Why Is Obamacare So Hard to Understand?

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?

Baffling buzzwords
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.

Combating confusion
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 (NYSE: WAG  ) 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.

In the meantime, Obamacare is rewriting the rules for the health care industry. Even though those rules might be complicated, they're creating massive opportunities for investors to get ridiculously rich. How? By investing in a handful of specific health care stocks. In this free report, our analysts walk you through these opportunities and the companies that are positioned to exploit them. The informational edge contained in it is invaluable, but can only be exploited profitably while the rest of the market remains in the dark. To access this free report instantly, simply click here now.


Read/Post Comments (5) | Recommend This Article (3)

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  • Report this Comment On August 17, 2013, at 3:40 PM, sypoth wrote:

    It's not really all that hard to understand when you realize Insurance companies wrote it and provided as many loop holes for themselves as possible. For Example, everyone must buy insurance or have insurance but they can still deny claims. It sucks money from the already overburdened Medicare programs as well as redirects funding of hospital support programs to insurance companies thus increasing the cost of hospital and clinical visits while reducing the number of people that qualify for medicare and medicaid this money is spread out among all the people who have insurance all at once whether they use it or not, this spread out does not offset the increase in cost by providers however leading to higher personal premiums. Since it is not mandatory Insurance companies now are free to also raise and fix market prices as they see fit rather than having lower costs to attract the people that need the insurance because now you are obligated to have it which is how a monopoly works. Since claims can still be denied health care providers must now also include lawyer fees and the people who are already too poor to afford lawyers must also find legal means to force insurance companies to pay which was the largest part of the problem to begin with. Many employers also cannot afford to pay the premiums for their entire staff as their profits are not that great, so the already poor people working full time must also take a cut to their hours meaning they are not making as much money, these individuals couldn't afford health insurance before as all their money went into rent, food, transportation, utilities, and other necessities yet they do not qualify for the so called free packages because their income which was already above the cut off point for medicare and medicaid is still too high for Obamacares even lower bar of acceptance.

    Yes I have read the thing and yes I understand what it is and what it does, which is why Health care providers consistently side with attempts to repeal it while insurance companies consistently support this ugly new law that help nobody but those who are already greedy and with tight purse strings and love to scam people out of their hard earned money.

  • Report this Comment On August 18, 2013, at 2:02 AM, chris293 wrote:

    For years, the insurance companies have done the bookwork for the state and national government medical programs. So again who are they kidding, Obama-care just adds another level of, this time, government workers to increase the expenses of this medical program.

    As with all liberal government ideas, personal responsibility for yours and my health is out the window and we will be taxed to death, pun intended. Why doesn't the government live within it's means.

  • Report this Comment On August 18, 2013, at 5:44 PM, sagehopper wrote:

    That's a no brainer. It had 2,700 pages , written by industry lawyers. Then the politicians got involved, now it is 20,000 pages, Government efficiency and brevity of printed material works every time.

  • Report this Comment On August 20, 2013, at 6:27 PM, TMFHobo wrote:

    It's in insurance companies' interests for you not to understand your benefits. That way they'll make more money off of you. Their business model is to pass on as many costs to you while denying as many benefits as possible. If you don't understand what you're paying for, then they have a natural advantage over you.

    Thanks for the article.

  • Report this Comment On August 20, 2013, at 7:08 PM, TheDumbMoney wrote:

    "Only 14% of Americans surveyed by Carnegie Mellon fully understood what deductibles, copays, coinsurance, and out-of-pocket maximums were."

    Dear. God.

    Morgan, true, on the other hand one provision of Obamacare is that it limits insurance company profits. http://www.calhospital.org/daily-news-article/does-obamacare.... So maybe that explains why they are now making more of an effort to explain....

    Personally, I think the insurance stuff is just the tip of the iceberg. As you have I think written about in the past, the status of disclosures regarding how much care costs at particular hospitals (let alone for particular procedures) is simply astounding. Nobody knows anything.

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