Navigating the Health Exchanges: Knowledge is Power, But Rarely Found

Purchasing health insurance remains a complicated process that, if not done right, can lead to serious financial challenges and even bankruptcy at a time when we are most vulnerable.

Less than two weeks into the second open enrollment period for the Affordable Care Act (ACA), we see a generally smooth rollout coupled with healthy demand for affordable and effective health plans. While I’m pleased to see coverage expanding across the country, I worry that some Americans are purchasing plans without fully understanding their potential impact.

A health plan is made up of easily understood fixed costs – monthly premiums – but also includes a number of fluctuating expenses based on the frequency and type of treatment – co-pays, co-insurance and deductibles – that do not fit cleanly into a family budget. All of these factors create a series of trade-offs that make it extremely difficult for the average American to understand their true financial exposure. The sheer volume of calls we received at HealthMarkets Insurance Agency from people looking to schedule appointments even before the open enrollment period began tells us that many Americans understand the importance of getting covered, but do not fully comprehend the trade-offs between plans.

At HealthMarkets, we recently surveyed one thousand people to shed light on whether consumers were prepared for the financial impact of a major medical issue. The answer across income levels was a resounding “no.” Our survey found that Americans can only afford a fraction of what they would have to pay out-of-pocket in the event of a serious medical issue. Households with annual incomes between $50,000 and $75,000 could only afford to pay $976 in out-of-pocket health care costs each year on average, yet a family of four could face costs of up to $10,400 under a Silver Plan. These massive gaps between affordability and costs are why according to Harvard Medical School, six in ten bankruptcies spawn from medical issues, more than three quarters of which involve people who had health insurance at the time of illness.

The level of services available under various plans is also a source of confusion. Depending on the plan chosen, your current primary care physician or a convenient hospital may not be covered in a health plan’s network, yet determining the makeup of a network often is not a straightforward process. The growth of “narrow network” plans that limit available physicians, hospitals and other providers may be more wallet-friendly, but require careful research to ensure they meet the needs of the person or family seeking coverage.

The increasing “consumerization” of health care is a positive development. It is spawning greater choice and empowering Americans to consider health care decisions both at the point of enrollment and at the point of service in the same way they view other important purchases, like buying a home or purchasing a car. Making the right choice on health insurance requires an accurate understanding of the trade-offs between payments, access and services.

American’s are being asked to navigate a complex system without proper support, and with the potential for serious repercussions. All involved parties must share in the responsibility of spreading knowledge. Though they cannot give advice, navigators are available to walk consumers through the on-exchange application process. Insurance carriers and brokers are able to provide informed counsel and flag for the consumer the important questions that people often overlook. Meanwhile, federal and state government programs must continue their outreach and educational efforts to promote sign-ups.

The Affordable Care Act will face many tests in the coming months. There is a real possibility that components of the law may change, increasing the need for comprehensive support services. As long as insurance agents, carriers and the federal and state governments play their part, consumers will be armed with the knowledge needed to weigh all the issues associated with selecting health coverage – including the very real financial risks of a serious illness.

Kenneth J. Fasola is President and Chief Executive Officer of HealthMarkets, Inc. a holding company focused on serving the insurance needs of individuals, families, and small business through its subsidiary insurance and distribution companies, including HealthMarkets Insurance Agency, a d/b/a or assumed name of Insphere Insurance Solutions, Inc.