February 10th, 2012
Editor’s note: See another Health Affairs post on this topic by Tim Jost.
How do you shop for health insurance today? For many of us, our employer makes the decision for us. And if there is a choice of health plans, the employer also provides helpful summaries of the benefits, premium differences, and cost-sharing so that we can compare plans easily and choose one that is right for us.
But for millions of Americans who don’t have job-based coverage, it is not so easy to make an informed choice when options are available. Because of differences in how coverage works, even different ways deductibles work, it is almost impossible to compare health insurance options. Even worse, rarely do two insurers use the same definition for the same terminology, leaving some consumers to make decisions in the dark.
On February 9, 2012, the Obama Administration released final rules on what the Kaiser Health Tracking Survey found to be the most popular provision under the Affordable Care Act (ACA) — known as “section 2715.” Akin to food labels that we use to compare ingredients in our food, section 2715 requires insurance companies and employers to provide people with an easy to understand 4-page summary of what a health insurance policy covers, what’s excluded, and cost information about deductibles, co-insurance, and copayments. The provision also requires insurance and medical terms to be defined in a standard, easy way.
Soon will be gone the days when a person needs a PH.D. in insurance law to understand how health insurance works. Section 2715 of the ACA will fundamentally change how insurance is sold and marketed, empowering consumers to make informed decisions about health insurance coverage.
The Development Of The New Rule
We applaud the Administration for taking a big step to empowering consumers through transparency. The Administration largely adopted the recommendations of the statutory working group established by the National Association of Insurance Commissioners (NAIC). The working group, on which we both served (and Ms. Kofman co-chaired), included state insurance regulators, insurance companies, physicians and other medical providers, agents, and consumers.
The group spent over a year working through both the substance and format for providing this new information to consumers. In the end, after hundreds of hours of debate and deliberation and public input, and consumer focus group testing, its detailed recommendations for the Departments of Health and Human Services (HHS) and Labor (DoL) were adopted unanimously by the NAIC. At the working group level, in fact, it was a member of a health plan that moved to adopt, and a consumer advocate that seconded the motion to adopt, the 4-page template and standardized glossary of terms – indicating the level of consensus and the importance of the products that had been developed.
We are pleased that, with relatively few changes, the Administration’s final regulations adopt the 4-page coverage summary and glossary of terms our working group initially developed. The new consumer-friendly information will be available for individuals and families buying their own coverage, people with job-based coverage, and in 2014 coverage sold through health insurance exchanges.
The final rule addresses many of the issues raised in the August proposed rule as well as those raised by employers, insurers, and consumer groups. These include: timing of when consumers should be able to access this new information; whether employers get a complete pass from providing the 4-page standard document; whether employers and insurers could provide the information in a different form, e.g. embed the new coverage summary in their “summary plan description” (SPD), which is a detailed description of a plan’s coverage and how it operates; whether premium information should be provided; whether health plans should be allowed to use a “coverage cost calculator” in place of the coverage facts label; and whether the four page summary will include coverage examples to help consumers understand how a policy works. The final rule addresses these and other issues.
Balancing Consumer Information Needs Against Regulatory Burdens
The rule reflects a balanced approach, weighing the need for consumers to have good information against “regulatory burdens” for employers and insurers. Some of its key provisions include:
- A requirement that insurance companies selling individual market coverage provide the standard 4-page summary of coverage. And, in spite of heavy lobbying , employers including self-insured plans and insurers offering small and large group coverage, will also have to provide the SBC to employees.
- A requirement that insurance companies and group health plans supply consumers and employees with the SBC starting September 23, 2012. While the law requires implementation by March 23, 2012, many in the industry urged delaying implementation until 2014. But the Administration struck a balance, requiring that the SBC be provided to consumers later this year so they can make informed decisions in time for plans’ open enrollment periods, which usually take place in the Fall. Employers will have to start providing the SBC for open enrollment on or after September 23, 2012 and for plans without open enrollment at plan renewal on or after September 23, 2012 (many plans renew in January 2013 or July 2013). Insurers in the individual market will have to provide the SBC starting September 23, 2012.
- A requirement that insurers must automatically provide the 4-page coverage summary to a person who completes an application for coverage or to any person who requests a summary (within 7 business days of the request). Employers must provide the summary when coverage renews (30 days prior to renewal) , must provide an updated summary if there is a material change during the plan year, and also upon request (within 7 business days).
Some will argue that the regulation falls short in the area of coverage examples – information designed to help a consumer to understand better how a policy works. We believe the two required coverage scenarios – normal pregnancy and diabetes treatment – are a good start. The regulations indicate that up to six coverage examples may be required in the future. For consumers to understand how a policy works, it will be important to provide additional coverage examples for other common conditions and treatment scenarios.
The NAIC’s recommendations included an example for breast cancer, and we believe there should be an example illustrating how a policy works in the case of a disease that impacts so many women and families in America. In addition, using a coverage example that demonstrates a treatment scenario for cancer provides consumers with a more comprehensive picture of what a plan covers. Cancer patients must undergo a broad array of health services, such as hospitalization, lab, expensive medicine, mental health and other benefits. This coverage example would have provided a better picture of how a policy works for a broad set of different kinds of services.
Some will also criticize the final regulations for allowing employers to include the 4-page summary in a longer document called SPD — or summary plan description — which they currently must provide to employees under ERISA. Although a standalone summary like the one required for the individual market would have been more useful to consumers, the Administration is clearly looking for ways to minimize costs for employers. However, to ensure that the summary of benefits form doesn’t get lost in what is often a long and legalistic document, the regulations specify that if the summary is part of an SPD, it must be intact and prominently displayed, e.g., after the table of contents.
Finally, some will criticize the Administration for not requiring information on premiums to be a part of the SBC. We support this decision because in most states, individual market coverage is underwritten – meaning that if a person is accepted for coverage (a big “if”), the standard rate will be increased to reflect the person’s health, medical history, gender, occupation, age, and any other factor currently permitted by the state where the consumer lives. Providing premium information that is standard and not close to what a particular consumer would be charged is not all that helpful to consumers. In 2014, when insurers are restricted in how they set premiums, premium information will be more useful to consumers purchasing outside of an Exchange. For those purchasing through an Exchange, premium information will be available.
We applaud the Administration for moving forward with this critical transparency rule. Given the bewildering array of technical and confusing forms that health insurance shoppers are confronted with today, it is no surprise to us that this polls as the most popular provision of the law. When consumers are armed with comprehensible and comparable information about their coverage options, they will be able to make choices that are best for themselves and their families.
This entry was posted on Friday, February 10th, 2012 at 8:41 am and is filed under All Categories, Consumers, Health Reform, Insurance, Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.