Removing the fear of the fine print…

As directed by the Affordable Care Act, the Institute of Medicine has been undertaking an important process to better determine what an “essential health benefits” package should look like. This is critical to the success of the Act, both in what Californians should be required to have in terms of coverage, and at what we should be subsidized to have coverage if we can’t afford it.

As part of their deliberations, the IOM committee came to Costa Mesa, California, and took testimony from officials from states from Washington to New Mexico.

They took testimony about processes here in California, from independent medical review at the Department of Managed Health Care, to the California Health Benefits Review Program.

Here’s a sample of my testimony that spotlights the importance of the IOM process, and the new federal law in general:

Financial Security and the Fine Print

The Affordable Care Act is a landmark piece of legislation that seeks to resolve a series of major issues. While it has been called health reform, the Act is actually as much about economic security as health coverage. It has the potential to solve the problem of medical bankruptcy—achieving the goal that was repeated virally during the health reform debate: “No one should die because they don’t have healthcare. No one should go broke because they get sick.”

Having served for a decade as the executive director of Health Access California, the statewide health care consumer advocacy coalition, I know that patients and consumers share a fundamental fear about whether their coverage will be there for them when they need it.

Consumers are worried about “the fine print”—the exclusions, loopholes, and caveats that mean that the care they need will not be covered when they eventually need it, leaving them in financial ruin when they are really sick.

In many ways, the Affordable Care Act provides major consumer protections against consumers getting trapped in the fine print of insurance contracts. Among the protections that are provided by ACA:
• Strict regulation of rescissions, losing coverage when you try to use it.
• No denials of coverage for pre-existing conditions or being denied coverage when you need it.
• An end to lifetime and annual limits that means insurance cuts off just when you need it the most.
• A standard on medical loss ratios, so most of your premium dollar goes to patient care, rather than administration and profit.
• An actuarial value standard, so a plan covers a certain percentage of a patient population’s care.
• Subsidies on a sliding scale, out-of-pocket maximums, and other minimum benefit protections.

The debate in which the Institute of Medicine is engaged about the nature of the essential health benefit is perhaps the most important remaining debate about the fine print and its impact on financial security.

The essential benefit standard can uphold or undermine the spirit of the law expressed through these numerous consumer protection provisions—to make real the promise that coverage will be there for us when we need it.

The Layperson’s Definition on What Constitutes Health Coverage

Opinion Research: 2006: Our work is informed by many years of state health reform efforts in California, from an effort to expand employer-based coverage in 2003 and 2004, to a state proposal by Governor Schwarzenegger in 2007 and 2008 similar to what was passed federally. Health Access participated in privately funded opinion research in the year 2006 in preparation for the health reform efforts in 2007. During that research, we participated in 14 focus groups in which we asked consumers and small businesses what constituted basic health care benefits. The list was remarkably consistent from group to group:
• Doctors
• Hospitals
• X-ray, lab
• Prescription drugs
• Mental health parity

Consumers and small businesses regarded basic benefits as those benefits covered by most employer-based coverage in California.

There is a layperson’s definition of coverage, which includes an expectation of coverage for basic services. In these focus groups, consumers were horrified to discover that lifetime limits or annual caps could leave other consumers exposed to tens of thousands or even hundreds of thousands of dollars in costs.

People buy coverage and make life decisions about their coverage based on this layperson’s definition—and so when they find holes in the benefits, it leaves people in financial trap. We know what that looks like in California because a small share of health insurance is regulated by the Department of Insurance where there is no standard for an essential benefit or basic health services. Here are some real examples:

• Susan Braig, Altadena, a self-employed graphic designer, bought what she thought was catastrophic coverage when she turned 50. She got breast cancer—and virtually none of her care was covered because what she had purchased was a hospital-only plan and almost all breast cancer treatment was outpatient. She ended up tens of thousands of dollars in debt and uninsurable.

• Laura Burwell, retired to Chico to open a wine shop and bought what she was told was coverage just as comprehensive as what she had previously from her very large employer. . She was clearing out her backyard, got bit by a rattlesnake, was taken to a local hospital, only to discover that her coverage did not cover the first and most expensive day in the hospital. Her bill for that first day of care was over $73,000 and her insurance covered only $3,000, leaving her on the hook for $70,000 in hospital care.

These two California consumers did the right thing and voluntarily purchased health insurance but saw their financial security destroyed by the fine print.

There is no benefit to consumers to having insurance products with these types of holes in coverage experienced by these consumers. One cannot, and should not be expected to, anticipate needing care for one ailment or not another; or inpatient rather than outpatient care; or a certain number of hospital days or prescription drugs. Even when these plans prominently disclose the holes in their benefits (which many do not), they rely on consumers lacking actuarial and medical information to provide context and evaluate risk appropriately.

Simplicity matters: insurance is a complex and confusing world, and it is in the consumers’ interest to standardize as much as possible, to minimize the number of variables they need to consider when choosing a plan. In fact, we want a health care system where insurers compete based on key elements of cost and quality, rather than on the confusing nature of their benefit design.

While many may seek ways to make a premium more affordable, the benefit package is the last place to seek such savings. A cheap premium is always attractive, but even cheap junk is still junk. To undermine a basic benefit package is to violate the point of coverage to begin with, which is to provide economic security and piece of mind.

We’ll post our full testimony, and the whole proceedings of the IOM essential benefits committee, when it comes online.

Health Access California promotes quality, affordable health care for all Californians.
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