One would think that in 2020, of all years, healthcare would have been top of mind of the American healthcare consumer. Perhaps it was, as people became familiar with epidemiological terms like herd immunity, flatten the curve, and non-pharmaceutical interventions. But, apparently the Covid-19 pandemic didn’t lead to improvement in patient literacy in healthcare finance, specifically related to health insurance.
Two-thirds of Americans can’t correctly define concepts such as healthcare insurance premiums, co-payments and deductibles. And, a majority of Americans isn’t familiar with basic elements of the Affordable Care Act (ACA), such as when the open enrollment period is, if there is a tax penalty for foregoing coverage, and whether health plans must enroll those with pre-existing conditions.
This is not because consumers or patients don’t have sophisticated ways to connect with all the various elements and players in the U.S. healthcare system. But all that information at their finger tips isn’t doing much to help them understand and navigate the highly complex healthcare system.
Given that the U.S. has a multi-payer system in which the market plays an integral role, it’s imperative for its optimal functioning that on the demand side the consumer is well-informed and can make appropriate decisions.
Yet, the American healthcare consumer is not well-informed. A dwindling number of middle and high schools offer consumer science courses on how to make informed decisions about major purchases, such as health insurance, or how to manage personal finances and budget accordingly.
Findings from a recently released survey by Policygenius - the fourth annual Health Insurance Literacy Survey - show just how challenging health insurance, in particular, is for many American healthcare consumers to comprehend.
More than 60% of Americans do not realize that the Affordable Care Act (ACA) stipulates that health plans must enroll people with pre-existing conditions. This has been a defining characteristic of the law and was a political hot button issue during the 2020 election cycle. Also, the majority of Americans does not know that there is no tax penalty for foregoing coverage. This change was instituted as part of the 2017 tax cuts, which effectively neutered the individual mandate.
Lack of health insurance literacy can contribute to people avoiding necessary medical care. A quarter of Americans forego healthcare because they don’t know what their health insurance plan covers. Even during the Covid-19 pandemic, 8% of people have eschewed coronavirus testing and even Covid-19 treatment because they were unsure whether it was covered by their health insurance carrier. Moreover, Americans who earn less income are more likely to avoid healthcare: 36% of people earning less than $75,000 annually said they decided against seeking care because of uncertainty about whether it was covered , compared to 24% of those making more than $75,000.
Earlier this year, the Biden Administration extended the open enrollment period to sign up for healthcare insurance in an ACA exchange. But, when nearly 90% of Americans cannot identify when the regular open enrollment period is for ACA exchanges, it’s hard to conceive of there being much awareness about the existence and timing of a special open enrollment period. In addition, although 86% of those who enroll on the ACA exchanges can receive a premium tax credit, only 25% are aware they can obtain subsidies.
There is also the ongoing issue of individuals who seek out health plans with lower premiums and higher deductibles, but don’t realize how short-sighted these decisions may be in the long run. Short-term plan enrollment, touted and promoted by the Trump Administration, has grown in recent years. These plans cost less than ACA options because they include high deductibles and don’t offer certain comprehensive benefits, such as preventive care. But, once patients receive care and the accompanying medical bills, incurring high out-of-pocket expenses, they discover how inadequate these plans can be.
In light of all that has happened in the past 15 months on the healthcare front it’s especially troubling to learn that healthcare literacy hasn’t improved. According to Hanna Horvath, healthcare expert at Policygenius, “this year’s findings are largely consistent with last year’s, which tells us that health insurance literacy has not improved, despite widespread attention in the past year from the global pandemic and election season.”
This implies that transparency and provision of information aren’t sufficient conditions to optimize how the healthcare market functions. To illustrate, thanks to a hospital price transparency rule that took effect January 1st of this year hospitals are now required to publicly post standard charges for all items and services. But that requirement in and of itself solves nothing. The vast majority of patients aren’t aware that hospital pricing information is now available, and most struggle to interpret what is publicly posted.
The persistent confusion speaks to the complexity of the U.S. healthcare system, but also the need to educate, through all means necessary, including public service messaging. When only a third of American consumers are able to correctly define concepts such as healthcare insurance premiums, co-payments and deductibles, and merely 5% of Americans can identify six basic tenets of the ACA, including that children can stay on their parents’ plan until age 26, perhaps it’s a good time to revisit the importance of educating healthcare consumers.
This article was originally published on Forbes.com on June 01, 2021.
Written by: Joshua Cohen