Some of you may remember home economics classes, now called family and consumer sciences. Although nutrition, cooking, and healthy living featured prominently in these classes, one of the items taught was personal finance and budgeting.
A dwindling number of middle and high schools offer family and consumer science courses. Findings from a recently released survey by Policygenius show how challenging health insurance is for many American consumers to understand. Perhaps it’s a good time to revisit the importance of educating future consumers.
Healthcare is one of the biggest expenses consumers make. Adding up premiums, deductibles, and cost-sharing for healthcare services and technologies, spending by consumers on healthcare comprises on average more than $6,000 per person on an annual basis.
In the Policygenius survey, the gaps in consumer knowledge of rudimentary concepts stand out:
- More than 50% of people surveyed didn’t know what a co-payment or deductible was. This is remarkable given that virtually everybody is impacted by co-payments and deductibles.
- More than 25% said they had avoided healthcare because they were unsure what their insurance covered. This may partly be the fault of insurance companies and pharmacy benefit managers who do not make it clear what is covered and not. The ambiguous “Plan x covers what’s medically necessary” statements do not suffice.
Other key findings include:
- Thirteen percent of people were unsure if they even had health insurance. The more you think about this poll result the harder it is to fathom.
- Almost 90% of people without health insurance couldn’t identify the open enrollment period to sign up for an Affordable Care Act (ACA) plan. This suggests the government is not doing a good job in notifying uninsured individuals of the possibility of enrolling in an exchange plan.
- About 87% of people who enroll in an ACA plan receive a premium tax credit, according to the Centers for Medicare and Medicaid Services, but only about 16% of people who lack health insurance are aware they can get government subsidies. Again, this points to the government not disseminating information about plans and premium subsidies to the public. The Trump administration has slashed ACA advertising by 90%.
The Policygenius survey results are consistent with a 2017 survey conducted by UnitedHealthcare, which showed that only 9% of Americans demonstrated an understanding of all four of these basic health insurance terms: Health plan premium, health plan deductible, out-of-pocket cap or maximum, and co-insurance.
In the 2017 survey, while approximately two-thirds of Americans understood either the term “health plan premium” or “health plan deductible,” less than half knew the definitions of “out-of-pocket maximum” and “co-insurance.”
The lack of consumer understanding of health insurance, coupled with inadequate or unclear messaging from government and private insurers, is a major problem when health plan members are supposed to comparison shop for providers and services. This is especially relevant during open enrollment periods.
The importance of improving consumers’ understanding of the fundamentals of health insurance is paramount in light of all the legislative and executive branch talk about transparency of hospital and drug prices. What good is transparency if consumers don’t have a fundamental understanding of basic health insurance terms? Here, transparency is a necessary but insufficient condition for establishing demand conditions that are more conducive to a competitive market. The informed consumer is a better consumer. And, a better educated consumer will also hold insurers, hospitals, physicians, and drug companies more accountable.