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Why Picking a Health Plan Is So Confusing

Even health and policy experts struggle to choose health care each year. Here’s what to know.

Credit: Irina_Strelnikova/iStock/Getty Images Plus

David Johnson and Terri Brady met at Harvard while both were working on master’s degrees in public policy. He became an investment banker, specializing in complex financial instruments like derivatives and options. She added a law degree from Columbia.

When the couple moved to Chicago and needed to figure out which health insurance plan to select from Brady’s employer, it felt natural for the duo to set up a spreadsheet. They’d simply calculate tradeoffs among the different plans, such as annual premiums and deductibles. After hours of frustration, however, the couple came to a realization.

“It was impossible to know for sure which approach would cost the most money,” recalled Johnson, now a health policy consultant. “It actually ended up being pretty complicated math.”

Welcome to open enrollment season. In contrast to general end-of-the-year cheer, selecting a health insurance plan typically conjures feelings of confusion and inadequacy. There’s a nagging worry that you’re wasting money, picking a plan with in-network doctors who will give you inadequate care — or both.

The bad news is that you could be right. But the good news, though it’s small consolation, is that you shouldn’t blame yourself. Your unease is ubiquitous, secretly shared by many health experts when they make their own choices, possibly because they’re even more attuned to the possible pitfalls.

“It was impossible to know for sure which approach would cost the most money.”

“Even if you understand all the terms, I think it can be very confusing,” says Paul Fronstin, a veteran economist for the Employee Benefit Research Institute (EBRI).

The 2018 Kaiser Family Foundation survey found that six in 10 workers whose workplace offers health coverage have more than one plan option. But while choice may signal a market sensitive to individual needs, having too many choices can overwhelm our brains and stress us out.

For example, EBRI uses an insurance exchange set up by the Affordable Care Act (a.k.a. Obamacare). At one point, Fronstin counted 60 different plans from which he personally could choose. The median number of plans offered by the Federal Employees Health Benefits Program, which covers 8.2 million people, is 24, according to a government report, and each plan can have up to three levels of benefits. Using that program’s online calculator, I portrayed myself as a federal employee in downtown Washington, D.C., paid biweekly. Absent other qualifiers, 34 possible plans popped up.

Tom Baker, a professor of law and health sciences at the University of Pennsylvania, co-designed an artificial intelligence tool called Picwell to help workers cope. Marketed to employers for their employees, the software learns from millions of insurance claims to identify people similar to you in order to recommend a plan.

Some individuals, though, continue to prefer human help. When Baker tried to help his parents pick a Medicare plan, he recalls, “Even though it was my company and my parents trust me, it was lucky that the nice lady at the senior center agreed.”

Whether with A.I. or human assistance, “You don’t even know all of the things you’ve never heard of that all of a sudden could get screwed up,” says Harold Pollack, a sociologist at the University of Chicago and a prominent policy expert.

The more fundamental problem, however, is figuring out exactly what you’re buying. Start with the jargon. Let’s say you’re picking a Medicare plan. Traditional Medicare directly offers Part A (inpatient care) and B (outpatient care), while Part D (drugs) is sold through private groups. But you’ll probably also want a supplemental policy, colloquially known as “Medigap,” which also comes from a private insurer and has its own slew of options.

Unless, of course, you’ve chosen a private Medicare Advantage plan, which, depending on your circumstances and the fine print, may or may not be advantageous.

Did I mention that Medicare Advantage plans are either HMOs (health maintenance organizations) or PPOs (preferred provider organizations), terms that don’t really explain their rules? HMOs and PPOs are likely offered in various forms by your employer as well, perhaps alongside indemnity insurance and the newest twist: high-deductible health plans.

In contrast to the limited replacement value of your home or car, there’s no natural limit on what an illness might cost. Insurers and self-insured entities legitimately struggle to balance how much medical cost you should bear.

Now, don’t forget flexible spending accounts (FSAs), health reimbursement accounts (HRAs) and health savings accounts (HSAs). To which your employer may or may not contribute. (Even I can’t keep them straight. Look here.)

Wait! I’m not through. The Trump administration has now tossed in so-called “short-term plans,” which can lower premiums by skimping on what illnesses they cover by claiming exemption from a host of Obamacare rules, including, most notably, the ban on discriminating against people with pre-existing conditions. (An industry trade group provides a good starting point to examine these plans. For a more jaundiced viewpoint, see my celebration of the “Placebo HMO.”)

Also, the Medicare rules can change slightly every year.

Trying to help her elderly mother in Brooklyn, Susan Gross concisely captured the anxiety of the nonexpert: “I consider myself a smart person, and my siblings are smart, but it’s just so baffling,” Gross says. “So much is at stake. That’s why it’s even more horrible.”

Depending on income, age, and/or degree of disability, someone may also be on both Medicare and Medicaid, so-called dual eligibles. (Gross wisely turned to a lawyer to navigate these shoals for her 85-year-old mom.) Those on Medicaid alone, however, may have no choice of plan at all.

Even if plans comply with the Affordable Care Act, however, provider networks may differ in size and scope. There can be different rules about seeking care outside the network, with different financial consequences. Even a plan that seemingly promises to pay 80 percent of your bills is really promising to pay 80 percent of what they deem reasonable charges for services, devices, or medications they deem necessary.

Why are health insurance choices this confusing?

Certainly, health insurance is more complex than property and casualty coverage. In contrast to the limited replacement value of your home or car, there’s no natural limit on what an illness might cost. Insurers and self-insured entities — large employers, the government — legitimately struggle to balance how much medical cost you should bear to prevent moral hazard (overuse of services due to the feeling that someone else is paying) versus the degree to which cost sharing might cause you to forego needed care.

At the same time, recent Republican administrations have increased the role of private companies. Sometimes that has led to innovation; other times, only to confusion. Meanwhile, fear of making a bad choice causes consumers to pay too much for their insurance, even for those who may work at a company with limited choices.

But the real problem with our system runs much deeper. Broadly speaking, while health insurance is viewed elsewhere as part of the social contract, in this country, it often isn’t. Conservative opposition has been long-standing and consistent.

As a 1949 commentary from the New York State medical society put it:

Any experienced general practitioner will agree that what keeps the great majority of people well is the fact that they can’t afford to be ill… Is it not better that a few such should perish rather than that the majority of the population should be encouraged on every occasion to run sniveling to the doctor?

If that callousness doesn’t seem contemporary, consider that in 2011, after the passage of Obamacare, then Rep. Ron Paul (R-TX), a physician, was asked what should be done about an uninsured 30-year-old man in a coma. “What he should do is… assume responsibility for himself,” Paul responded, adding, “That’s what freedom is all about: taking your own risk.”

This cold-blooded definition of “freedom” leads to opposition to universal coverage. It also leads to describing high-deductible plans as “consumer-driven,” despite evidence that consumers can’t distinguish between needed and unneeded care, so they may simply be saddled with enormous bills. It leads to work requirements for Medicaid — a Trump administration feature — despite data showing that Medicaid recipients who can work are mostly already doing so. And finally, it leads to ignoring the inconvenient fact that those without adequate insurance still generally choose to seek care that the rest of us end up subsidizing.

Put all of this together, and most of us can empathize with the feedback that policy consultant Johnson says he received from an accomplished university economist who spent eight hours trying to optimize his health insurance choice: “Finally, he threw his hands up and said, ‘Let’s do what we did last year.’”

As author, researcher and consultant, I focus professionally on safe, high-quality and patient-centered health care. I also write on more personal concerns.

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