I bought my car over five years ago, but our salesman still remembers that day. I know this, because my husband dug out the salesman’s contact information recently to see if he could help my sister with her car purchase, and he first wanted assurance that we would not be joining her at the dealership! The problem was there were just too many options. Should I get a sedan or an SUV? New or used? How many seats did I need? What about safety ratings? It was overwhelming, and I changed my mind countless times. The poor salesman earned his commission several times over.
I feel similarly overwhelmed every time I compare health insurance policies. When every policy has a different deductible, copays, coinsurance, inclusions, and exclusions, it can seem to consumers like comparing apples to oranges and bananas (PDF), but without the confidence that any of their options are actually good for their health. Furthermore, patients with chronic conditions face the more daunting task of finding a plan that doesn’t make their already increased health care costs even higher, through excessively high cost sharing for necessary medications or out-of-network charges for certain specialists. That can discourage high-need patients from enrolling or surprise those patients who do enroll with high costs of care later. The data has shown that many consumers end up choosing their health plan based solely on the monthly premium (PDF), which is like choosing the lowest car payment, regardless of whether it fits your needs or will cost more in maintenance.
One way some states, such as California, New York, and Massachusetts (all of whom have diverse health insurance marketplaces, like Colorado), are working to fix these issues is by developing standardized health insurance plans. These plans are developed by the state marketplace and have a set cost-sharing structure. For example, the state may set copays for primary care, specialist, and emergency room visits, as well as the deductible, coinsurance for certain basic health benefits (as required by the Affordable Care Act), and some aspects of the prescription formulary. Then, each participating health plan individually determines the remainder of the benefits and the cost for the plan. A study of standardization in Massachusetts showed that after standardization, enrollees were better able to assess value in the available plans, and many more chose plans with more robust benefits rather than those with the lowest premium. In fact, enrollment in high-deductible, low-premium plans decreased from 54% to 29%.
A recent article in Health Affairs analyzed health plans from six states—three that required standardized plans in their marketplace and three that did not, including Colorado—in order to determine if standardization improved benefit design to be more inclusive to those with chronic or increased health needs. The results were striking. For example, on comparable plans, a year of treatment for HIV costs $8,512 in Colorado, but $1,727 in California. Given that those with the lowest incomes and the least resources are at a higher risk of chronic conditions, Colorado’s plan design may be setting up those who need the most help from their insurance plan to be unavoidably underinsured (PDF).
As we seek new ways to cover the remaining uninsured and ensure our coverage options meet consumer needs at a fair cost, health plan standardization is an interesting approach to consider. Its success in other states in simplifying enrollment and making plans more inclusive is encouraging and appealing. There is a lot of exciting work being done around the state in benefit design and insurance affordability, and this could be one more way to reduce barriers to good health for all Coloradans.