You Should Know What Your Insurance Premium Actually Buys

Isaiah J. Poole

Imagine that you’re choosing between two health insurance plans. One has a $15 co-pay for doctor visits and says it covers hospital charges up to 80 percent of “reasonable and customary” charges. The second has a $20 co-pay and covers only 75 percent of “reasonable and customary” hospital charges. The first plan is clearly the better deal, right?

Not necessarily. Do you know how each company defines “reasonable and customary” and how different those definitions are between the two plans? Suppose Plan A rejects twice the expense claims filed by patients and their doctors as Plan B? In that scenario, the more certain 75 percent of Plan B, with you paying the remaining 25 percent, becomes a lot cheaper than the 80 percent advertised by Plan A that in reality leaves you paying 40 percent of a bill when you expected to pay only 20 percent.

But consumers don’t get to know that kind of information up front, because insurance companies won’t reveal it.

AUDIO: NEWS CALL

Hear Rep. Rosa DeLauro, D-Conn., Institute for America’s Future health care project director Diane Archer, Georgetown University research professor Karen Pollitz and Consumers Union senior policy analyst Bill Vaughan explain their effort to get the Senate to break the veil of secrecy insurance companies place over the the prices they charge and the care they cover.

Making that type of information public and easily accessible is the goal of health reform leaders trying to get insurance industry transparency language that has already been approved by the House included in the Senate’s health care bill.

“Under the status quo, health insurance is essentially a black box,” said Rep. Rosa DeLauro, D-Conn., in a call with reporters today organized by the Institute for America’s Future. “The fact is that countless Americans buy coverage that they thought was comprehensive, only to realize that it has gaps once they get sick.”

A letter to Senate Majority Leader Harry Reid signed by 30 health-care experts said:

Today, health insurers deem a considerable amount of information about the prices they charge and the care they cover business trade secrets. The unavailability of this data makes it particularly difficult for professionals, let alone individuals, to compare health insurance plans or to understand how well competition is working in the health insurance market. Lack of data makes it hard to identify and address fraudulent insurer behavior and difficult for Congress to address emerging issues in health insurance markets post reform.

What DeLauro and her supporters would like to see is publicly available information for insurance company policies that would be comparable to the nutrition information available on food labels, with industry-standard terms that are consistently applied by each company so that customers can make apples-to-apples comparisons of various policies.

That level of disclosure and consistency would also enable state and federal regulators to do a better job of policing insurance companies.

Sen. Jay Rockefeller, D-W. Va., brought attention to this issue in November when he blasted Cigna for failing to properly account for $5 billion in premiums paid by group insurance purchasers in 2008. The insurance industry says that that it pays out 87 cents of every premium dollar on medical claims, but a Senate Commerce Committee analysis says the actual figure can be as low as 66 cents of every dollar.

That figure, however, varies widely depending on the kind of policy you have and from where you get it. If you work for a small company and are getting insurance through that company, you are most likely getting a worse deal than if you were working for a large company. You are also more likely to get less for your money with a policy from one of the country’s largest insurers.

Unlocking the secrets of what the insurance industry calls the “medical loss ratio”—the percentage of premiums paid out in claims—would give consumers a powerful way of using the market to put some discipline on prices. But as much as conservatives like to talk about empowering health care consumers by giving them more information, conservatives in Congress have not taken up this particular fight. When it comes to health care reform, DeLauro said, “I don’t believe there is anything that will satisfy them.” Especially if it means stepping on the toes of the health insurance industry.

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