If the American people were required to take “Health Insurance 101,” half of them would fail it.
According to a new poll conducted by the Harris Institute on behalf of the American Institute of CPAs, many Americans can’t correctly define the basic financial terms that relate to their health insurance plans. Half of U.S. adults don’t know what a premium, deductible, or co-pay is.
Thirty four percent of participants thought a premium was an expense at the time of receiving medical service or a prescription (in fact, that’s a co-pay). Twenty four percent thought a co-pay was the cost of obtaining insurance (nope, that’s a premium). Twelve percent didn’t realize that a deductible is the amount of money you have to pay before an insurance company will start making payments.
The new poll did find that knowledge of those three insurance-related terms increased with education levels. But regardless of education, Americans have typically struggled to understand the complexities of the health insurance system as a whole.
Another recent study from a health care economist at Carnegie Mellon University found that even when people think they have a good understanding of how health care works, they’re often wrong. For instance, although 100 percent of the people who participated in the study thought they knew what a co-pay was, only 72 percent of them actually did. And hardly any of them could successfully navigate a hypothetical insurance plan to figure out what a four-day hospital stay would cost.
“I have a PhD in economics and I’ve spent a bunch of time giving insurance companies feedback about policies, and I still find them difficult to understand,” the Carnegie Melon professor, George Loewenstein, pointed out in an interview with Wonkblog. “I assumed that extrapolating from myself that the average American individual would have an even lower understanding.”
The health reform law takes some steps to attempt to address this issue. Obamacare requires insurers to provide a “Summary of Benefits and Coverage” that explains how the plan works in plain language. Insurers will also be required to distribute a glossary of common health care terms that will be uniform across different plans. The hope is that Americans will be more able to easily figure out exactly what they’re getting with their current benefit plan, compare it to other health care options, and decide whether it makes sense stick with it.
Improving Americans’ health care literacy is going to be especially important in light of the upcoming changes under Obamacare. The new state-wide insurance marketplaces will open for enrollment in October, but most Americans still don’t know much about health reform will affect them, and they aren’t getting their information from Obamacare from sources they actually trust.