Few exchange consumers understand basic insurance terms

December 19, 2013 | By Alicia Caramenico

More than 60 percent of the target population for the health insurance exchanges do not understand fundamental health insurance concepts, according to a December Health Affairs study.

The study highlights Health Reform Monitoring Survey (HRMS) data from summer 2013, which found that only about 40 percent of the target insurance marketplace population understood all nine key concepts of health insurance--premiums, deductibles, copayments, coinsurance, maximum annual out-of-pocket spending limits, provider networks, covered services, annual limits on services, and noncovered or excluded services.

The target population for the new marketplace consists of individuals with family income above 138 percent of the federal poverty level with nongroup coverage or no insurance, according to the Urban Institute's HRMS, which launched this year and provides quarterly data for about 7,400 nonelderly adults and 2,400 children.

The target population cited friends, coworkers and family members as their primary source of health insurance information, which could explain the information gap, according to a Health Affairs blog post. Moreover, young adults, Spanish speakers and the uninsured reported lower confidence in understanding the nine basic concepts, likely due to their lack of exposure to private insurance markets.

"Confusion around these concepts would make it difficult for consumers to understand trade-offs between different health insurance plans and to choose the insurance plan that best meets their needs," the study states.

The "troubling findings" suggest navigators, in-person assisters, call center operators, brokers and agents should not assume high health insurance literacy among consumers.

Similarly, an August study published in the Journal of Health Economics found consumers don't understand how insurance works. Of 202 surveyed adults, only 14 percent correctly understood deductibles, copays, co-insurance and out-of-pocket maximums.

Recognizing the importance of health literacy, insurers are taking steps to address the issue, such as providing cross-cultural training for networked doctors to help improve communication with their members. America's Health Insurance Plans identified eight common approaches some of its members have implemented to boost health literacy, which include adopting a targeted reading level to use on all communications with consumers, and conducting inventories of jargon and acronyms used by the company to create lists of "words to avoid" and "words to use," FierceHealthPayer previously reported.

To learn more:
- here's the Health Affairs blog post
- check out the study