Health plans preparing new insurance coverage summaries

The government wants insurance policies to have labels like nutrition facts on breakfast cereals, and health plans are busy creating them to mail to their customers this fall.

Under the Affordable Care Act, insurers must give each consumer buying or renewing coverage a standardized Summary of Benefits and Coverage form. The requirement applies to policies sold or renewed after Sept. 23. That date is an extension from the March 23 deadline written in the health reform law.

Health plans must detail out-of-pocket costs, disclose any coverage exclusions, and outline coverage for two common episodes of care: childbirth and managing well-controlled type 2 diabetes.

The American Medical Association has been supportive of the new rules, which were adopted largely from recommendations by the National Assn. of Insurance Commissioners. In 2010, the AMA called on insurers to be clearer about out-of-pocket costs and benefit limits as part of its Health Insurer Code of Conduct.

Insurers say they already provide consumers with plenty of information about coverage. They said the redesign of benefit summaries will be expensive and drive up the cost of coverage.

Health insurance trade group America’s Health Insurance Plans estimates the initial cost at $188 million and annual cost at $194 million — roughly more than $1 per year for each of the 180 million enrollees. The estimates were considerably higher than the government’s, which put the 2012 cost at $73 million and the 2013 cost at $58 million.

The new forms will give consumers significantly better information in a clearer format than what health plans now offer, said Lynn Quincy, senior health policy analyst for Consumers Union, the nonprofit advocacy group that publishes Consumer Reports. Even if AHIP’s estimates are correct and the entire cost is passed on to consumers, most people would be happy to pay $1 for a better understanding of their coverage, she said.

Consumers Union did a series of tests in which consumers evaluated the template summary of benefits and coverage. Quincy said participants liked having the ability to compare one plan against another by what it would pay for childbirth or diabetes care.

Another favorite was the explanation of coverage features under the heading, “Why it matters.” Quincy said that’s helpful in elucidating terms that are unfamiliar to the typical health plan customer.

Quincy said giving patients better information about their coverage represents one step toward making them better shoppers and decision-makers.

“Consumers feel like when they consume medical care and have insurance, it’s like having a blindfold on,” she said. “They really need help, and this form goes a long way toward helping them.”