for laypeople. "The health-insurance industry must be transparent and really specific about what they are going to cover, what their premiums are, what they're going to expect in co-pays, and what the deductible is," McKay says. "Why do they have to try to be so obscure in the language they use?"

Jargon may not be the worst thing insurance companies are accused of inflicting upon their members. But some insurance companies recently have made serious efforts to reduce the number of jargon-laced insurance forms that Americans must sift through. Aetna (AET) published a manual in 2008 called Navigating Your Health Benefits for Dummies. ASI, the for-profit arm of the AARP, is working on efforts to "better communicate" Medicare insurance plans—in 2010, ASI and UnitedHealth Group (UNH) will introduce a clearer, easier-to-comprehend explanation of benefits as well as a remodeled certificate of insurance. And Cigna (CI) has released new guidelines for its customer service representatives.

"We're trying to get people engaged in learning about health," says Sheila McCormick, director for consumer education at Cigna's Chicago office. Cigna's 26,000 employees have been ordered to stop using jargon and use simpler words to help consumers understand their policies.

Instead of the term "formulary," for example, Cigna's people must say "drug list." Instead of "patient liability," they must say "your responsibility." Instead of "carry-over funds," they must say "last year's unused funds," or "money left in your account from last year." And when employees talk to customers about their "deductible," they must include a definition of the word when first referring to it.

Change in the Medicare Rules

What led to insurers looking at jargon in their policies? Terry Clark, chief marketing officer for Ovations, UnitedHealth's company dedicated to the senior market, says an important event was the introduction in 2006 of Medicare Part D, which provided coverage for some drugs but also required many seniors to pay full price for their prescriptions. "There was so much confusion in the marketplace," Clark says. "We wanted to work with the government and local organizations" to help seniors better understand Part D.

"Medicare is extremely confusing," he says. Since 2006, "we've designed a set of standards and a training program across our whole organization." This involved redesigning the explanation of benefits, for example. To make documents more easily understandable for seniors, "we had extensive focus groups and looked at the design elements," Clark says. The revamped materials included things like "less words, more white space, and the use of more icons."

Ingrid Lindberg, Cigna's chief customer experience officer, says the company's program, called Words We Use, was developed in 2008. "We started with things like our enrollment guide, because we know that's what people use to make their decisions," she says. "We simplified the heck out of that. And we changed how our call-center representatives speak."

A Score for Readability

Insurance is currently regulated at the state level, not nationally. The standard that state regulators use to judge insurance policies' readability is a model regulation introduced by the National Association of Insurance Commissioners (NAIC) in 1995. Most states now require that insurance policies conform to the language requirements of the NAIC model regulation, which uses the Flesch Reading Ease test to judge how complicated insurance policies are.

According to the Flesch scale, a policy with a score between 60 and 70 is considered understandable by 13- to 15-year-olds; a score of 30 is considered understandable by university graduates. Insurance forms are supposed to achieve a minimum score of 40.

Sandy Praeger, the Kansas Commissioner of Insurance and former president of the NAIC, says the states "look very carefully at the forms that are submitted to make sure they're readable, and to make sure the language is not confusing." Before an insurance agent can go into the field and sell products, she says, "the forms that they're using have to be approved by us."

The Flesch scale, however, can be a tricky way of judging how readable insurance policies really are. Cogan in Rhode Island says that even if an insurance policy scores a 40 on the Flesch scale, it is not necessarily a policy most Americans can quickly understand.

Just Skimming Through

Despite the recent language reforms, most insurance policies and bills remain difficult to parse. One lingering problem is that Americans don't spend much time reading their policies. Lindberg says average Americans spend just 30 minutes a year choosing their health insurance.

"There's a lot of factors at play here," says Cogan. "As more and more aspects of our lives become complicated, consumers have less and less time to devote to an undertaking like a health-insurance policy." It's not a place, he says, "where they're going to allocate their time."

Cigna's McCormick says health care is complicated stuff, any way you word it. "At a certain point people just tune out. They say: 'I just can't process this.'" She believes that stress is a big factor in how people approach and analyze their plans. "When people are accessing the information, they're not really in their best frame of mind. You tend not to look at something until you really need it."

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