Q&A: Understanding health plan language improves employee experience

Making well-informed health plan decisions can be difficult given the complexity of the industry today. To improve health plan literacy for employers and their employees, it’s important to create a better understanding of the language of the health insurance industry.

Different designs call for different coverage specifics, often leaving employees confused about basic elements of their plan. Research also shows that employees have a lack of understanding around key terms like coinsurance and deductibles. So, before employees can engage with their health care, they need to understand it.

We sat down with Paul Sharkey, a former benefits consultant who now advises small businesses for UnitedHealthcare, and Carolyn Mincey Freeman, who runs a life coaching business in Delaware, to discuss health plan literacy, and how to best de-code confusing health plan jargon. Carolyn’s business, the Carolyn Mincey Learning Center, educates clients on ways to make smarter wealth management and health care decisions.

Sharkey: Yes. It’s not surprising that many people in the United States are not familiar with many of the terms associated with their health plan or health insurance. UnitedHealthcare did a survey that showed only 6% of Americans could identify the 4 major basic health insurance terms or concepts — plan premium, deductible, coinsurance and out-of-pocket maximum. That’s a shockingly low number employers should pay attention to as part of onboarding employees to their plans.

Sharkey: Statistics show that people with lower health literacy are actually more likely to suffer from more costly health conditions, like diabetes, high blood pressure and high cholesterol. With low health literacy, they end up not utilizing the health care system as effectively as possible, so you end up seeing more emergency room and hospital visits, and longer stays while in hospital. There is also a higher readmittance rate to inpatient facilities for people with lower health literacy.

We tend to see that people with lower health plan literacy tend to access care they’re familiar with when not feeling well, like at the emergency room. Unfortunately, the emergency room is pretty much the most costly place to start care if it’s not a true emergency.

Mincey Freeman: The Small Business Health Options Program (SHOP) is a marketplace for small business health plans where users can comparatively shop and see what’s available to them. Since I’m a veteran, I was first introduced to SHOP through USAA (United Services Automobile Association). SHOP gives me an easy place to go to compare good insurance policies for my employees. Even though it’s easy, it’s still time consuming since you have to make sure to compare all of the possible options to figure out what’s best.

Sharkey: Health insurance premiums are no different than life insurance or auto insurance premiums. The premium is the amount that the employer pays each month to offer that coverage/insurance to their employees. What differs with health insurance premiums from what you might see in auto insurance, for example, is that the employer pays a portion — a large portion in many cases —and then the remaining portion is deducted from the employee’s paycheck.

Sharkey: Because many insurers set a minimum threshold that the employer must contribute (usually about 50% of the premium), and since many small business employers want to take great care of their employees, it’s pretty common for small business employers to pay between 75%–80% of health plan premiums.

Sharkey: A deductible is that amount you pay for covered health care services before the insurance plan starts to pay. For example, if you have a $2,000 deductible plan, the member will pay the first $2,000 in covered expenses. Once you’ve reached your deductible, then you’ll generally be subject to a copayment or coinsurance for a covered service.

Sharkey: There are a number of things that are covered within a health benefits plan and the health insurance coverage offered by a small business. Covered services tend to be things like doctor visits, emergency room coverage, inpatient medical stays, outpatient surgeries, pharmacy costs — most of the things you’d normally think about when accessing health care. Some of the things that are usually not covered, or may have an additional cost associated with them, would be things considered “out-of-network.” For example, if you were with insurance carrier A, they offer a very strong network of in-network physicians and facilities that drive lower costs for that health insurance plan. If you choose to go to a provider outside of that in-network coverage, you’ll either not have insurance coverage or the service may be at an additional out-of-pocket cost.

Sharkey: Coinsurance is the percentage of cost of a covered health care service. For example, coinsurance could be 20% or 10% after you’ve paid your deductible. So if the cost for a service was $100 and you’ve already met your deductible, a 20% coinsurance would mean that your cost for that service would be $20. The health insurer would pick up the remaining 80% of that covered service.

Sharkey: When I think of out-of-pocket maximum, I think of someone holding your arm behind your back until you say, “Uncle, uncle!” The out-of-pocket maximum is the most you would have to pay for covered health care services in a given plan year. This means that, after hitting your deductible, any applicable copayments, any coinsurance and once you hit the out-of-pocket maximum defined by the plan, then the health insurance company will pay 100% of the costs for the remainder of the plan year for all covered benefits. Once you reach that maximum, every other service you would need for the remainder of the plan year would be free to you — covered in full by the health insurance company.

Mincey Freeman: We make sure to look at the shared lingo between health insurance companies and how they communicate with people. After doing this sort of research, we like to quiz our employees to help them understand the ins and outs of health insurance and common health care lingo. Doing this not only helps out business and allows us to operate and educate clients effectively, but it also helps our employees. I don’t want anyone, clients or employees, to have to venture out into the world and not understand how to navigate health insurance and health care benefits. We really make a concerted effort to ensure our employees are fully health plan literate.