Shining a Light on Health Insurance: Senate Commerce Committee Examines Progress, Challenges

Health insurance is a product that everybody needs – yet, while we are glad to have it, most of us dread shopping for it.  And it’s no wonder: health insurance is a complicated product that consumers have difficulty understanding, a common theme throughout Wednesday’s Senate Commerce Committee hearing on “The Power of Transparency: Giving Consumers the Information They Need to Make Smart Choices in the Health Insurance Market.”  As witness Lynn Quincy of Consumer’s Union put it, “Complexity has a cost…with something this important and expensive, consumers should not be asked to shop with a blindfold on, that is, with an incomplete idea of how much coverage they are getting.” And Chairman Rockefeller spoke to the importance of better transparency to protect consumers from unexpected medical bills, noting, “A complicated pregnancy, a cancer diagnosis or even a broken limb could push families well beyond their tight budgets.”

Fortunately, new tools are already available to help consumers shop for and compare coverage, and more will become available as Affordable Care Act implementation continues to roll out.  Wednesday’s hearing focused on the Summary of Benefits and Coverage (SBC), a new, streamlined coverage information document that first became available to consumers in the individual and group markets in fall 2012, allowing them to make “apples-to-apples” comparisons and find plans that better meet their coverage needs.  The SBC, a page-limited document that clearly outlines a plan’s benefits, cost-sharing, and benefit exclusions, is a requirement of the ACA (which added a new Section 2715 of the Public Health Service Act) and was developed through an exhaustive multi-stakeholder process convened by the National Association of Insurance Commissioners.  The NAIC Consumer Information (B) Subgroup then presented recommendations that were largely adopted in rulemaking by the Departments of Health and Human Services, Labor, and Treasury.

As witnesses noted at the hearing, the SBC can be a valuable tool for helping consumers understand their coverage because it standardizes the display of coverage information across multiple types of private insurance plan, for the first time allowing consumers to conveniently compare their options and cut down on the time they spend “searching for and compiling health plan and coverage information.”  Moreover, the SBC must be made available to consumers before they actually enroll in coverage.  As Michael Livermore of the Institute for Policy Integrity at NYU’s School of Law pointed out, this reduction in search time and concomitant improvement in consumers’ ability to identify high-value plans could both reduce costs and lead to the longer-term benefit of increasing competition among health insurance issuers.  Finally, the SBC includes a new feature called a Coverage Example that allows consumers to see the total cost of a typical episode of care, such as having a baby or managing type 2 diabetes for a year.  According to Ms. Quincy of Consumer’s Union, these examples, while not serving as cost estimates for any given person, do help consumers realize both the high cost of care and the value of the health insurance they are buying.  Neil Trautwein of the National Retail Federation noted that, despite initial skepticism from employers about the usefulness of the SBC and overall concerns from employers about regulatory requirements under the ACA, the SBC itself can be a “helpful tool” for employers to educate their employees about benefits.

According to a just-released Consumers Union study of the initial rollout of the SBC, most consumers who saw the SBC while shopping for coverage in fall 2012 found it to be helpful – even ranking it more helpful than other sources. For instance, in the group market, 89% of those shopping for group coverage found it very or somewhat helpful, compared to 78% for their employer-prepared health plan comparison and 49% for health plan ratings viewed on the Internet.  In the private, non-group market, 90% of those who saw the form found it very or somewhat helpful, compared to 78% for the health insurer’s brochure and 67% for health plan ratings viewed on the Internet.

As the hearing also made clear, however, more can be done to make the SBC useful to consumers. For instance, Ms. Quincy noted that only 50% of those shopping for coverage in fall of 2012 had recalled seeing the form – pointing to the need for increased awareness of the form and oversight to make sure it is being provided as required.  The good news for consumers is that the SBC promises to become even more widespread, especially as exchanges – which are required to provide the forms to consumers – come online.  According to the Consumers’ Union report, consumers varied in their opinions about how to improve the form, with some believing it provided too much information and others too little.  According to Mr. Livermore, additional, ongoing consumer testing will be an important consideration for fine-tuning this tool to make it as useful as possible to consumers. Other suggestions for improving the form raised at the hearing included adding more coverage examples – in particular, for a potentially very expensive condition such as breast cancer — making sure it is available in multiple languages, adding premium information, and verifying the forms’ accuracy. Mr. Trautwein emphasized the business community’s desire for continued flexibility in how the form gets distributed to employees – for instance, online and by email, with paper copies available on demand.

Wednesday’s hearing highlighted bipartisan agreement that – while specific tools such as the SBC may continue to be a work in progress — transparency is a necessary remedy for today’s confusing, complex, and downright opaque health care system.  Moreover, both witnesses and committee members emphasized that helping consumers find the best coverage will require broad efforts beyond the SBC.  Margaret O’Kane, President of the National Committee on Quality Assurance, emphasized the opportunity presented by health insurance exchanges to help consumers find coverage that provides the highest-possible value, which she cautioned “means more than low premiums… value is the quality of the health and well-being you get for the total cost you pay.”  Ms. O’Kane urged policymakers to encourage both federal and state exchanges to “support innovation and consumer engagement” once they get past initial establishment hurdles, helping consumers easily obtain and understand cost and quality metrics and making high-value plans “easier to reach” through such tools as choice architecture – the way that choices are presented to consumers, which can have a significant impact on what they actually purchase.

Despite some inevitable disagreement aired at the hearing about the overall impact of the ACA, there was consensus that consumers need help making better coverage choices, and tools such as the Summary of Benefits and Coverage are already helping them do so.  However, presenting the right information to consumers when they need it is no small task, and consumers will benefit from a continued focus on the part of policymakers, health plans, employers, exchanges, and others to make sure that transparency in general, as well as tools such as the SBC, continue to improve over time.

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