Health insurance shoppers often focus on premiums when comparing policies.
The strategy can backfire, consumer advocates say, when low monthly premiums leave people on the hook for big medical bills if they use health care.
The state’s MNsure health insurance exchange and the federal government’s HealthCare.gov website are responding this fall with new online tools that try to highlight the out-of-pocket costs.
The tools are especially important on the government-run exchanges because shoppers at certain income levels who focus on premiums could miss extra financial benefits that are built into the federal Affordable Care Act.
“This flags premium vs. deductible and total cost in a nice way, and that was my biggest concern,” said Tom Forsythe, a MNsure board member, after a presentation of MNsure’s new online tool during a board meeting Wednesday in St. Paul.
“Without a comparison … I might choose a health plan based on the premium, and it might be a really bad decision if I didn’t totally grasp that it had a $12,900 deductible,” Forsythe said. “I think it could help people not make a mistake.”
Deductibles are an amount that health insurance enrollees must pay before most health care services are covered as part of their benefits.
After growing in size and prevalence for many years, health plan deductibles increasingly are being criticized for contributing to the growth in unpaid medical bills while creating a new form of financial insecurity for consumers. Bigger deductibles and other forms of “cost sharing” such as co-payments and coinsurance are also seen adding to the confusion and frustration that many experience when shopping for health insurance.
“People dread choosing insurance,” said Robert Krughoff, the president of Consumers’ Checkbook, a nonprofit based in Washington.
“As soon as they start doing it, they see that these insurance policies have a lot of different rules and provisions that in many cases the consumer doesn’t even understand.”
Krughoff’s group developed MNsure’s online tool this year under a $473,000 contract. Consumers’ Checkbook has published guides to health insurance for more than 30 years, including online tools used by health exchange shoppers in Washington, Illinois and Missouri.
MNsure users enter their age, health status and whether they expect to use one of 16 common and costly medical services in the coming year. With the information, the online tool calculates the consumer’s expected yearly cost based on averages generated from a large federal database on medical expenditures.
Ranked by annual costs
Health plan options are ranked according to the yearly cost estimate, which factors not just premiums but also the out-of-pocket costs that each health plan would require assuming average use of medical services.
“What we give you is an actuarial estimate of average total costs for someone like you,” Krughoff said. “Realize that you are betting — insurance is about anticipating the future.”
The yearly cost estimate isn’t the only thing consumers might consider, Krughoff said, noting that some health plans might have better customer service, while others have different networks of doctors and hospitals.
The MNsure online tool doesn’t address those variables, Krughoff said, but it does show a consumer’s estimated cost in a bad year with very large medical bills. Some consumers might give more weight to the worst-case scenario than others. The online tool also shows the straight premium and deductible.
In one sample search, Krughoff showed how a hypothetical 42-year-old consumer in excellent health in Ramsey County might be drawn to a “bronze” grade policy with a monthly premium of just $159 after tax credits. According to the online tool, the policy comes with an expected yearly cost for the consumer of $7,809.
The annual cost estimate drops by more than $700 if the consumer picks a “silver” policy, even with the higher premium of $276 per month.
“If you take the lowest premium, you will win if you don’t have any health care expenses,” Krughoff said. But he added: “People who get the plan with the lowest yearly cost estimate are going to come out ahead — on average. What we’re taking into account is your possibility of having expenses of all different levels, plus your certainty of having the premium.”
MNsure launched the online tool last week, and the early reviews have been mixed. Health insurers said they supported making cost-comparison tools available to consumers, but insurance agent Heidi Michaels Mathson said the lack of information on health plan networks is an important miss considering big average premium jumps for next year.
“Consumers are looking for lower cost options — which often means accepting a limited network,” wrote Michaels Mathson, who is president of a trade group for Minnesota insurance agents, in an e-mail. “Consumers need to understand the impact of seeing an out of network provider.”
One reason the silver policy in Krughoff’s sample search had a lower estimate for yearly cost stems from a factor that’s invisible to most consumers.
‘Cost sharing reductions’
The federal health law provides what are called “cost sharing reductions” that lower out-of-pocket costs to consumers at certain income levels, so long as they purchase a silver policy. That’s why health exchange websites across the country are adding online tools that will highlight these savings, said Sara Collins, a researcher with the Commonwealth Fund, a New York-based health policy group.
“We find that 24 percent of people with incomes in the range that made them eligible for cost sharing subsides purchased a bronze plan, which means that they got a lower premium, but paid a higher deductible, and left the cost sharing subsidies on the table,” Collins wrote in an e-mail.
Minnesota was one of more than a dozen states to launch a health insurance exchange in 2013 to implement the federal health law. In most states including those that border Minnesota, the federal government’s HealthCare.gov website does the job. That site debuted its cost calculator last month.