Health insurance literacy and the unseen costs of health care in the US

This is the third part in a three part series on health literacy. The first was about identifying the competition. The second was about health care literacy. This post is focused on the topic of health insurance literacy. 

Health care in the United States is big, bulky, and complicated. Anyone who has spent time trying to understand their insurance benefits, let alone receiving care, knows just how dysfunctional the health care system can feel to the average person.

As I learn more about health care, I have come to realize how much I didn’t and still don’t know about how it works in the United States. As you may know, my background is in government relations and business, and not as a health care provider. I have no clinical experience other than supporting important clinical functions that help people get well after feeling ill. Despite extensive time, reading, and research of my own, I realized that if areas of our health care system are still a mystery to me, then there is a lot that the average patient who comes to us through the emergency room will not know, ranging from how they receive care, their diagnosis, and the cost of their care.

I remember the first clue I had that the US health care system was broken. When I left my first job to start my next professional opportunity, I opted in to COBRA benefits for my health insurance coverage. I opted in to both a medical and dental plan. I went to the dentist and the claim was denied by my insurance. I went back and forth with the COBRA administrator and the insurance company because one saw that I had coverage, the other did not. When I asked the COBRA administrator to call the insurance company to reconcile the difference, the response I received was “that is not my function”.

My reaction was one of confusion and frustration—how could the administrator for my insurance company not be able to solve an issue relating to their company of employment? Wasn’t that their job? I had thought I was doing everything right, but was still being denied access to the benefits I was paying for.

Feeling hopeless, I asked the COBRA administrator customer service representative what they would do if they were in my situation. “Sir, people in your situation generally have success by calling us, putting us on hold, then calling the insurance company, and merging the calls together”. So that is what I did and it did fix the issue. Reflecting back on this experience, I am still baffled, but thankful that I was able to resolve the issue. I cannot imagine how many other individuals went through the same struggle, but were not able to obtain a successful result.

I did some research at that and found out that 25% of the cost of health care in the United States is administrative, not in treating patients clinically. That means hospital overhead (roles like mine), and paying people to work in the insurance industry account for 25% of spending. As a hospital administrator, that feels high. But when you include the insurance companies in that percentage, it makes more sense.

On that point, in the American College of Healthcare Executives latest issue of the Journal of Healthcare Management, there is an article on health insurance literacy. Not surprisingly, my suspicions were confirmed. As it turns out, my COBRA experience was not unique. It turns out that many people struggle with even the basic terminology that all insurance companies use on a daily basis for pretty much any and every plan they offer. These are terms like co-pay, premium, and deductible.

Many hospital patients will struggle with this gap in health care literacy throughout their care, even though many will not explicitly express it. Patients often can feel like they may not understand their diagnosis or reason for their symptoms. They may not understand the treatment they are being prescribed, they often have trouble identifying caregivers (physicians, nurses, techs), and they can get especially lost in understanding the cost of their care and how to ultimately pay for it.

This is a size-able gap, but one that can be bridged without a major system overhaul. A first step is providing education proactively. Next, insurers need to educate beneficiaries on the basic terminology and benefits of their products. Insurers and providers can and should cooperate in order to change some of our laws to produce fewer bills for the patient, including their explanation of benefits (also known at EOB—aka “this is not a bill”). Finally, insurers need to simplify their processes and stop denying claims for reasons that have nothing to do with fraud, waste, or uncovered services.

Health care literacy is our responsibility. Providers and administrative partners must simplify the healthcare system while also educating consumers/beneficiaries. We should not assume that the consumer will know everything about health care that we know industry on a daily basis. The improvement of health care literacy will help to improve patient care, which should be the ultimate reason why we do what we do.

KEY TAKEAWAY: It is our responsibility to educate consumers on navigating the health care environment, including insurance. We can do so by simplifying our system and working to change laws that no longer make sense. Together, we can make a difference.