If you think most Americans are confused about upcoming changes related to the Affordable Care Act, commonly referred to as Obamacare, you're right.
A recent poll by InsuranceQuotes.com found that 85% of respondents didn't think consumers had enough information about Obamacare. Some Americans in a May survey by health insurer WellPoint (NYSE: ANTM ) thought that the Obamacare exchanges would include insurance for pets, homeowners, and cars. (They won't.)
Recent research conducted by Carnegie Mellon University economists indicates that the confusion goes beyond just Obamacare, though. Their study concluded that many people in the U.S. don't understand health insurance in general. Why aren't we as informed about this important subject as we should be?
One key reason behind the confusion: a bevy of baffling buzzwords. Only 14% of Americans surveyed by Carnegie Mellon fully understood what deductibles, copays, coinsurance, and out-of-pocket maximums were. Even fewer could calculate how much they would have to pay for a hypothetical four-day hospital stay.
A 2011 survey of insured adults sponsored by Aetna (NYSE: AET ) found results that were better but still showed plenty of consternation. Thirty-two percent of respondents didn't understand the total cost of their health-insurance plans. Thirty percent didn't know the difference between preferred provider organizations, or PPOs, and health maintenance organizations, or HMOs.
Aetna reported that 26% of adults surveyed didn't understand which providers were in network. When referrals are needed and not needed spurred plenty of questions also, with 24% indicating trouble understanding this part of their health plan.
Some companies are trying to combat the confusion about health insurance. Aetna, for example, redesigned its website to better explain its health benefits. The site even allows members to download a free copy of Navigating Your Health Benefits for Dummies.
UnitedHealth Group (NYSE: UNH ) turned to social media. The big insurance company has several YouTube channels that explain health insurance options to its customers. Like Aetna, UnitedHealth also offers resources on its website to help customers, including a glossary of health insurance terms.
At least a couple of big companies are working to help Americans better understand Obamacare. Walgreen (NASDAQ: WBA ) joined with the Blue Cross and Blue Shield Association, or BCBSA, in July to educate consumers about health reform. Walgreen launched a website that answers questions about Obamacare and will offer informational brochures in its stores. Exactly what actions the BCBSA, which includes 14 plans owned by WellPoint, would take weren't clear.
A few weeks after the Walgreen/BCBSA announcement, CVS Caremark (NYSE: CVS ) said that it, too, will help educate consumers about Obamacare. CVS reported plans to hold "retail events" and include brochure displays in its 7,400-plus retail stores and 650 MinuteClinic locations, as well as make information available online.
A simple solution?
All of this education could be beneficial, but the bottom line is that health insurance is complicated. Obamacare is complicated. Making something complicated sound simple isn't easy.
Attempts to make purchasing insurance online straightforward in Massachusetts, whose health insurance plan served as a model for Obamacare, didn't pan out too well. Even with a concerted effort to streamline the website to make the process as painless as possible for online buyers, more than 40% of those who used Massachusetts online exchange found it difficult to comprehend. Around 20% were overwhelmed by the available choices.
What's the best answer to overcoming Americans' ignorance about health insurance? Dr. George Loewenstein, the lead research on the aforementioned Carnegie Mellon study, says a better approach would be to "simplify the underlying product".
The Carnegie Mellon team found solid evidence that consumers would better understand a simpler health plan compared to current health plans. On the other hand, the evidence wasn't as strong that simpler plans would attract customers or result in their changing health-care choices.
My guess is that simpler plans would be winners in the marketplace. As of now, insurance companies aren't exactly going overboard in offering less complex plans, partly because of continued anxiety over the impact of Obamacare. If one does step up to the plate in an innovative way, though, I suspect customers -- and investors -- will reward that company for keeping it simple.
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