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Half of U.S. Adults Fail ‘Health Insurance 101’

Healthcare-questionsI dislike going to the doctor – who doesn’t? However, in recent years I’ve found that I dislike the confusion I feel when I attempt to understand the vagaries of my healthcare provider’s policies even more. While understanding the policies can be frustrating, not understanding the basic terms of health insurance plans can lead to bad decision making and wasted dollars. And, unfortunately, a recent AICPA survey found that many Americans don’t understand these basic terms.

The telephone survey, conducted late last month for the AICPA by Harris Interactive, found that more than half, 51 percent of respondents, could not accurately identify at least one of three common health insurance terms: premium, deductible and copay.

A third, 34 percent, thought a premium was an expense at the time of receiving medical service or a prescription; more than a quarter, 27 percent, thought a copay was the cost of obtaining insurance; and 12 percent did not know a deductible is the money one pays before an insurance company makes payments.

“Half of Americans would fail health insurance 101,” said Ernie Almonte, CPA, chair of the AICPA’s National CPA Financial Literacy Commission.

The Patient Protection and Affordable Care Act will require individuals to buy health insurance or pay a penalty beginning next year, with open enrollment starting in October. Despite ample publicity of the law, the survey found limited knowledge of its implications.

Forty-one percent said they are not at all knowledgeable about the law and another 48 percent said they were only somewhat knowledgeable. Young people were the least knowledgeable, with nearly half, 48 percent, of adults aged 18 to 34 saying they had no knowledge.

“Americans need to take time in the coming weeks to familiarize themselves with key terms and assess their needs so they make the best decisions for their health and financial situations,” Almonte said.

CPAs can play a role educating members of their community to ensure that all Americans understand the basic terms in their policies and the ramifications of the healthcare decisions they make be making in the coming months.

The National CPA Financial Literacy Commission offers these tips to the public, which you can share in your community, on what to consider when comparing health insurance plans:

  • Review your history and behavior. Before considering health insurance plans, think about your health history and behavior. Are you prone to illness? How many times in the past year did you visit the doctor or purchase medication? Do you engage in sports or risky pursuits that make you more susceptible to injuries? Are you planning to start a family? The answers to these types of questions can help you better assess costs and coverage.
  • Compare premiums.  A premium is the fee paid, usually monthly, to a health insurance company for coverage. It is often the starting place when comparing health insurance plans since consumers want to know first if a particular plan will fit within their budget. Premiums can vary based on a number of factors, including age. It’s best to shop around.
  • Compare other fees. A deductible is the amount paid toward medical expenses before an insurance company begins to pay. A copay is the amount paid each time you visit a doctor or get a prescription. Coinsurance is the percentage of medical costs that you have to pay after you satisfy the deductible. The fees can add up, so it’s critical to understand how they apply and how they vary across plans. Some key questions: Do you have to satisfy the deductible annually or each time you are hospitalized? Do different deductibles apply to different types of care? What is your out-of-pocket maximum?
  • Compare coverage. Each plan typically has different features. You’ll want to understand whether a particular policy has coverage limitations or include a maximum benefit ceiling. You’ll also want to know if it sets limits on the doctors you can visit or if you have to get a referral to see a specialist.

More tips and advice on evaluating and choosing health insurance plans are available on the AICPA’s financial education website.

In addition, the site specific articles detailing which health-care provisions have become effective in 2013, and how the healthcare law is helping people already.

, AICPA Staff.

Healthcare questions image via ShutterStock

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