Health Reform Brings Standard Consumer Disclosures

Standardized descriptions of health policies and insurance terms aim to improve coverage decisions.

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Beginning next month, consumers will receive two new documents designed to make health insurance a lot clearer than ever before. By standardizing what health plans say about their policies and the language they use to say it, health care reform planners hope to usher in substantial improvements in public understanding of health coverage.

One document is called the Summary of Benefits and Coverage (SBC). As painstakingly developed, vetted, and approved by federal bureaucrats, the SBC must be provided to most people trying to renew or obtain health insurance.

It takes effect September 23, in time for the fall open enrollment period common to many health plans. The SBC will be up to eight pages long (or four pages printed on each side of the page) and use at least 12-point type, meaning that no "fine print" will be allowed. People who receive it electronically can also request a free paper version if they choose.

The second document is a standardized glossary of insurance terms and definitions. By requiring insurers to use a common language in discussing their policies, it's hoped the glossary will increase consumer understanding and, as with the SBC, help them make "apples to apples" comparisons when they choose among competing health plans.

"I think what this really does for the first time is to give consumers the ability to compare health plans much more easily than has ever been done before," says Michael Hash, interim director of the Center for Consumer Information & Insurance Oversight, which works to implement Obamacare. "One of the chief objectives here is not only to have a clear and easily understood summary" of insurance coverage, he adds, "but also to have the ability to compare competing insurance plans on an apples to apples basis."

Hash's office has released a model SBC template that contains the required information that insurers and employers must use in the SBCs they provide to consumers and employees who seek health coverage.

It begins by requiring that consumers be provided answers to eight key health insurance questions:

1) What is the overall deductible?

2) Are there other deductibles for specific services?

3) Is there an out-of-pocket limit on my expenses?

4) What is not included in the out-of-pocket limit?

5) Is there an overall annual limit on what the plan pays?

6) Does this plan use of network of providers?

7) Do I need a referral to see a specialist?

8) Are there services this plan doesn't cover?

The next section presents common medical events and requires insurers to spell out costs and coverage limitations. The events include visiting a doctor's office, having a medical test, using prescription drugs, requiring immediate medical attention, staying in a hospital, having mental health or substance abuse needs, being pregnant, and having a child with dental or eyecare needs.

Insurers also must separately list services not covered in their health plan, other covered services, consumer rights to continued health coverage, consumer grievance and appeals rights, information about foreign-language versions of the SBC.

Lastly, the template includes detailed examples of how a health plan covers two specific medical needs. In the first SBCs to be provided this fall, the two coverage examples are for having a baby and for managing type 2 diabetes. Sample care costs and patient expenses for the health plan must be provided to consumers, along with explanations of the assumptions underlying the coverage examples, how to understand them, and how to use them to compare competing health insurance plans.

Over time, Hash explains, the government plans to add more coverage examples. Eventually, there will be an online library of comparative tools that consumers can use to better understand the insurance and overall financial impact of various health conditions.

The Obamacare model insurance glossary provides standard definitions for 44 common healthcare and insurance terms. Plans may provide additional definitions. The model document also notes that its definitions may in some cases differ from the terms and definitions used in a particular plan, and that the plan's language is the controlling definition. The glossary also includes an illustrated example of how consumers and insurers share costs in sample health plan.

The 44 terms in the model glossary are: Allowed amount, appeal, balance billing, co-insurance, complications of pregnancy, co-payment, deductible, durable medical equipment, emergency medical condition, emergency medical transportation, emergency room care, emergency services, excluded services, grievance, habilitation services, health insurance, home health care, hospice services, hospitalization, hospital outpatient care, in-network co-insurance, in-network co-payment, medically necessary, network, non-preferred provider, out-of-network co-insurance, out-of-network co-payment, out-of-pocket limit, physician services, plan, preauthorization, preferred provider, premium, prescription drug coverage, prescription drugs, primary care physician, primary care provider, provider, reconstructive surgery, rehabilitation services, skilled nursing care, specialist, UCR (usual, customary, and reasonable), and urgent care.

Twitter: @PhilMoeller