Saturday, November 17, 2007

The hidden insurance problem: they can play the game better than we can

Last week I wrote that it is impossible for a sane human to truly judge the value of employment benefits, particularly health care benefits.

That complexity is not accidental. Complexity facilitates deception. The consumer can't really price the product, but the vendor can. A product that seems to offer good consumer value may be a trap.

It's a huge competitive advantage. Companies that don't leverage it will disappear, until finally it's the only way to play the game.

Bob Herbert provides a great example of the game in action:
It’s Not Just the Uninsured - Bob Herbert - New York Times:

...The next round of bad news came in a double dose. One night, after coming home from school, Brittney suddenly found that she couldn’t walk. The cancer had attacked her spinal cord. As the doctors geared up to treat this new disaster, Ms. Hightower received word that her insurance policy had maxed out. The company would not pay for any further treatment.

Ms. Hightower was aghast: “I said, ‘What do you mean? It was supposed to be a $3 million policy.’ ”

She hadn’t understood that there was an annual limit of $75,000 on benefits. “It was just devastating when they told me that,” she said.

Most of the debate about access to health care has centered on people without insurance. But there are cases like this one all over the country in which individuals are working and paying for coverage that, perversely, kicks out when a devastating illness kicks in...
Few consumers would knowingly purchase an insurance policy with a $75K yearly cap, but that cap can make the coverage very profitable.

The best way out of this trap is to create offerings that apply across a state or region, and make the available to all persons in the region. This allows newspapers, consumer organizations, and government to analyze plans and expose deception. The next best option is to create standard care scenarios and require insurers to describe how their plans would operate under the scenarios.

Lastly, we could make insurance companies liable when a "reasonable person" would be unable to understand the true costs and benefits ofa given plan.

There are lots of ways we could make things better - even without reforming the health care system.

A year from now, we might even hope that some of them might become law.

No comments: